Skechers U.S.A., Inc. (SKX) Earnings Call Transcript & Summary

Good morning, everyone. I guess it's still morning. Thanks for joining Day 3 of the Evercore ISI Consumer Summit. Very excited for this fireside chat. Today, we got Skechers, John Vandemore, CFO. I really appreciate you being here for our conference. Thanks for joining. How are you?

Thanks for having us. It's definitely morning here and a little bit sunnier than even normal here on the West Coast. So we're enjoying the onset of summer and the resurgence in the consumer, everybody is seeing.

Yes, yes, yes. The revenge spend and roaring '20s and all of that. We're here to talk about that and more. So we've got 35 minutes. I'm just going to hopefully, casual laid back, hit a bunch of topics and let the markets hear what you're thinking.

Great.

I'd start by saying asking John, obviously, Skechers had a ton of strategic initiatives in motion pre-COVID and a lot of opportunities, which you guys were executing against. But maybe start by telling us if you think about the company today versus 18, 24 months ago, how has it changed versus pre-COVID? Are there new capabilities, new priorities, new opportunities, new risks? It'd be really interesting to kind of hear how you frame the nature of the business and where you're at versus before this pandemic all started.

Yes. Actually, my current answer would be it doesn't feel like much has changed at this point. Now obviously, we've been through a lot, everybody collectively, including Skechers. But what we're starting to get the sense of in the marketplace is that things are getting back to the type of growth that we like to see, which is kind of a high teens compound annual rate. That's incredibly encouraging to us given what we've all been through. But it's also, I think, a testament to the focus we maintain on our business, but also on preparing our business for the future. As we went into the pandemic, I think like most companies, we put a broad pause on almost all significant investments, save for those in the online space. But we very quickly came to the realization that we, as a brand, we're clearly going to survive. We have the liquidity. We maintain the connection with the consumer, and so we put a lot of those investments back into motion. So as we sit here today, I'm actually incredibly enthusiastic about the future as much as I would have been coming out of '19, which you know for us, ended in magnificent fashion. But I'm equally excited now about the capabilities we chose to install into the company between then and now during the pandemic. And certainly, a lot of our focus on the company during the pandemic was ensuring survival. But an equal part was on preparing for the next wave of the future for us. And that's everything from ensuring we have great product, product really focused on satisfying consumer needs but also all the backbone necessary to continue to grow the brand globally. And so if I think about how we ended '19, which is on a very robust growth trajectory, but now doing that with the same and more tools in our belt, increased distribution capacity and capabilities, a much more significant and robust online presence, a completely replatform point-of-sale solution at retail and soon to be launched our new loyalty program. It feels like we're getting the best of both worlds. We're getting that growth, that consumer realization that our products are delivering, but now we have even more weapons to be able to exploit that across the globe.

Yes. There's a lot to dig in there. That's a really helpful context. Before we do, dive in on some of those subtopics, I'd love to get your view on some of the macro kind of consumer trends going on as we come out of the pandemic and what the recovery looks like. Maybe you could touch especially Skechers kind of really unique point of view, its casual offering. We've all been talking about the move to active lifestyle, the move to casual, especially pandemic. There's a lot of us that think that some of that casual is going to stay. I know my feet don't miss leather dress shoes and are going to have a hard time putting those back on at some point, kind of hoping sneakers are the new thing. But I'd love to hear, will you guys come out on that? How the company is positioned, especially given the breadth of the product line? Maybe you could touch on that as well.

