User Agreement

By accessing or using this Tremblant Capital ("Tremblant") web site (the "Site"), you hereby accept and agree to comply with the terms and conditions set forth in this User Agreement. This User Agreement is a binding agreement between you and Tremblant, and governs your access and use of the Site, which includes any text, graphics, user interfaces, visual interfaces, information, data, tools, products, services and other content (together, "Content") and the design, structure, selection, coordination, expression and arrangement of the Content on or through the Site. You may contact Tremblant by e-mail (legal@TremblantCapital.com) with questions about the terms and conditions of this User Agreement.

PLEASE READ THIS USER AGREEMENT CAREFULLY BEFORE USING THE SITE. EACH TIME YOU USE THE SITE, YOUR USE INDICATES YOUR FULL ACCEPTANCE OF AND AGREEMENT TO ABIDE BY THIS USER AGREEMENT IN ITS THEN CURRENT FORM. IF YOU DO NOT ACCEPT THE TERMS AND CONDITIONS STATED IN THIS USER AGREEMENT, DO NOT USE THE SITE.

1. Tremblant grants you a limited right to use the Site.

  • Your right to use the Site is subject to your agreement to abide by this User Agreement in its entirety, as well as any other rules, procedures, policies, terms or conditions that govern all or any portion of the Site.
  • You may not disclose any Content to any third party, except to your financial, legal or tax advisors, and others with whom you share investment decisions.
  • At any time and for any reason we may revoke your right to use all or any portion of the Site.
  • You may not violate or attempt to violate the security of the Site.

2. The Site is owned by Tremblant, its affiliates and/or third parties.

  • The Site is protected by one or more copyrights, patents, database rights, trademarks, servicemarks and/or other intellectual property and proprietary rights that are owned by Tremblant, its affiliates and/or third parties.
  • You may not decompose, decompile, reverse engineer, disassemble or otherwise deconstruct all or any portion of the Site.
  • You may not publish, broadcast, retransmit, reproduce, repackage, frame, commercially exploit, create any derivative of or otherwise redistribute all or any portion of the Site except as explicitly permitted in this User Agreement.
  • You may print copies of any accessible portion of the Site only for your own personal use. You may discuss information that you learn from the Site with your financial, legal or tax advisors, and others with whom you share investment decisions.
  • You may not remove any copyright, trademark or other proprietary notice or legend contained on (or printed from) the Site.

3. You make certain representations and warranties regarding your use of the Site.

  • You represent and warrant that: you have full authority and all rights necessary to enter into and fully perform all of your obligations pursuant to this User Agreement; you have not and you will not enter into any agreement or perform any act which might contravene the purposes and/or effects of this User Agreement; and you will not delete any Content.
  • The Content may contain information, including fund terms, relating to funds in which you are not currently invested. By accessing this website, you acknowledge that you have requested for the Content to be made available to you and that this request does not arise from any Tremblant marketing.

4. All Content is for informational purposes only.

  • Nothing on the Site is an offer or solicitation to buy or sell any security.
  • Although the Site may include investment-related information, nothing on the Site is a recommendation that you purchase, sell or hold any security or other investment, or that you pursue any investment style or strategy.
  • We do not give any advice or make any representations through the Site as to whether any security or investment is suitable to you or will be profitable.
  • Nothing on the Site is intended to be, and you should not consider anything on the Site to be, investment, accounting, tax or legal advice.
  • If you would like investment, accounting, tax or legal advice, you should consult with your own financial advisors, accountants or attorneys regarding your individual circumstances and needs.
  • THE PAST PERFORMANCE OF ANY INVESTMENT, INVESTMENT STRATEGY OR INVESTMENT STYLE IS NOT INDICATIVE OF FUTURE PERFORMANCE.

5. There are various risks you assume in relying on the Content.

  • Dated Content speaks only as of the date indicated.
  • We make reasonable efforts to provide accurate Content, but at times we may not promptly update or correct the Site even if we are aware that it is inaccurate, outdated or otherwise inappropriate.
  • We may change all or any portion of the Site at any time without notice to you.
  • We do not endorse the opinions of, or warrant the accuracy of facts or other Content contributed by, any third party.
  • You agree that we are not liable for any action you take or decision you make in reliance on any Content.

