Heelys, Inc.'s revenues improved 19.7 percent in the first quarter, to $7.3 million but lower margins caused its net loss to expand to $1.6 million, or 6 cents a share, from $1.2 million, or 4 cents, the prior year.
Domestic sales grew 23.5 percent to $2.1 million, primarily as a result of broader distribution of Heelys wheeled footwear. International sales increased 15.9 percent to $5.1 million, primarily the result of increased sales to third party distributors, growth in Japan, and sales of new product lines. While sales of Heelys-wheeled footwear were down in France and Germany, the declines were offset by sales of Blazer Pro and District scooters and accessories and Tony Hawk skateboards.
Gross margins eroded to 44.3 percent in the quarter from 49.3 percent due to greater sales of lower margin products in the U.S. and mix changes internationally. The bottom line was also impacted by $546,000 in severance and other charges related to its decision to close its office in Brussels, Belgium.
On a conference call with analysts, Tom Hansen, CEO, noted that the period represented Heelys' fourth consecutive quarter of year-over-year sales increases in the U.S. Said Hansen, “While we are pleased with the results, we expect international sales to continue to be subject to unstable economic conditions, especially in Europe, but potential new distributors in Central and South America, eastern Europe and southeast Asia should add volume as we complete contracts and they come online throughout the year.”