I mean, I think, the first issue we have to address is that you may need to get you in some Mark Nason leather shoes, which have a lot of our comfort technology infused in them because they're the most comfortable dress shoes you'll ever wear. Absent that, I think there are a couple of broad trends, some of which you touched on, that are enduring. The first is we were casualizing as a world before the pandemic. Certainly, the pandemic accelerated some of that. But our view is that, that's here to stay and that will continue. The second is, we've seen during the pandemic a much higher realization from consumers that comfort is important, not just because it makes you your feet feel a little bit better at the end of the day, but it's actually a core element of your health and wellness. Having pained feet while you're walking around all days is not good for you. And so as I think the focus on health and wellness intensified over the course of the pandemic, we view that as a very solid tailwind for our business and in particular, our brand because comfort is such a core component of what we focus on. That all being said, I would say, certainly, we're not completely free of the effects from the pandemic yet. We're still seeing flare-ups in different markets. And for us, I think that's important because we are a very global brand. So as much as there's a returning sense of normalcy in the United States, there are several markets internationally that have had flare-ups with the pandemic, and that continues to bedevil our business overall only because it hasn't reached the point where every market is going in the same direction. That being said, what we're seeing as the most encouraging trend is that when markets reopen, when consumers can get back into stores and shop, they're choosing our brand. And that's probably the most encouraging sign that once we get clear of the major impacts from the pandemic, we're going to see a return to our business growth profile that we've seen over the last 7 to 10 years. I think that's going to be aided by those 2 prior factors we talked about, casualization and a focus on comfort. But I think it also is just incredibly encouraging to know that consumers are going to come back to the brands they know and trust, and they're going to continue to lead those forward. And then we're going to continue to discover new consumers across the globe, which has always been a key growth driver for us.

Great. One kind of macro follow-up, especially related to your North America business. Can you see -- can you tell the difference between stimulus and the benefits there versus that kind of post-vaccine reopening, returning to normal? Can you tell the difference and what's really the bigger underlying driver? Or is it hard to discern?

Yes. I mean, it's almost impossible to discern in part because what we saw was almost a quadruple witching so to speak. We turned on some marketing in almost the precise right moment as lockdowns were easing, as stimulus was hitting, and people were going back out to shop with a lot of the savings that they had pent up. So we've tried to look at it quantitatively, but the reality is those factors almost all hit at the precise same moment. What we know is all of them probably contributed. We have seen durability in some of the revenue favorability we saw begin in Q1, which leads us to conclude that, that stimulus while certainly had an impact was not probably the major driver of that. What's really we think driving consumers is just being able to get out and shop, address their needs. There's even been a little bit of almost back-to-school-ish activity in the marketplace as some markets began to reintroduce kids to in-person learning. So I think the good news is all those were tailwinds and have been tailwinds for us. I think the better news is we're not seeing a significant letdown in the consumer wanting to get back out and shopping. I think the one other element we'd like to see is a return of tourism. We certainly have some locations that are a bit more sensitive to tourism globally. And we'd like to start to see that happen. The reality is tourists make great customers because they walk a lot, they're out a lot. And they want to be comfortable, and that fits our value proposition to a T.

That's great color. Before we dive in on digital, so I have several questions on digital and the transformation that's been happening there. Some of the things you said remind me of the operational capabilities, the depth and breadth of Skechers' logistical, operational from design and supply chain to sourcing in this pre-COVID -- at the height of COVID, post-COVID environment, where the reality around you is changing on a whim. And you mentioned the perfectly timing the marketing. And maybe you could elaborate a little bit and remind us how good Skechers is, as a global organization from design to supply chain to distribution to retail operations and how that's plays into your current and future success.