6. Tremblant is not liable for any technological problems and any impact that they may have.

  • All or any portion of the Site may not be available and may not function properly at any time.
  • We make reasonable efforts to avoid technological problems, but at any time the Site may have and may cause technological problems such as viruses and other damaging computer programming routines or engines.
  • We take reasonable security precautions when using the Internet, telephone or other means to transport data or other communications, but we disclaim liability for any interception of data or communications.
  • We make reasonable efforts to ensure that the Site is secure but we do not guarantee the security of the Site.
  • We are not liable for any damage or injury caused by the performance or failure of performance of all or any portion of the Site.
  • We are not liable for any defects, delays or errors in or resulting from your use of the Site.

7. Tremblant is not responsible for information on any third party web site that is referred in, or accessible or connected by hyperlink to, the Site.

  • If you access any third party web site through the Site or otherwise, you do so at your own risk.
  • Hyperlinks to or from the Site do not constitute third party endorsement of, sponsorship by or affiliation with us.

8. Tremblant has the right but not the obligation to monitor and record activity on the Site and respond as it deems appropriate.

  • We may monitor and record activity on the Site for any reason or for no reason.
  • We may investigate any complaint or reported violation of our policies.
  • We may report any activity that we suspect may violate any law or regulation to regulators, law enforcement officials or other persons or entities that we deem appropriate.
  • We may issue warnings, suspend or terminate use of the Site, deny access to all or part of the Site or take any other action that we deem appropriate.

9. Tremblant will abide by its privacy policy.

  • Personal nonpublic information that we gather from you will be governed by our Privacy Policy.

10. TREMBLANT DISCLAIMS ALL WARRANTIES WITH RESPECT TO THE SITE THAT THE LAW ALLOWS IT TO DISCLAIM.

  • THE SITE IS PROVIDED "AS IS" AND "AS AVAILABLE."
  • WE DISCLAIM ALL REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND WITH RESPECT TO THE SITE INCLUDING WARRANTIES OF
    -MERCHANTABILITY,
    -FITNESS FOR A PARTICULAR PURPOSE AND
    -NON-INFRINGEMENT OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.
  • WITHOUT LIMITING OUR GENERAL DISCLAIMER, WE DO NOT WARRANT THE AVAILABILITY, ACCURACY, COMPLETENESS, TIMELINESS, FUNCTIONALITY, RELIABILITY, SEQUENCING OR SPEED OF DELIVERY OF THE SITE OR ANY PART OF THE CONTENT.
  • TREMBLANT'S LIABILITY WITH RESPECT TO THE SITE IS LIMITED TO THE MAXIMUM EXTENT PERMITTED BY LAW.
  • IN NO EVENT WILL WE OR ANY OF OUR AFFILIATES, AGENTS OR EMPLOYEES BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES HOWEVER CAUSED ARISING OUT OF THIS USER AGREEMENT, THE SITE, OR THE INABILITY TO USE THE SITE.
  • OUR LIABILITY IS LIMITED EVEN IF WE HAVE BEEN ADVISED OF THE POSSIBILITY OF THE DAMAGES THAT YOU SUFFER OR IF ANY REMEDY YOU HAVE FAILS OF ITS ESSENTIAL PURPOSE.
  • UNDER ALL CIRCUMSTANCES, THE MAXIMUM LIABILITY OF TREMBLANT, ITS AGENTS AND EMPLOYEES TO ANY USER OF THE SITE WITH RESPECT TO THE SITE IS $100.
  • THIS DISCLAIMER OF LIABILITY APPLIES TO ANY AND ALL DAMAGES OR INJURY, INCLUDING THOSE CAUSED BY ANY FAILURE OF PERFORMANCE, ERROR, OMISSION, INTERRUPTION, DELETION, DEFECT, DELAY IN OPERATION OR TRANSMISSION, COMPUTER VIRUS, COMMUNICATION LINE FAILURE, THEFT, DESTRUCTION OR UNAUTHORIZED ACCESS TO, ALTERATION OF OR USE OF ANY ASSET, WHETHER FOR BREACH OF CONTRACT, TORTIOUS BEHAVIOR, NEGLIGENCE OR UNDER ANY OTHER CAUSE OF ACTION.

11. You will be responsible for any liability to Tremblant that arises out of your breach of this User Agreement or your use of the Site.

