After passing the $1 billion revenue threshold in the fourth quarter of 2018, Skechers USA ended up again with record sales in the first quarter. They reached $1,280 million, an increase of 2.1 percent over the year-ago quarter. In constant currencies, revenues increased by 5.6 percent. This was fueled by the company's uninterrupted international growth.
While sales abroad jumped by 9.3 percent – or by 15.0 percent in constant currencies – to represent 57.8 percent of total revenues, domestic sales declined by 6.3 percent.
However, shares fell by 13 percent in pre-market trading on Thursday after the footwear maker missed analysts' expectations about the company's profits. Its net income fell by 7.6 percent from the year-ago quarter to $108.8 million. The gross margin was also slightly lower, dipping by 0.4 percentage points as improved margins in the company-owned domestic retail business were offset by lower international margins from higher discounts and negative foreign exchange impacts.
Nevertheless, the management said the momentum it experienced in 2018 is continuing, and the focus has been on designing and delivering relevant product across all genders and categories and supporting it with targeted marketing for the company's diverse consumer base.
In the quarter, Skechers shipped a record number of pairs from its distribution centers in Japan and Europe, and it saw strong growth within its international distributors' network and in its joint ventures, including China. To further build its global business, it converted its joint venture in India to a wholly-owned subsidiary, and it finalized a joint venture agreement with its distribution partner in Mexico earlier this month. The management expects these investments to be accretive in 2019.
In a conference call, the management said that it recorded strong growth in India. China and Europe performed well, but the company faced currency headwinds in these markets. After several difficult quarters, Japan and Korea bounced back, while Latin America were close to ending the quarter in the positive.
Skechers' GOrun Razor 3 Hyper received the Editor's Choice award from Runner's World during the quarter. The brand was on Fashion Week runways in Berlin and London, and launched both a new men's campaign during the Super Bowl with football legend and broadcaster Tony Romo and a fresh women's campaign with the pop superstar Camila Cabello, who appeared in Skechers D'Lites in store windows and magazines and on television and billboards around the world.
The management said that Skechers is continuing to capitalize on the chunky trend it developed with heritage styles for both men and women, with new styles shipping around the world throughout 2019.
By segments, the company's international wholesale business rose by 8.7 percent, the company-owned global retail operations improved by 6.7 percent, and the domestic wholesale business fell by 10.9 percent. Comparable store sales in company-owned stores and e-commerce edged up by 0.7 percent, including growth of 0.2 percent in the U.S. and 2.3 percent internationally. This excludes 61 stores in India that recently transitioned from third-party to company-owned operations.
For the second quarter of 2019, the company believes it will achieve sales in the range of $1,200 million to $1,225 million. This guidance takes into account the impact of existing foreign exchange headwinds and the commencement of joint-venture operations in Mexico.