Shares of Skechers (NYSE:SKX) slumped on Thursday after the footwear company reported its first-quarter results. While earnings were in line with analyst expectations, revenue missed estimates. The stock was down about 11.3% at 11:30 a.m. EDT.
Skechers reported first-quarter revenue of $1.28 billion, up 2.1% year over year and $20 million below the average analyst estimate. Currency was a big problem during the quarter, knocking down sales by more than three percentage points. Adjusted for currency, Skechers' revenue rose 5.2%.
The international wholesale business grew by 8.7%, while the global retail business grew by 6.7%. That growth was partially offset by a steep 10.9% decline in the domestic wholesale business. Skechers had previously warned that the timing of Easter this year would hurt its sales in the first quarter.
Adjusted earnings per share came in at $0.73, down from $0.75 in the prior-year period and in line with analyst expectations. That adjusted figure backs out $0.02 worth of one-time discrete items. A much larger income tax expense compared to the prior-year period was responsible for the entirety of the earnings decline. Operating income rose 11.5% year over year thanks to higher revenue and lower operating costs.
Skechers expects to produce second-quarter revenue between $1.200 billion and $1.225 billion and earnings per share between $0.30 and $0.35. The midpoints of those ranges represent year-over-year growth of 6.9% and 12.1%, respectively. The revenue guidance includes an expected negative impact from currency.
Skechers CFO John Vandemore called the conditions "fairly challenging" in the first quarter. That was reflected in Skechers' growth rate, but the market may be overreacting to this report. Skechers' second-quarter guidance marks an improvement over its first-quarter results, although growth is certainly slower than it has been in the recent past.
The international business is still growing fast, even with the currency headwind, and Skechers still has a cash-rich balance sheet that will see it through whatever lies ahead. While the market punished the stock for Skechers' sluggish growth, there's still a lot for long-term investors to like.