  • You agree to indemnify and hold harmless Tremblant and its affiliates, agents, employees and third party sources from and against any and all suits, losses, claims, demands, liabilities, damages, costs and expenses (including reasonable attorneys' fees) that arise from or relate to: -your use of the Site,
    -your breach of this User Agreement or any representation, warranty or covenant made by you in this User Agreement,
    -your violation of any applicable law, statute, ordinance, regulation or of any third party's rights, or
    -claims asserted by third parties which, if proven, would place you in breach of representations, warranties, covenants or other provisions contained in this User Agreement.

12. You will be bound by revised versions of this User Agreement that Tremblant posts on the Site.

  • Modifications will be effective immediately upon posting unless we indicate otherwise.
  • Your use of the Site indicates your full acceptance of this User Agreement in its then-current form each time you use the Site.

13. New York law governs this User Agreement.

  • This User Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard for the conflict of laws principles thereof. Each party hereby consents to the jurisdiction of both the state and federal courts of New York. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding relating to this User Agreement.

14. You are bound by certain other general conditions.

  • We may assign this User Agreement in whole or in part at any time without your consent. You may not assign this User Agreement or delegate any of your obligations under this User Agreement. Any purported assignment of this User Agreement in violation of its terms is void.
  • If any provision of this User Agreement is found invalid or unenforceable, that provision shall be enforced to the maximum extent possible and the remaining provisions of this User Agreement shall remain in full force and effect.
  • This User Agreement constitutes the entire understanding, and supersedes all other understandings, between you and Tremblant concerning the subject matter hereof.

Privacy Policy

Tremblant Capital ("Tremblant") does not disclose nonpublic personal information about our clients or former clients to third parties other than as described below.

Tremblant collects personal information about you in connection with our providing advisory services to you or in correspondence and conversations with Tremblant’s representatives. This information may include other information such as your:

  • Social security number;
  • Assets;
  • Investment experience;
  • Transaction history;
  • Income; and
  • Wire transfer instructions.

Tremblant collects this information from you through various means. For example when you give Tremblant your contact information, enter into an investment advisory contract with us, buy securities (i.e., interests in a fund) from Tremblant, tell Tremblant where to send money, or make a wire transfer. Tremblant also may collect your personal information from other sources, such as our affiliates or other non-affiliated companies.

All financial companies need to share customers’ personal information to run their everyday business and Tremblant uses the personal information we collect from you for our everyday business purposes. These purposes may include for example:

  • To provide advisory services to you;
  • To open an account for you;
  • To process a transaction for your account;
  • To market products and services to you; and
  • To respond to court orders and legal investigations.

Tremblant may provide your personal information to our affiliates and to firms that assist us in servicing your account and have a need for such information, such as a broker or fund administrator. Tremblant may also disclose such information to service providers and financial institutions with whom we have joint marketing arrangements (i.e., a formal agreement between nonaffiliated financial companies that together market financial products or services to you, such as placement agents). Tremblant requires third-party service providers and financial institutions with which we have joint marketing arrangements to protect the confidentiality of your information and to use the information only for the purposes for which we disclose the information to them. These sharing practices are consistent with Federal privacy and related laws, and in general, you may not limit our use of your personal information for these purposes under such laws. Tremblant notes that the Federal privacy laws only give you the right to limit the certain types of information sharing that we do not engage in (e.g., sharing with our affiliates certain information relating to your transaction history or creditworthiness for their use in marketing to you, or sharing any personal information with nonaffiliates for them to market to you).

To protect your personal information from unauthorized access and use, Tremblant uses security measures that comply with Federal law. These measures include computer safeguards and secured files and buildings.

This Site may use "cookies," which from time to time automatically collect certain information and data. "Cookies" are small pieces of data sent to your computer browser from our web server and stored on your computer's hard drive. The data identifies you as a unique user and facilitates your ongoing access to and use of this web site. Cookies also help us diagnose problems with our server.

Proven Investment Strategy

Capitalizing on consequential change since 2001

Tremblant is a long-term oriented investor that seeks to double our investment in three years or less. Our investment strategy is based on identifying companies with significant upside that we expect to be realized over a medium to longer-term horizon. As a result, Tremblant generally expects to hold long positions for two to three years and short positions for one to two years. Tremblant also seeks to partner with our clients. An advanced institutional infrastructure and strong emphasis on customer service gives us the resources to meet our clients’ needs.