Yes. I think it's a great question because it's an often overlooked element of Skechers business. I mean, I think people often view Skechers as an upstart brand that just arrived a couple of years ago, but the reality is, we're the third largest footwear supplier in the world. We've been doing this for a long time, and we think we do it in a unique fashion but with some excellence that is often underappreciated. And I think added to that, we also were very careful during the pandemic, not to, if you will, cut our nose off despite our face. We didn't probably as aggressively pursue actions like furloughs or reductions in force as some of our competitors. But it was because we wanted and we needed to have the people that make Skechers, Skechers, available to us when the markets reemerge. And I think that's really what we were able to capitalize on. We didn't lose a beat on product development. Our supply chain team has been working diligently under extreme duress over the last year to deal with all the challenges associated with mass cancellation shifts, production coming in and out of the window. I mean, it's been an enormous pressure. And I think we've actually probably worked through that better than most, not perfectly, but better than most because of the talent of our teams and their familiarity with how we do business. And to be honest with you, I think we're a really good partner. We're a good partner to our customers. We're a good partner to our shipping partners. We're a good partner to our factories. And we took special attention throughout the pandemic to make sure that they were okay. Because our view was if we got through the pandemic well, but they did not, we weren't going to be in any better shape than they were. And so we wanted to use a bit of a rising tide lifts all boats mentality and make sure that they were fine getting through the pandemic and that they would be there for us when we needed to. And I think that's allowed us to fulfill at a better rate, deliver more on time than some of our competitors. But mostly, it's with the end goal of trying to be there for the consumer. Because certainly, what we find is if we design for the consumer in mind and we produce against that design plan that satisfies consumer needs, and we get it into their hands and we deliver it with as little friction as possible, then they'll be there. And they want the brand and they want the product.

Got it. All right. One more category question before we go into the digital, I was thinking about in return to office world, is it a big deal? Mark Nason aside, is it a big deal if a lot of office spaces where it was kind of frowned upon to wear sneakers but post-pandemic becomes much more sneaker and denim type friendly. Is that a major deal or is it just another kind of quiver in the overall secular health in the sector?

Well, we think it's a big deal, but we think it's been a big deal for probably about 10 years now. I mean the overall trend of casualization, like I said, I mean, a lot of what you saw in the pandemic was pre-existing trends intensify. And they probably sped up. I mean I can even tell you, our own digital business sped up certainly. We jumped a couple of years forward in our planning, which was both good and bad at the same time. But I would say that broader trend towards casualization definitely works for our brand. And I think it -- again, it aligns with that notion of people valuing their own health and their own comfort and those 2 being very inextricably linked. And so we think it's nothing but a positive for us overall. I think we also have to recognize, I mean, I don't think we're close to getting back to the status quo in that everybody is in the office every day. I think there's probably going to be a healthy mix of some variable in-office, out-of-office work solutions, probably permeating most of the job markets globally. And so we think that also lends itself very well to a brand like Skechers because we also can be tapped in both of those avenues for consumer needs, which is great.

Got it. Got it. Okay. Let's dive into digital and e-commerce a bit. You guys really did a lot in this area during COVID. How big of a business can -- how material, especially your digital direct business, can that be for the company? There's still a lot of investments to make. You talked about you're going to roll out your loyalty. I know there's probably a lot of tie in there. Maybe we'll start there before we dive into some of the profitability questions in digital.

Yes. I mean we almost don't -- we don't put a cap on what any of our businesses can be, but certainly not the digital-only channel. It will absolutely double or maybe even triple in the near term from where it is today because it's still been in build mode for us. I mean I couldn't be more thrilled with how we were able to respond to the pandemic. But in light of where we were, we were quite, I think, lucky in some sense, to have already undertaken a lot of the technology restacking that we needed to do, so that we were primed to be able to transition into a solution for consumers that was largely digital-only for a period of time. And we've been able to leverage that going forward. There's absolutely more we can do. Loyalty is going to be a key component of that. We continue to build out our capabilities internally. That all being said, what I would say our focus is on delivering is direct-to-consumer as a whole because we really believe there is a blending of capabilities between digital and physical that works optimally for consumers. I mean, I know when I shop, I don't generally think I want to go to a store, I want to order something online. It's usually picking the solution that works best for whatever prevailing need I have, either speed on the one hand or price on the other or convenience on the other. And so we're really trying to create that omni solution that works well, both for our consumers and then, ultimately, although quite frankly, a little bit further off, for Skechers, right? Where we're able to leverage our store to our economic benefit to satisfy consumers' preferences, either digital-only, BOPIS or BOPAC or an in-store shopping experience that is digitally infused. And so I think it all has tremendous room to run. I think it is a solution at the consumer level that marries very well with how we're seeing consumers shop nowadays and see them shop in the future. And I think married with our product excellence is the right answer for the marketplace long term.

