Heelys Inc. said general economic weakness and bad weather in the Northeast and Midwest sank sales during the first quarter ended March 31, but improved cost cutting measures helped minimize the company’s net loss.


Revenues for the wheeled footwear manufacturer fell 28.1% to $6.7 million from $9.2 million in the year-ago quarter on domestic and international sales that plummeted 22.8% and 30.0%, respectively. The net loss narrowed slightly to $1.2 million, or 4 cents per diluted share, from a net loss of $1.3 million, or 5 cents per diluted share, in q1 last year. Gross margins for the quarter were 47.9% of net sales up considerably from the 36.7% margin in the year-ago period.


Management said the decrease in domestic sales was due to lower unit sales and decreased sales to discount retailers, which they said was a result of having lower level of older product in available inventory.


International sales reportedly suffered from lower unit sales and a decrease in sales to independent distributors in Japan and a decrease in sales in the German and French markets.


SG&A expenses, excluding litigation settlements and related costs, were $4.2 million compared to $5.1 million in the first quarter of last year.


Litigation settlements and related costs incurred during Q109 were related to the class action lawsuit (filed in August 2007), the shareholders’ derivative lawsuit (filed in October 2007) and the individual lawsuit (filed in May 2008).   The lawsuits were settled during the third and fourth quarters of 2009.


CEO Tom Hansen said HLYS plans to introduce two new products during the summer months with “appropriate marketing spending” through the end of the year.