Investment Process

Tremblant Capital employs a long-term, fundamental, bottom-up approach to investing that relies on extensive proprietary research to identify equities trading at a material dislocation from fair value. Key to Tremblant Capital’s investment approach is an expertise in recognizing and evaluating consequential changes, as they are often the catalyst for compelling opportunities. In particular, secular changes in consumer behavior often result in accelerating, rather than linear, growth rates that are frequently underappreciated by the marketplace. It is in such instances that our estimates of a company’s future earnings power can diverge significantly from consensus and lead to an investment with considerable upside. Importantly, our research seeks to differentiate real consequential change from short-lived trends or fads. As a result, Tremblant Capital generally expects to hold long positions for two to three years and short positions for one to two years. The fundamental analysis includes in-depth research on both the business and financial models of a potential investment.

Step 1

Idea Generation

Identify a company that may be trading at a significant price dislocation due to an underappreciated, consequential change.

We identify and analyze consequential, disruptive changes and seek companies that are likely to be beneficiaries or casualties of these shifts

We determine if there is a reasonable likelihood that these companies are trading at a material dislocation from fair value

Various idea sources include industry relationships/networks, management team meetings, site visits, trade publications, supply/demand analytics, and industry conferences

Step 2

Research & Evaluation

Deep fundamental research is used to determine if we have a variant perception of the company’s future earnings power and to formulate upside/downside price targets.

Business Model Analysis

Understand the company’s source of competitive advantage

Assess the quality of the company’s management team

Study and analyze industry trends and dynamics

Analysis of the material environmental, social, and corporate governance risk factors

Financial Model Analysis

Forensic review of historical financial statements and “Quality of Earnings”

Analysis of key drivers of financial performance and possible variables

Formulate upside and downside scenarios and associated price targets

Data Sciences Group

Execute custom research projects for analysts on both portfolio and watch-list securities

Proprietary work includes data extraction and analytics, surveys, channel checks, and product testing

Historical cumulative database and project library is used to analyze longer-term trends

Step 3

Portfolio Construction & Risk Management

Portfolio Construction is primarily determined by our conviction and assessment of each position's risk/reward.

Tremblant's CIO works with each Sector PM to size positions optimally and to adjust exposures based on market conditions

Tremblant Sector PMs construct an optimal set of positions within their area of expertise and established risk guidelines

Tremblant’s Investment/Risk Committee, led by Mr. Barakett, provides a system of checks and balances to ensure capital is allocated to the ideas with the highest conviction and the most compelling risk/reward profiles

Investment Strategies

Tremblant is focused on partnering with our clients to help them achieve their investment goals. As such, Tremblant offers several equity strategies and managed accounts. Tremblant is registered with the U.S Securities and Exchange Commission as a Registered Investment Adviser and is a Qualified Professional Asset Manager under ERISA. Additionally, Tremblant acts as a sub-adviser for strategies that are compliant the European Commission's UCITS regulatory framework.

Long/Short
Equity Strategies

Long-Only
Equity Strategies

Bespoke Client
Strategies

ETF
Tremblant Header

December 1, 2021

CC: Skechers Board of Directors

David and John,

Thank you for spending half a day helping us better understand the impressive business that you, the Greenberg family, and the entire team have thoughtfully built over the past thirty years. As we examine your market opportunity, product, pricing, brand, and distribution capabilities we remain extremely enthusiastic about the future of Skechers.

As long-term shareholders, we share your view that the best way to create lasting shareholder value is by growing the brand. Following our distribution center (“DC”) tour, we understand the capital investments in your DC will support growth, improve your e- commerce capabilities, reduce labor costs, and increase optionality through potential drop- ship partnerships down the road. Additionally, we appreciate the progress towards diversifying your board (Ms. Blair’s appointment in May 2019), additional communication on ESG topics such as sustainable materials and Uyghur labor concerns (March 2020), and instituting annual guidance (April 2021). We believe these changes improve both your business and the investment case.

