Skechers USA Inc. ( SKX - Analyst Report ) , the designer, marketer and distributor of footwear, recently reported wretched second-quarter 2011 results. Weak top-line performance coupled with the company’s aggressive inventory offloading and added product reserve, weighed upon its bottom-line results. Consequently, Skechers delivered a loss of 62 cents a share.

However, excluding the effects of inventory offloading and added product reserve, Skechers delivered a loss of 31 cents a share, which came down sharply from the earnings of 82 cents posted in the prior-year quarter. The quarterly loss fared better than the Zacks Consensus Estimate loss of 34 cents a share.

Skechers, which competes with Deckers Outdoor Corporation ( DECK - Analyst Report ) , stated that total net sales for the quarter dropped 14% to $434.4 million from the prior-year quarter, reflecting a decline in demand of toning shoes. The reported revenue also came below the Zacks Consensus Estimate of $438 million.

Skechers sold 2 million pairs of Shape-ups for a loss of $21 million to right-size its inventory. Consequently, total inventories at the end of the quarter under review were $325.8 million, reflecting a decrease of 18.3% from December 31, 2010.

Gross profit plunged 39.7% to $143.3 million, whereas the gross profit margin contracted to 33% compared with 47.1% in the year-ago quarter, including the negative impact of inventory unloading and added product reserve. The decline also reflected sluggish sales, rise in input costs and concessions provided by the company to clear excess inventory.

However, excluding the effects of inventory offloading and added product reserve, gross margin came in at 41.5%.

Management remains optimistic for the coming quarters despite soft results as it continues to focus on new lines of products, opening of additional Skechers stores this year and increasing distribution channels with the development of international distribution agreements to boost its sales and profitability.

Moreover, international business remains a significant growth driver for the company’s sales and registered a double-digit growth in the quarter. Skechers through its distribution networks, subsidiaries and joint ventures is poised to enhance its global reach in the footwear market.

Skechers portrays a healthy balance sheet with cash and cash equivalents of $250.8 million, long-term debt of $81.1 million and shareholders’ equity of $908.5 million, excluding non-controlling interest of $38.3 million at the end of the quarter.

Currently, we maintain a long-term ‘Neutral’ recommendation on the stock. Moreover, Skechers holds a Zacks #5 Rank, which translates into a short-term ‘Strong Sell’ recommendation.