David Weinberg: Yes, I think it’s fair to say receipts will slow down. I think in taking the question a draw further to John’s point, we were down in the U.S. It’s growing internationally. It grew primarily in EMEA, where we had a very strong January because of demand. We had a lot of movement from fourth quarter into first quarter this year because of the backup that happened to some of our consumer base. And I think it shows well for some of our operating margins as well. If you think about it, we had a catch up on our stores. The fact that our stores are now full and we’ve utilized all the cost and filling them up. So shipping them significantly more pairs than are selling, starting probably in the middle of the second quarter through probably the middle of the fourth quarter, we’re now current.
So we will have less cost to supply our own stores throughout the first half of the year, and they’re doing quite well than we had in the middle of last year. We now have a significant amount of inventory. Basically, what happened last year was a lot of what people thought was going to be delayed and get later and they wanted to increase their purchasing. We now have we’re helping our customer base both domestically and internationally as best as we can. But we’ve already paid for all the receipts. We’ve already gone out of our way to increase the size of our distribution centers so we can hold that. And that cost is already behind us as we fill these orders, it’s only a shipping piece. So as wholesale continues to grow and we ship less per week to our retail stores, we’ll gain much more efficiency certainly from a financial perspective in the first quarter and going into the first half.
I’d also like to point out some of the inventory build is normal just from the movement and the change in our business. By and large, our own retail sits on inventory significantly longer than our wholesale partners. They — we tend to turn wholesale much quicker. We’re on a flow with them. We run our flows through, obviously, because of direct-to-consumer. We carry more in our stores and the more stores and the bigger they become, the more we carry so that there’s a bigger carry piece in it. So we’re looking much better. And we’ve gotten the inventory early and our receipts are slowing down. So it builds for more efficiencies and more continued sales. I think it’s pretty normal that domestic wholesale had a tougher January than our own stores would indicate simply because they took a lot of product in the last quarter of last year coming into this year.
And we don’t have no overlap of stuff that was shipped in January as opposed to December. The end of January and the first couple of days of February have shown significant increases also in our wholesale deliveries. So everything we see is moving in the right direction and the timing of what we’re holding and how it gets to be billable or invoice as it moves out is looking more and more solid as we move into the back half of the first quarter and into the second quarter.
Jim Duffy: I wanted to dig in some on the comments on the domestic wholesale situation. Of course, there are difficult compares with Q1 a year ago. But I’m curious that backup, which you speak to of inventory in the channel, is that concentrated with any specific channels or key channel partners? Or is it wide spread across your U.S. wholesale base?
David Weinberg: Some are obviously worse than others, and we want to talk about specifics. But by and large, everybody took a significant amount of inventory, not necessarily Skechers. Our own inventory, we’ve cleaned up. So some customers like us ahead of the curve as we are with is why I think our direct-to-consumer will show so strong in January, but everybody is working through it. January, while everybody is showing some increases, we saw some increase here not the strongest month. It’s a closed out month transition for product. I think as we got through January, which was the toughest comparison for us from year-over-year in the first quarter and why there’s going to be pressure on the quarter simply plus last year, everything just opened up, and it went into empty shelves.
So it really did create quite a distortion. But I think you won’t see the same thing to the same order of magnitude for the balance of the quarter. We just won’t catch the first month, but everything is cleaning out, everything is starting. And as we get to new seasonal goods, we find a lot of our customers are starting to get online now to even take more for January, February and getting ready. So if weather doesn’t change the sales pattern, we should see that for the most part of February going into March.
Operator: And our next question is from Rick Patel with Raymond James. Please proceed with your question.
Rick Patel: You talked about the wholesale dynamic between the first and second half, but what’s the right way to think about units versus price? Because I believe you’re taking pricing in wholesale. So I’m just curious if you can contextualize what the pricing tailwind might be that we see in the first half that could help to offset some of the pressure on the unit side? And also as a follow-up, whether you expect to take additional pricing action as we think about the new year as a whole?
John Vandemore: Yes. I mean — so we won’t talk about the pricing increases that we had announced previously, but we’re waiting to materialize. You saw that in the gross margin performance this quarter, kind of quarter-over-quarter being up, those benefits will continue near to our P&L particularly over the first couple of quarters. So a lot of what you’re seeing kind of to the commentary David just provided is a unit issue, and that speaks to congestion. So there’s nothing in — we see the envelope of pricing action that’s actually going to change the dynamic. No matter what price we sell have, if they can’t take the goods from a physical congestion perspective, you can’t take the goods. So that should help, and that is part of what will continue to help support our gross margins certainly in the first half of the year. But in the domestic wholesale marketplace in particular, it’s mostly a units-driven headwind.
Rick Patel: And as we think about the back half, what do you see is driving the recovery in the wholesale channel? Does that I’m curious like, is it inventory just being in better shape and your customers returning to a more normal cadence of taking in product? Or do you have innovation or demand creation in the pipeline that you think gets better traction in the back half?
John Vandemore: Well, Rick, you could not tee us up any better than that. I mean the answer ultimately is both. There’s definitely — I said a lot of this is congestion, congestion gets resolved and then product will flow. And to David’s commentary, we’re already seeing a little bit of that loosen up, which is an encouraging sign. But we also have, obviously, some continuing product introduction activity that’s going to, I think, really propel where the market goes for Skechers in the back half of the year, most notably our slip-in products that’s really when they begin to hit in full force in the market. Early indications have been nothing but incredibly strong from a consumer perspective. So those will start to hit. But I would also point out, a lot of our other comfort features continue to perform really well.
Arch Fit continues to be a very solid franchise for us. So to answer your question, cleanly, it’s both. We’re going to see less congestion and that’s going to help things. We’re going to see the product really take hold. And you’re going to see us also get behind that from a marketing perspective. So that will also be a propellant in kind of the back half of the year.
Operator: And our next question is from Alex Straton with Morgan Stanley. Please proceed with your question.
Alex Straton: Great. I know in the last year, we’ve talked a lot about shelf space opportunities for Skechers as peers have pulled back from wholesale and shifted into DTC. I know now that’s a little bit bundled just with so many being over inventory and now kind of reverting back to wholesale. So is there anything you can provide us or any observations as it relates to the competitive dynamic and how you’re thinking about shelf-space opportunities now?
John Vandemore: I would tell you, from our perspective, we haven’t seen a significant change. Again, the major issue, as we’ve already, I think, beating the dead on this is it’s a supply chain and logistics issue. We haven’t seen a dramatic turnaround and approach from any of the brands that have previously been out of an account going into an account. So there’s really — from our perspective, there’s still abundant opportunity to take more shelf space to bring more product forward to bring some of our new innovation for our slip-in technology, Arch Fit, et cetera. . So we still feel very good about those opportunities. Again, the biggest headwind that we continue to face is kind of on the logistics side, pure physical logistics. I would also just note because we watch the sell-through rates we see at our accounts, and we measure those against last year, a normalized year of 2019 and the metrics there continue to be very positive for the brand.
