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As discussed last quarter, this growth came despite slight decreases in our domestic wholesale and international distributor channels. We believe these businesses will turn positive in the back half of the year. The second-quarter record net sale follows our first-quarter achievement of the highest quarterly sales in the company's history, which resulted in a new 6-month record of $2.38 billion in sales. Second-quarter highlights include a new second-quarter sales record; record quarterly gross margins of 49.4%, a 24.9% sales increase in our international wholesale business, the result of continued strong growth in our subsidiary and joint venture countries; a 12.8% sales increase in our global company-owned retail stores with a comp store sales increase of 4.5% globally; international wholesale and retail representing 51.6% of our total sales; expanding our S's retail network to 2,715 stores worldwide, including the opening of 12 new company-owned stores and 107 third-party stores; resurgence of Skechers D'Lites in the United States and key markets around the world; elite golfer, Brooke Henderson, winning the LPGA LOTTE championship and Skechers GO GOLF and the repurchase of 510,000 shares at a cost of $15 million.

Now turning to our business channels in detail. In line with our expectations, our domestic wholesale business decreased 7% for the second quarter and increased 1% for the first six months. Our business within our core accounts remained solid during the quarter. Our product strength in the United States came across multiple divisions with men's and women's sport, work and golf, as well as woman's sandals, all performing particularly well.

The trend toward chunky outfit has been a benefit to Skechers as we started this look with the Energy in 1999 and then D'Lites in 2007. As an originator of this look, we are receiving a great deal of press coverage and capturing attention of a younger demographic. For the second quarter, we remain the No. 1 men's and women's work, men's and women's casual lifestyle footwear brand and the No.

1 walking brand. To support our domestic business, we ran multiple media campaigns. For women, a Skechers D'Lites campaign with Camila Cabello, Skechers GOwalk Joy and sandals. For men, working casual slip-on sports starring Tony Romo, Relaxed Fit with David Ortiz and wide with footwear featuring Howie Long.

And for kids, we ran commercials on children's programming for Twinkle Toes and our lightweight sports footwear. Our golf business continues to grow. During the second quarter, Canadian golfer, Brooke Henderson, won the LPGA LOTTE Championship in Hawaii. And recently, golfer, Russell Knox, won the Irish Open.

Both are Skechers's ambassadors and both competed in our GO GOLF footwear. Additionally, football legend, Tony Romo, has been competing in Skechers GO GOLF on the amateur and celebrity circuits and won two tournaments this month. The Racine Tri-Course Amateur Championship in Wisconsin and last weekend's American Century Championships in California. While we will face some tougher comparisons in the third quarter from last year's growth, we believe our product and marketing are both on point.

Based on our meetings with accounts and backlogs, we believe our core wholesale business remained strong, and we will achieve positive results in the back half of the year. International wholesale remains our single largest distribution channel, representing 41% of our total sales in the second quarter and 43.7% for the first six months, while international wholesale and retail combined represented 51.6% for the quarter and 52.8% for the first six months. Our total international wholesale business increased by 24.9% in the second quarter. The increase was the result of a 34% growth in our subsidiary and joint venture businesses, which was slightly offset by a 6% decrease in our distributor business.

For the first six months, our international wholesale business increased by 22.9%, which was primarily the result of 31.8% growth in our subsidiary and joint venture businesses. As in the first quarter, the decrease in our distributor business was primarily the result of a slowdown with our largest international distributor in the Middle East. Further detailing our international growth. For the quarter, our wholly-owned international subsidiary business grew by 23.1%, and our joint venture sales grew by 42.6%.

All but one of our subsidiaries achieved growth in the quarter with Germany, Canada, U.K. and Spain generating the highest dollar gains. All of our subsidiaries achieved growth in the first six months. China remains a dominant force in our international business with approximately 5.6 million pairs shipped in the quarter, a retail base of approximately 775 Skechers freestanding stores, 2,350 points of sale and a strong and growing e-commerce business with double-digit increases in the second quarter, due in part to the second largest online shopping day in China, June 18th.