You kind of alluded to it just now that you're -- this kind of like omni kind of holistic solution for consumers is still a little bit of ways off. Where do you guys stand on kind of the technology and logistical capabilities to activate inventory in your stores and throughout your already very sophisticated supply chain.

Yes. I think the good news is, we know what we need, we know where we need it, and we know how to do it. We just can't do it all at once. So I think that's the challenge with all great ideas, right, getting them executed and executed well. Our focus at the moment is getting the customer-facing elements up first so that we have those. And then optimizing for our own benefit behind that. And I'll give you an example. I mean so obviously, we want to make sure we have a direct-to-consumer online presence everywhere we do business. Today, that's limited to about 5 markets internationally. By the end of 2023, it will be almost every market we're in, certainly as a direct business. So that's well underway. We know we need to have that because as much as we might have been a little bit later in arriving to the scene domestically, we don't want to suffer that same fate in other markets. And other markets are still early stage in their developing of that digital economy. So we're going to get those sites launched. And then we're going to make sure we have the consumer-facing elements that we need to have, loyalty, a robust platform and app, and all of those capabilities that come with it which, by the way, have been enhanced by that point-of-sale system, which then will deliver real-time inventory visibility. And then what we'll do for our own account really is figure out how to use the stores as an efficient base for that last-mile delivery, satisfying last-mile needs. I mean today, we process most of our e-commerce, if not all of it, out of our facility here on the West Coast. But there's no reason in certain circumstances, we can't use our vast network of neighborhood warehouse big-box stores to do the same. And what you're starting to see is even more exciting if I can create that last mile in the most efficient way possible, but also optimize for where my inventory is, I can actually be solving for the best and most profitable solution for Skechers, while simultaneously solving a need at the consumer level. And that's nirvana when I'm making the consumer happy and I'm optimizing for my own P&L. That's the best possible solution. And we know what's needed for that. It's just going to take us a bit of time to build out some of that technology and capability across our fleet.

Got it. It's great to hear that you have the vision for it, though, and you're down that path. So what does all this mean for profitability. Overall, corporate profitability, digital profitability, if you even look at it that way, and the effect near, medium and long term of this kind. You said 2, 3x, like you said, we don't know, it's just going to be a lot bigger on the overall kind of margin structure of the franchise.

Yes. I mean, it's baked into what we've said long term, which is we continue to invest for growth. We want that growth to be similar to what we've seen in the last 5 to 10 years, which is kind of that mid to high teens compound annual top line growth rate. The profitability we know, follows. We've seen it follow in certain circumstances, but we don't want to be shy about making the investments necessary to have that happen as quickly as possible. So I would say there's really no, in our view, any sort of diminishment of the overall profitability that can be derived from these businesses as we continue to grow. And there's not a significant amount of incremental investment. It's really more about execution in the near term. So we've said we want to get back to the profitability levels on an operating margin basis that we were at in '19, which was just a hair under the double digits that we've talked about. And then there, we think the category growth, the geographic growth that we have ahead of us will get us to kind of that low teen range that we've talked about. Now -- and we're not trying to engineer that in a day. We'd rather prepare the business for growth long term, while simultaneously marching up that operating margin profile. That all being said, the best solution to that is it's continuing to grow for us and continue to leverage the investments we've already put in place. And that will certainly be a key element of what we focus on going forward.