Since Skechers has been among our top holdings for years, we are frequently asked by our own investors, “Why is Skechers so inexpensive?” Honestly, this question is puzzling to us as well since the fundamentals of your business are better than peers over an extended period of time. Specifically, over the past decade, Skechers has grown revenue faster than Nike, Adidas, Puma, Under Armour, Crocs, and any other relevant peer. While Skechers’ margins are lower, we remain confident in the margin progression and in the view that Skechers’ margins have greater upside potential than peers. Despite these impressive facts, Skechers continues to trade at less than half of the earnings multiples of these peers. In our experience, the businesses with the highest sustainable growth tend to trade at premium multiples over peers, not discounts.

Skechers is unique among its peers because the founding family continues to control the business through super-voting shares. The evidence would suggest that the Greenberg family has proven to be arguably the best management in all of footwear in recent years. However, we often hear concerns about SG&A volatility, lack of dividends, lack of buybacks, lack of capital markets days, lack of internal investor relations, and frequent share sales by insiders. Those not involved in the stock (or in some cases short) point to these factors and suggest that the family is not truly focused on shareholders. This narrative is limiting value creation for all shareholders, including the Greenberg family.

We know management is highly aligned with shareholders as the Greenberg family owns ~1.1B of stock. However, we believe our suggestions could create greater than $4B of incremental value over the next ~10 years just for the Greenberg family alone, and we are happy to walk you through our assumptions. Most of these concerns can be addressed relatively easily. We believe once those concerns are addressed, shareholders will likely feel so aligned with management and the Greenberg family that unease around the founding family dynamics will dissipate, driving the multiple higher and creating tremendous value for all shareholders. Beyond the obvious shareholder value creation, we believe a higher share price would create additional value by attracting more top talent, motivating employees through RSU’s, and allowing potentially accretive acquisitions down the road.

We suggest the following:

  • Eliminate the Dual Share Class Structure (by removing super-voting shares)
    • In our view, this is the single largest overhang on the stock. While we are not suggesting any changes to the day-to-day operations of the business, this change would reassure the market that Skechers will continue to be run in shareholders’ best interests.
    • We believe the family absolutely should continue to hold the same key management positions and significant Board representation.
  • Initiate an Aggressive Buyback
    • We believe Skechers can conservatively buyback ~40% of the business over the next 10 years (unless there is material multiple expansion during that period) while still continuing to build a net cash balance sheet.
      • This results in a greater than 60% uplift to EPS in year 2030 (versus no buybacks)
    • This additional EPS growth and prudent capital allocation should close the multiple gap over time creating another ~100% upside (because peers trade at more than twice SKX’s current forward multiple)
      • We do not expect this multiple gap to close quickly. Additionally, as long-term shareholders, we hope that the multiple remains low so the company can buyback more shares!
    • Lastly, this would highlight that your own shares are more attractive than any potential acquisition in the market right now which is something we strongly believe
  • Initiate a Dividend
    • Even a small dividend reduces the need for insider share sales
    • Attracts a more diverse investor base
    • Reduces total shareholder return volatility
    • Illustrates the sustained earnings power of the business
  • Host a Capital Markets Event
    • Shows the active engagement of management with shareholders
    • Highlights the value of higher growth, under-earning markets where shareholders have historically received little detail and thus been unwilling to ascribe value
    • Explains the expense savings achieved through significant DC investments in recent years, and the corresponding increase in excess cash flow going forward
    • Provides a forum in which to show a clear path to medium-term revenue and earnings targets, reducing focus solely on quarterly results
  • Internal Investor Relations
    • Someone working closely with John Vandemore (CFO) should be able to host more prospective investor conversations, allowing the company to cast a wider net for interested investors
    • Consistent with other players in the industry, it shows a concern for shareholders and it frees up more of John’s time for other responsibilities including growth strategy, capital allocation, and expense management

As promised, we have sent The Outsiders by William Thorndike. We hope that you will share these copies with the Greenbergs and other Board members as we believe these detailed examples of eight CEOs whose stocks outperformed the S&P by over 20x during their tenures are quite powerful. More importantly, their strategies are repeatable and applicable in the case of Skechers as it is a sustainable, highly cash generative business trading at an inexplicably low multiple. This creates the opportunity to generate many billions of dollars in value for the Greenberg family and other shareholders through thoughtful capital allocation that focuses on maximizing long-term shareholder value.

We look forward to continuing the discussion. Once again, thank you for taking the time to explain some of the exciting aspects of your business at your DC recently.

Sincerely,

Brett Barakett, Austin Stephen, and Bryan Walsh

Tremblant Capital Group