Boosted by robust gains internationally and some improving trends in the U.S., Skechers USA reported first-quarter earnings and sales that easily topped its guidance.

Highlights of the quarter included a 16.8 percent quarterly increase in its international wholesale business and a 12.8 percent increase in its worldwide company-owned Skechers retail stores, which included retail comps of 2.9 percent, said David Weinberg, EVP, COO and CFO, on a conference call with analysts.

Domestic wholesale business was relatively flat as it shipped 4.5 percent more pairs than the first quarter of last year but had a decrease in average price per pair of 4.8 percent, or $1.10 per pair. The decline in average selling prices was due to a shift in product mix including strong sales in its sandals and casual lines and BOBS from Skechers. Domestic sales were also impacted by the Easter shift in the second quarter of 2017 and one less day in February.

Worldwide backlog is up low double digits, with domestic backlog ahead mid single digits.

Overall, revenues in the quarter climbed 9.6 percent to $1.07 billion, marking Skechers’ first billion-dollar quarter in its 25-year history. Results came in at the top end of its guidance calling for sales in the range of $1.05 billion and $1.075 billion.

Net earnings dipped 3.4 percent to $94 million, or 60 cents a share, due to ongoing investments to support international growth. Guidance had been between 50 to 55 cents a share.

In its domestic wholesale segment, numerous marketing campaigns arrived in the quarter to support its brands, including new executions with Rob Lowe, Brooke Burke-Charvet and Meghan Trainor, along with other campaigns supporting its men’s and women’s lifestyle lines. In addition, a new campaign for Kid’s Memory Foam and lighted footwear for kids was introduced. On the performance side, Skechers sponsored both the Los Angeles Marathon and Houston Marathon and ran commercials for GOrun and GOwalk footwear as well as for its expanding GO Golf collection, which included its golf ambassadors, Matt Kuchar, Russell Knox, Billy Andrade, Brooke Henderson and Wesley Bryan

Weinberg said Skechers continues to be the leading resource for walking, work and casual footwear across its key domestic accounts and “we’re focused on maintaining our position on the floor while managing our inventory flow.”

More key styles will be emphasized in the current challenging retail climate. Said Weinberg, “While we are cautious due to the closing of numerous stores in 2016 and again in the first quarter of 2017, we remain optimistic and poised to move quickly to fulfill consumer demands in our dedicated wholesale accounts.”

The overall 16.8 percent gain internationally was primarily due to growth in Asia and the Americas. The increases were the result of growth of 17.6 percent, or $61.5 million, in its subsidiary and joint venture businesses and 12.5 percent, or $8.9 million, in its distributor business.

Sales increases within its subsidiary business came primarily from Canada, Chile, Spain, Central Eastern Europe and Latin America. While the United Kingdom delivered 6.1 percent sales growth in local currency, sales in the country were down 8.2 percent in dollars due to currency headwinds. The bankruptcy filing of budget footwear chain Brantano in the U.K. also led to canceled orders.

Joint ventures sales grew by 52.9 percent for the quarter, led by a 39.6 percent gain in China and an 85.1 percent increase in India. Joint ventures are also beginning to benefit from the transition of its distributors in Israel and South Korea in the second half of 2016. Overall, international wholesale now represents the largest piece of its three distribution channels, making up 45.7 percent of its total business.

In its retail segment, domestic company-owned retail store sales increased by 8.2 percent and international retail stores sales by 28 percent for a combined worldwide retail sales increase of 12.8 percent. This included positive comp-store sales of 1.5 percent domestically and 8.2 percent in its international stores, for a combined total comp-store sales increase of 2.9 percent. Online sales grew 23.5 percent.

Gross margins increased to 44.4 percent compared to 44.2 percent.

Selling expenses increased to 6.9 percent of sales compared to 5.5 percent due to higher international advertising and sales commissions, primarily related to its international subsidiaries and joint ventures. General and administrative expenses were 26.3 percent of sales compared to 24.8 percent. Earnings from operations decreased 10.2 percent to $124.4 million.

Looking ahead, Skechers projected second-quarter earnings to land in the range of 42 to 47 cents a share, slightly down from 48 cents a year ago. Revenues are expected between $950 million to $975 million, representing a gain of around 10 percent versus $877.8 million a year ago.

“We are pleased with the growth and position we achieved and maintained in the first quarter of 2017,” said Weinberg. “We ended the first quarter with low-double-digit increases in backlog on a worldwide basis with all of our business units up a minimum of mid single digits. Already in April, we’ve achieved high-single-digit comps in our company-owned retail stores, which also benefited from Easter falling into this month.”

Photo courtesy Skechers