Riding the toning craze, Skechers USA's Q2 sales catapulted 68.9% to $504.9 million, the highest in its 18-year history. Earnings grew to $40.2 million, or 82 cents a share, rebounding from a $5.9 million loss in the year-ago period. Earnings virtually doubled Street expectations and backlogs accelerated to triple-digit growth, up from high double-digits at the end of the first quarter.

Domestic wholesale revenues jumped 97.5%. Led by toning, triple-digit improvements were seen in its women's business. Men's toning product also showed strength in the quarter and kid's toning will soon be launched.  Second generation toning styles have tested well at key retail accounts and company-owned stores.

“We have just completed three weeks of product and marketing meetings with key accounts at our Manhattan Beach offices this week, and the reaction to our new offering for Holiday 2010 and Spring 2011 has been very positive,” said company COO/CFO David Weinberg on a conference call with analysts. “We are looking forward to delivering these fresh styles and believe consumers will continue to seek out our latest offerings.”

Double-digit gains were also seen in the men's, work and kids segments. Weinberg said growth was spread across divisions, mentioning heritage, men's and women's sport, work, active and kids, as well as its new toning lines.

Excluding toning, units were still up in men's, kid's and women's non-fitness.

The international wholesale business climbed 26%, primarily the result of strong improvements in the subsidiary and joint venture businesses, which were up 44% for the quarter.

Combined domestic and international retail sales were up just over 41% for the quarter. Domestic sales improved 40% and international retail, including 10 stores from its distributor in Chile, advanced 52.5%. Combined comps climbed 30%. At quarter-end, SKX had 262 company-owned Skechers retail stores after opening 13 stores in Q2, including one in both Charlotte and Atlanta, its first  Shape Ups store on Fifth Avenue in Manhattan, and its first airport store in Orlando. Nine more stores are scheduled for Q310, including two more Shape Ups stores in the Santa Monica Place Mall and Hollywood. Eight are planned for the fourth quarter.

Gross margins improved 600 basis points due to more in-line, in-demand inventory, combined with strong sell-throughs, a 50% increase in domestic pairs sold, and an increase in average price per pair of $5.96, or 31.5% per pair.

Inventories at quarter-end were $219.4 million, up 14.7% versus the same time last year. Said Weinberg, “We believe our inventory is clean and well positioned for the remainder of 2010.”

Asked in the call’s Q&A session about competitors coming into the toning space, Weinberg said, “It's fair to say that there are certainly more entrants, but we believe and we plan on continuing to be the most prolific builder and offering the widest variety of anything that any company could bring into this toning category. So I think that's still on track, and I think that's where we are now.”

>>> The big upside here, and what retailers are talking about, is the move to lower profile toning product in addition to the rocker bottom look others are chasing.  This is not a one-trick pony, but rather a foundation for a performance business…