Right. Yes. No, I mean I'm definitely getting the growth message coming across loud and clear. Let's dive into it a little bit, though. Not all growth is equal. Not all growth is this profitable. Maybe talk about that kind of mid to high teens long-term target, which you've executed against. But especially as I think about some of the other brands in the marketplace, seeing AUR and pricing increases out there, is the algorithm just -- and especially as you're getting also a shift from -- maybe a mix shift from wholesale to DTC, which comes at a higher price per unit, of course. So I'd love to -- is there a pricing element in that long-term 15-plus? Is there a mix shift element that drives it? Or is it -- is unit growth the way to think about it? Because 15 to 17 -- 15 to high teens -- mid-teens to high teens growth is fabulous. But the only thing better than mid- to high-teens growth is mid- to high-teens growth on unit growth that's less than that.

Yes. No, I mean it will be a blend of both. I would say it's less in our mind about pricing up than delivering value at the consumer level. I mean, where we've had the most success in creating value at the consumer level is where we've also had the most success in pricing. And I think that's really what it's got to be. I mean I'm fond of the saying that no company determines the price. The consumer determines the price. So -- to us, it's really a product-focused, deliver value for the consumer and the price will follow. Now obviously, there's exceptions to that. We look at cost inputs, and we make adjustments when we need to if raw materials are up, and we do that actively. But the true solution for us longer term is continuing to add value at the consumer level and then make sure we're pricing for that value in the marketplace. And I think, quite frankly, we've seen a greater ability to do that of late as we've really focused down on comfort and delivered comfort technologies across our categories. And so I'd say the answer is, it will be a bit of both. We certainly like to drive volume where we can because that generally means we're further penetrating into markets that are constructive for us. And I think the most exciting thing we see in the lineup of geographies we're attempting to grow in is that a lot of them are growing very, very nicely in and of themselves, much less when you leverage the full weight of the Skechers brand and product categories. That includes markets in Asia, which are still very early stage for us: India, Vietnam, Thailand, Indonesia, Malaysia to parts of Europe, Eastern Europe, but we're also seeing growth in Western Europe. And then, South America to us, we're exceptionally strong in Chile. The brand has strong resonance throughout the continent. But we're still way underpenetrated in a handful of other markets there that offer, we think, an incredible long-term trajectory for the brand. So we'll continue to approach growth, but it's not a growth at all costs. We're still trying to drive profitability. That's just not our main priority when we still see that there are markets that are significantly underpenetrated for us. And the last comment I'll make is to your mix question, sometimes the biggest challenge to mix benefits is that all of your businesses are growing at once. So you actually don't get the mix shift because they're all growing. And one of the things we've seen is that last couple of quarters, with the small exception of last quarter where there was a timing issue, I mean, the domestic wholesale business has grown for us. right? And that's one of our lower gross margin business. It's a very good contributor to us. But if that keeps growing, then it dilutes the mix benefit of growing internationally and direct-to-consumer. So that's a great problem to have. I'll take that problem every day of the week, but it does somewhat diminish the mix benefit you can get. Over time though, mix will absolutely play a key role and continue to drive those margins up.

Got it. That's really helpful context, John. While we're on the -- just -- you mentioned the topic of pricing and how creating the value and the pricing will follow, touch quickly, if you can, on inflation. It's a big topic in the market right now. Obviously, there's a lot of segments through consumer and throughout the economy where supply is being outstripped by demand. Are you seeing inflation? Are you comfortable with what you're seeing? Do you feel like you have the other -- all the other tailwinds behind kind of gross margin are adequate to offset at least from what you see at this point? Any color there would be helpful.

Yes. I mean this is more of a personal view and a little bit infused by what we see as a company, but we're absolutely seeing inflation indicators. We've seen them for a while actually, and it's been somewhat discordant here. The general conversation be around transitory issues when we've seen labor inflation, raw material inflation, transportation cost inflation. I mean, seen it everywhere. Now the encouraging sign from us is that we've been able to price for it, and we expect to continue to do so as long as we're delivering value at the consumer level. But no doubt in our mind that's certainly a pressure we've seen and we're going to be vigilant about both in terms of what we design and how we design it? What we deliver to the consumer and then how we price for it, but absolutely seeing it across many different elements of our business.