In addition, India, South Korea and Singapore all had considerable dollar and percentage sales gains in the second quarter. Despite the pressure in our international distributor business, we are experiencing robust growth with our partners in Russia, Scandinavia, Turkey, Indonesia and Taiwan, as well as numerous others. At quarter end, there were 2,255 Skechers branded stores owned and operated by international distribution partners, joint ventures and a network of franchisees. In the second quarter, 107 third-party owned stores opened, including our first store in Azerbaijan; 41 in China; 23 in India, five each in Indonesia and Turkey; three in Italy, two each in the Czech Republic, Malaysia, South Korea and Taiwan; and one each in Australia, Algeria, Armenia, Cambodia, Denmark, England, Hungary, Iraq, Israel, Japan, Kuwait, Latvia, Morocco, Saudi Arabia, Singapore, South Africa, Spain, Switzerland and the UAE.

36 third-party stores closed in the second quarter. Eleven third-party owned Skechers stores have opened in the third quarter to date including our first in Uzbekistan and one store closed. We expect another 300 to 325 third-party owned Skechers branded stores to open in the remainder of 2018. We believe our international distributor business will be positive in the third quarter, resulting in low double-digit growth for our total international business.

And we believe international remains the biggest growth opportunity for the company. In our company-owned global retail business, sales increased 12.8% in the second quarter, which was the result of a sales increase of 25.5% in our international stores and 7.2% in our domestic retail stores. This included worldwide positive comp store sales of 4.5% in the quarter, including 2.2% domestically and 11.3% internationally. For the first six months, sales increased 15.5%, which was the result of an increase of 27.9% in our international stores and 9.9% in our domestic retail stores.

At quarter end, we had 668 company-owned Skechers retail stores, of which 209 were outside the United States. In the second quarter, we opened 12 stores, including six international locations and closed one domestic concept store. We also remodeled and expanded our California flagship stores in downtown Manhattan beach and on the Third Street Promenade in Santa Monica. To date in the third quarter, we've opened one store in Canada and one in Peru, with another plan to open this weekend in Peru.

For the remainder of 2018, we expect to open 30 to 35 company-owned Skechers stores with the majority in the fourth quarter and remodel, relocate or expand an additional 15 to 20 existing stores. Further, in June, we introduced the Skechers D'Lites collaboration with the One Piece, the top-selling anime series in our company-owned domestic retail stores. With three of the six styles available now, this series is already a success in the first month of its launch, and we're looking forward to launch of additional three colorways in September. Adding to our direct-to-consumer growth was our domestic e-commerce business, which grew by 10.8% for the quarter.

We also have company-owned and operated e-commerce sites in Chile, Germany, in U.K., Spain and Canada. Now I'll turn the call over to John to review our financials.

John Vandemore -- Cowen and Company -- Analyst

Thank you, David. I'm pleased to share our second-quarter results with you, which once again illustrate the growth potential of our strategy and brand. Second-quarter sales increased 10.6% over the prior year to $1.13 billion and represented a new second-quarter sales record. This growth was due to increases in our international wholesale business of 24.9%, driven by a 23.1% increase in our subsidiary business, a 42.6% increase in our joint venture business and an increase of 12.8% in our company-owned global retail stores.

In particular, China contributed significantly to our growth in the quarter, increasing 44.1%. This increase in sales was partially offset by an expected 7% decline in domestic wholesale and a 6.1% decline in our distributor sales, due in part to the previously discussed weakness in the Middle East. Excluding distributor sales, our international wholesale business was up 34% in the quarter. Gross profit was $561 million, up $72.6 million compared to the prior year, and gross margin increased 180 basis points to 49.4%.

This improvement was attributable to strength in our gross margin accretive international business, due in part to favorable foreign exchange rates. Selling expenses increased $14.1 million to $114 million or 10% of sales from 9.7% of sales in the prior year. The 30-basis-point increase was due to higher international advertising expenses to support our overseas growth. Our domestic selling expenses were down slightly in the quarter.

Total general and administrative expenses were up $65.6 million to $370.9 million, representing 32.7% of sales compared to 29.8% of sales in the prior-year period. This increase reflects our continued investment in our long-term global growth initiatives and included $29.4 million to support continued double-digit growth in China. It also included an increase of $11.7 million associated with 54 additional company-owned Skechers stores, of which 12 opened in the second quarter and $19.8 million related to corporate and domestic expenses, of which $7 million related to increased domestic warehouse and distribution costs and $6.2 million related to certain legal costs. Earnings from operations decreased 5.7% versus the prior year to $81.4 million, and as a percentage of sales represented a 120 basis point decline from 8.4% in the prior year to 7.2%.

