With a spike in margins and a 43.5% sales hike with the help of Shape Ups and Tone Ups, Skechers USA’s Q1 earnings shot up nearly six-fold to $56.3 million, or $1.15 a share, from $8.2 million, or 15 cents, in the year-ago quarter. Double-digit improvement was seen in its Women’s, Men’s, and Work divisions with single-digit growth in Kids. Average prices grew $6.53, or 38%; and domestic pairs sold increased 10%.

 

Domestic and international wholesale backlogs grew 60%.

 

Domestic wholesale revenues increased 52%, pushed by the strong acceptance of new lines within its Skechers men’s and women’s collections. “We saw broad acceptance of our athletic product with an existing account and the opening of new accounts to support this new offering,” said David Weinberg,  Skechers COO, on a conference call with analysts.  “We supported our new men’s and women’s lines with print, outdoor and television campaigns, including spots during the Super Bowl and the Oscars. We believe this targeted advertising has created a halo effect with our many other Skechers lines, including our men’s sport and men’s and women’s USA, all of which saw growth in the quarter.”

 

SKX fashion brands posted a decline due to the closing of several lines last year and the changing trends. However, management said new styling has helped Zoo York return to double-digit growth this year.

 

International business improved by 24%, led by a 42% gain in the international subsidiary and joint venture businesses. Germany and Brazil were particularly strong. Skechers international distributor business was down by 18% as a result of the transition of Chile from a distributor to a subsidiary and weak economies in several countries.

 

Skechers combined domestic and international retail sales jumped 45% for Q1, with its domestic sales improving 40% and international vaulting 132%, which includes the addition of 10 stores from its distributor in Chile. Retail comps on a combined basis rose 30%. At year end, SKX had 250 company-owned stores and plans 20 to 25 openings this year.

 

Gross margins improved to 48.2% of sales from 36.5% of sales in Q1 2009 due to improved quality of inventory which resulted in reduced closeouts, strong product sales and higher margin product mix. Selling expenses increased to 7% of sales from 6.3% due to increased advertising and promotional expenses and higher tradeshow costs.

 

In the Q&A session, Weinberg said Skechers business is “growing more or at a higher percentage rate with athletic specialty because we were the most underutilized there,” and the brand is also adding new accounts with mom and pop independents. But he indicated the brand was growing across retail.

 

“We are gaining real dollar shelf space; probably at a higher rate even in some of our family footwear channels and some of the department stores,” said Weinberg. “So we continue to increase both store count and shelf space just about from top to bottom.”

 

He also said Skechers has not seen any resistance from newer toning lines priced 10% to 20% higher than past ones. But he noted that the average price gains in the quarter reflected improvement beyond its toning lines because Q109 was a closeout period for many of its styles.

 

“I think it is fair to say that weve had price increases in every category in all of our groups, because everything we have is brand-new product,” said Weinberg.