Image source: The Motley Fool.

Growth is slowing at Skechers (SKX 0.25%), and investors are paying the price. Shares of the country's second-largest footwear brand plunged 22% on Friday after Skechers posted its weakest top-line growth in nearly four years.  

Revenue clocked in at $877.8 million, 9.6% ahead of where it was for last year's second quarter. After posting three consecutive quarters of year-over-year growth of roughly 27%, Skechers is proving mortal. You have to go all the way back to the third quarter of 2012 to find the last time that revenue growth didn't break into the double digits.

Most of the growth came from the Skechers brand flourishing overseas. Its international subsidiary and joint venture business rose 34.6% since the prior year with its international company-owned retail stores growing even faster. Closer to home, company-owned retail sales rose 15.4%. The drag on results was a 5.4% dip in its domestic wholesale business.

This isn't a surprise. Skechers did credit robust wholesale growth three months ago on a shift of orders from April last year to March this time around as a result of the timing of the Easter holiday. It's a move that inflated the first quarter's performance at the likely expense of the second quarter.

Room to run

Image source: Skechers.

The silver lining in the emphasis shifting away from wholesale and toward international and retail is that gross margin moved higher for the period. However, it wasn't enough to save a dip in bottom-line results. 

Net earnings were $79.8 million or $0.48 a share. It rang up a profit of $0.52 a share a year earlier. Unfavorable foreign exchange moves, a fire in its Malaysian warehouse, and an uptick in G&A overhead as a result of additional VAT taxes in Brazil weighed on its profit potential.

The market obviously didn't appreciate the financial update, but the factors weighing on its net margin make sense. Skechers also elaborated on its wholesale business weakness during its subsequent conference call. April was predictably rough given the Easter timing shift, but that brutal 25% year-over-year plunge had started to stabilize in May before turning positive in June. 

Skechers continues to grow its retail presence. After opening 133 stores during the quarter, the store count stood at 1,548 as of the end of June. Most of those retail outlets -- 1,144 -- are outside of the U.S. market.

Growth should improve during the current quarter. Skechers' guidance is calling for $950 million to $975 million in net sales. That's top-line growth of 10.7% at the low end, thrusting growth back into the double digits. With wholesale momentum bouncing back and international sales growth continuing to pad its lead as the company's biggest segment, the fundamentals at Skechers may not seem as dire as Friday's stock activity.