Skullcandy hosted an investor earnings call yesterday detailing the results for the second quarter of 2012. With net sales jumping 38.2% to $72.4 million and gross profit up 33.1% to $35.7 million, the company fielded a promising quarter.
The boost of Net Sales was influenced by growth across all channels and geographies, both international and domestic. Domestic sales rose 34.1% to $50.6 million, driven in large part by an increased volume of product making its way to existing retailers, as well as higher average selling prices. Also a contributing factor was the timing of the ‘back-to-school’ shipments, which were sent out a week earlier this year, meaning the revenue that they brought it was attributed to Q2 this year as opposed to Q3. For their part, international sales hiked up to $16.5 million, an increase of 59.9%, helped along by growth in the European and other international markets— 33.1% and 98.7%, respectively. Online sales rose 22.8%, to $5.3 million, with the gaming business to thank for bringing in $2.2 million worth of online sales for the quarter. Slighty off-setting the online success, however, was the company’s decision to cut out its clearance offering on its website, which negatively impacted organic online sales.
Sales to Skullcandy’s top 10 domestic customers rose 42% during Q2, accounting for 49% of all sales. The double-digit growth that the company saw across all major channels received its main support from the core specialty, wireless, and international channels.
Skullcandy reported that its selling, general and administrative (SG&A) expenses increased 39% to $24 million. The company has attributed half of the increase to strategic investments in the Company’s direct international and gaming platforms, as well as expansion of personnel. The other half was due to $900 thousand of additional depreciation and amortization expense, and approximately $2.4 million of infrastructure, public company compliance and variable expenses. In addition, EBITDA in the second quarter of 2012 came in at $13.0 million, a 31.2% jump.
On the product front, sales were led in the over-ear and on-ear category by the Hesh, Uprock, Low-rider, and Aviator models. In-ear headphones were led by the Ink'd, Smokin Buds, Heavy Medal, 50/50 and Fix models.
Skullcandy President and CEO, Jeremy Andrus, talked of the company’s tapering investments, which lends itself, in turn, to the return of incremental revenues. The second part of the year will see the release of new and redesigned products— the Stack, Navigator, and Icon 3— as well as a brand revamp, with new imagery across all channels. In May, Skullcandy launched its new website, focused on continuing to build a consistent and inspiring brand story, revolving around its athletes and ambassadors. The brand seeks to put more focus on skateboarding, and will soon release its Hesh2 video, which features the Skullcandy Skate Team of Eric Koston, Sean Malta, Theotis Beasely and Steve Berra
Q2 saw more grassroots marketing and sponsorships, as Skullcandy took an active part in the Zumiez Couch Tour, and the Journey's Backyard BBQ Tour. The brand has held 47 events in 29 states so far in 2012, with 34 events still to come this year, including the Triple Crown of Surfing and 7 Redbull events.
Internationally, Skullcandy’s office in Zurich, Switzerland, is performing very well, now boasting 22 employees as well as its own Netherlands-based distribution center. In addition, a new office was opened in Shanghai in June, with a respectable 12 person staff and newly appointed general manager. This new appointment fits in with the brand’s trend of changing its executive management team. June 19,2012 marked the addition of Brett Wilkins as the new VP of Global Business Development, and Sam Paschel will officially take on the role of VP of product development and merchandising come September 14, 2012. The company’s open CFO position is currently in the end stages of being filled.