Got it. And is there a level of inflation like a theoretical level of inflation because you obviously have some people out there predicting hyperinflation to some extent. But is there a level of inflation where it becomes too difficult to price for? Or is that even hard to know?

That's definitely hard to know. I mean I think the most nefarious form of inflation we're seeing right now is kind of that artificial labor rate inflation, right? When you have to eclipse what is otherwise free to people in terms of extended benefits and sustenance from the government, you're not competing in the marketplace. You're just competing against the government. And that's a bad equation to be in for any company. I think to the extent that level of artificial wage labor support starts to fade. We get a little bit more comfortable that over time, we'll be able to price for what remains. But we're also looking at other solutions. We look at automation. We look at using technology to help increase productivity as an offset. So it's not all about price. It's a composite of other elements at our disposal as well. But certainly, we'd rather not be dealing with that. We'd rather just be focusing on delivering value at the consumer level.

Of course, of course. Let's talk about, again, a little bit ancillary to the pricing conversation, the brand position. Skechers has been an evolving brand, a significantly evolving brand, even just over the last 10, 15 years, the breadth of the product line has changed. Obviously, the global nature of the brand. The brand is maybe positioned or perceived a little bit differently in different markets. Maybe you can give us an update where it fits in the marketplace. We've got, obviously, Nike and Adidas out there. But maybe help update us where the brand is positioned? How it's evolved? And what that means for the future?

Yes. I mean, I think there certainly is different perceptions of the brand in different markets. And some of that's curated, some of that's just by happenstance. What I would say that's most encouraging to us is, no matter where you are in the globe, if we ask you what you like about your Skechers product, we get a fairly consistent reply. And I mean really consistent reply. It's about comfort, it's about quality. It's about style and it's about value and price. And I think that element of how we really focus on driving our business is key. Now that can mean different things at different levels of the consumer. To one demographic it means one thing, to the other it means another. But I think being consistent on those key customer attributes is important. What we tend to see is that we have a bit more of a premium position outside the United States than inside the United States. Although we're also seeing really favorable trends in terms of how people are perceiving the brand and the brand's contribution to what they want out of footwear as improving, and in part because of the casualization and comfort trend we noted. I mean, as people value health and wellness more than they value comfort in their footwear more. And that then speaks to what Skechers is bringing forward in the marketplace because where we are renowned for comfort is in the United States. That's by far the #1 attribute people associate with our brand, and we think that's incredibly encouraging for the future. Overall, I would say we're going to continue to curate the brand kind of on a market-by-market basis based on what's best, but then we're going to leverage that brand to bring the full scope of our product because I mean, U.S. is a great example, but other markets, Germany, a great market. Once you're known for comfort, you can extend comfort into work footwear, occupational footwear, to walking, to running, to sandals. I mean it's pretty limitless because the one thing is, you'll always have footwear on your feet. Robert Greenberg has a great saying. He said, "We're not in the shoe business, we're in the transportation business." And humans will always need to be transported. Now in our case, obviously, it's on foot, but we fit that need really, really well. And I think we'll continue to do that across the globe and leverage our brand to drive that growth we look for.

Yes. Comfort is a pretty good brand -- a top brand attribute to have right now, I would say.

Absolutely.

So maybe could you translate that to the product line, especially when it comes to the fashion side. You touched -- you alluded to it a little bit. It's not just comfort. There's -- you also -- I find that you guys -- again, with this kind of very sophisticated, flexible and speed-oriented design and product development, supply chain process, maybe talk to the style and fashion side of the equation and what that play -- what part did that play in your success?

