The weak retail environment continued to drag down Skechers USA Inc.'s domestic wholesale revenues in Q109 and to a lesser degree, internationally. While earnings were down from the prior year, however, a continued focus on managing expenses and inventory drove significant profit improvements over the fourth quarter of 2008.
Skecher's Q1 domestic wholesale business decreased 18%.
On a conference call with analysts, Skechers COO David Weinberg said an overall reduction in orders “reflects the extremely cautious stance” around inventory planning by its retail partners.
Several lines – including Skechers Sport for Men, Unlimited by Marc Ecko, Zoo York for Women and its fashion kids' collections – experienced “solid sales” in the quarter, he said. New brands at BEBE Sport and Punkrose “exhibited strong initial showings.”
The Skechers international wholesale business was essentially flat for the quarter, primarily due to the strengthening U.S. dollar and declining economies in select regions. International subsidiary sales were down 5% on a U.S. dollar basis, but up 8% in pairs shipped in the first quarter. Strong markets were Germany and Chile. Combined domestic and international owned-retail sales were flat for the first quarter. Domestic comps were down 7%.
When looking for something positive in the results, SKX said that while first quarter margins were 36.5% versus 44.7% a year ago, they noted that it was a marked improvement over the 31.9% margins in Q4 2008. SG&A expenses were reduced by $5.2 million in spite of 29 more retail stores being operated in Q109 and additional start-up expenses of $3.8 million related to China and Brazil. Earnings were also helped by a reduction in income tax expense of $1.9 million or 4 cents a share, related to an over-accrual of income tax expenses.
