Skechers USA reported a drop of 54.9 percent to $49.1 million in its net earnings for the first quarter ended March 31 on 2.7 percent lower revenues of $1,242 million. In terms of local currencies, sales were down by 1.2 percent, with a small increase of 2.9 percent in the U.S. offset by a big 6.8 percent decline in the rest of the world.

On a comparable store basis, retail sales were off by 4.7 percent in the U.S. and by 16.6 percent internationally, due to the coronavirus epidemic. In the first two months of the quarter, Skechers’ comparable store sales rose by 9.8 percent. After most of its stores were locked down, the company’s e-commerce operations boomed, leading to an overall increase of 70 percent for the online channel during the quarter.

Wholesale revenues were up by 9.0 percent in the U.S. In the rest of the world, wholesale revenues declined by 8.4 percent, driven down by a 47 percent slump in China. A 9 percent gain at the company’s foreign sales subsidiaries was offset by a drop of 39 percent at the company’s foreign joint ventures. Sales to distributors were still up by one percent. The management mentioned Germany, Central and Eastern Europe, Scandinavia, Turkey, Japan and Australia as bright spots.

The international wholesale business was hit by a drop of 4.2 percentage points in its gross margin, down to 41.8 percent, which led to a decline of 2.2 percentage points to 44.1 percent in the overall gross margin. Higher expenses on new stores and digital marketing, rebates granted to Chinese wholesale clients and the acquisition of its distribution in Mexico caused Skechers’ operating expenses to grow by $78.3 million in the quarter. The operating margin plunged to 3.6 percent from 13.0 percent in the year-ago period.

The number of company-owned stores increased by 11 units, while the number of franchised stores declined by seven units. Store lockdowns caused Skechers’ inventories to swell by 33 percent.

The management expressed confidence that Skechers will remain “a leading footwear brand” after the corona-induced disruption is over, judging from the brand’s strong performance prior to the pandemic, but it declined to provide any financial guidance for the balance of this year.

It noted that the company’s e-commerce was up by 250 percent in the first few weeks of the second quarter as compared to a year ago and that demand from third-party e-tailers had increased as well. The offline retail business in China is operating at about 70 percent of its normal level.

Skechers noted that it has implemented various measures to optimize its cash position, drawing down $490 million on its senior unsecured credit facility, managing operating expenses, inventory levels and production orders, and postponing non-critical capital expenditures. Managers have taken a cut in their compensation.

The quarterly results were largely in line with analysts’ expectations, l