Yes. I mean, look, we say it's 4 attributes and certainly styles in there. And where we probably lead with style is in our fashion segment. We also use that as a little bit of a hook to bring folks who are not yet familiar with the comfort of our product in. We've done a lot in just the raw fashion space, leveraging some styles that we are, quite frankly, taking off the shelf and updating from our history. Like a lot of other brands, we focused on some really successful collaborations, and we'll continue to do that because we find that to be a very effective means at both bringing the value of the product forward to consumers, but also leveraging other brands and translating that brand into value for Skechers. I think the reality is, you got to fight that fashion game every day, sensing what's going on in the marketplace where the market is going where the consumer is going, requires you to be very adept at staying ahead of that. And I think when we combine that with those other features, that's what really resonates with consumers. I would also add, what we're also seeing is there's almost a whole new channel within the online world where we can be a little bit more fashion-oriented for some of our product categories and really drive that through social media. I mean social media is a tremendously effective means at getting fashion distributed and building awareness. And so what we found is that leveraging social media as a means to build awareness within the frictionless transactional capability right behind it, has been very encouraging. So there's many weeks when our online hot seller is, quite frankly, something we chose to support on social media. Sometimes fully intentionally, which is the best case. Sometimes unintentionally, but it happened to resonate really well. And so we realize there's latent power in that, that we need to continue to leverage as a brand.

Yes. It's pretty cool. All right. I want to ask about -- we've got a couple of minutes left, I want to ask about China. Stocks in consumer world that have big China businesses, that are growing fast and have a long runway in China tend to get high valuation. So maybe give us an update. I know it's a really large and important market for you guys too. Maybe give us an update on where you stand in China. They went through the pandemic a little bit differently than the rest of the world. And how open is that runway still for the Skechers brand?

Runway is wide open in China. I mean we're still much, much smaller than we can be in China, and we know that. Our Supreme hope is that this year, we'll bust through the $1 billion mark in China, which is a great accomplishment in light of the pandemic. But really, we haven't gotten anywhere near contemplating where we think that growth rate starts to diminish considerably other than through the law of large numbers. We still see e-commerce as being a huge driver of growth in the marketplace. Retail still has a place to play and is starting to recover more fully now from the effects of the pandemic. But most importantly, I mean, you just have tremendously positive demographic trends in that market, more people coming into the middle class, more people buying more. Another area of focus for us in that market is kids. It's still a relatively undefined market in China, not very precisely owned by any one brand. We think we have a lot of room to continue to penetrate in kids. And I mean that fits very well with what you're going to see in China, where more children is going to be the norm in family. So we think the world of the opportunity we have in China, that's really about execution for us at this point, and we'll continue to grow that robustly. But I would also -- just stepping back and taking that lens now and considering the broader Asian market is important because we also think India looks a lot like China 10 years ago. Vietnam, Thailand, Indonesia, Malaysia, Philippines, that entire market is really just one where you started to scratch the surface. I mean, there's a lot of similarities, shared capacities between those markets that work really well. But also the brand heat for us in those areas is particularly strong. So we'll continue to focus on that region as a major area of growth opportunity for us. And certainly look forward to the time when we could talk about China as a $2 billion or $3 billion marketplace.

I mean there's certainly a lot of feet in the markets you're talking about that do a lot of walking honestly, too. So is the brand positioning similar, would you say, centered around comfort, but with all the other breadth and product and attributes? Or is the brand position evolving in some of those big markets?

I would say, just by the nature of how we entered a lot of those markets, we sit at a little bit of a more premium position. So if you kind of do an unaided awareness in that marketplace, we generally register as a top 5 international brand. I mean, obviously, the gorilla is still Nike. But after that, we actually see a lot more resonance. I mean -- and we're doing battle in those markets with the top local brands as well. So I would probably characterize it as a bit more premium, a bit more style-oriented. And in addition to comfort, but also still developing because that's just a very raw market for us. It's -- even though it's big, even though it's highly productive, it's still -- there's still a lot to be defined in that marketplace for the Skechers brand.

Understood. We're at the hour here. Thank you so much for your time, John. That was a really enlightening and fun conversation. Have a great rest of the summer. Good luck with everything.

You too. Thanks, Omar. We look forward to being in person again soon.

Yes, that will be great. Thanks.

All right. Take care.