Our operating leverage was lower than prior year due to higher international advertising and distribution-related costs. Net income for the second quarter was $45.3 million or $0.29 per diluted share on 157.1 million shares outstanding compared to $59.5 million or $0.38 per diluted share on 156.2 million shares outstanding in the prior-year period. The earnings per share decline of 23.7% was due to higher operating expenses, including the legal cost previously mentioned as well as adverse foreign exchange impacts, a higher effective tax rate and elevated minority interest. Our income tax rate for the quarter was 18.8% compared with 16.1% in the prior-year period.

This rate reflects updates to our understanding of the impact of the recently enacted tax reform legislation. Given this, we now expect our effective tax rate for 2018 to be at the top of or slightly above our previously announced guidance range of 12% to 17%. And now turning to our balance sheet. At June 30, 2018, we had $887.7 million in cash, cash equivalents and short-term investments, which was an increase of $151.3 million or 20.5% from December 31, 2017, and an increase of $136.2 million or 18.1% over June 30, 2017.

Our cash and investments represented approximately $5.65 per diluted share at June 30, 2018. During the second quarter, we acquired approximately 510,000 shares of our Class A common stock at a cost of $15 million. We remain confident in the strength of our balance sheet and our ability to fund our growth prospects, while continuing to execute this repurchase program. Trade accounts receivable at quarter end were $574.4 million, an increase of $54.9 million from June 30, 2017.

And our DSOs were 37 days at June 30, 2018, compared to 36 days in the same period last year. Total inventory, including merchandise in transit, increased 22.8% to $822.4 million, an increase of $152.7 million, which included an increase of $90 million in China alone. We believe that our inventory levels are in line with our growth expectations for our global business. Long-term debt was $70.2 million compared to $68.3 million at June 30, 2017, and working capital was $1.6 billion versus $1.4 billion at June 30, 2017, primarily reflecting the aforementioned inventory and accounts receivable levels as well as higher cash balances.

Capital expenditures for the second quarter were approximately $25.3 million, of which $13 million was related to 12 new company-owned domestic and international store openings and eight store remodels, $4.2 million to support our international wholesale operations and $6.3 million for the expansion of our domestic distribution center. For the remainder of 2018, we expect our ongoing capital expenditures to be approximately $40 million to $45 million, which includes an additional 30 to 35 company-owned retail store openings, 15 to 20 store remodels, expansions or relocations and office renovations. This estimate excludes capital expenditures related to our distribution centers worldwide, including China as well as office expansion at our corporate headquarters, projects which we expect to break ground on later this year. Now turning to our guidance.

We currently expect that third quarter sales will be in the range of $1.2 billion to $1.225 billion, and net earnings per diluted share will be in the range of $0.50 to $0.55. Underpinning this guidance is the belief that our domestic wholesale and international distributor businesses will return to growth in the second half of 2018 and that our retail comps will remain positive. We also expect that our effective tax rate for the year will be at the top of or slightly higher than our previously announced guidance range of 12% to 17%. And due to continued double-digit growth in our joint venture businesses, the minority interest will continue to grow more than our total sales.

Lastly, although we do not speculate on the impact of foreign currencies, we will note that the recent strengthening of the U.S. dollar could continue to translate into potential earnings headwinds as we approach the back half of 2018. I will now turn the call back to David for closing remarks.

David Weinberg -- Chief Operating Officer

Thank you, John. The second quarter marked a new sales record for the period, and when combined with our highest sales quarter ever in the first quarter, we achieved a new 6-month record of $2.38 billion. The quarterly growth was the result of double-digit gains from our international wholesale and company-owned retail stores. Essential to our success is the strength of our brand, product and marketing.

Our core product of Skechers Sport and Skechers Work continued to be in demand as well as newer lines like Skechers GO GOLF and our heritage Skechers D'Lites collection. We remain a leader in work, casual lifestyle and walking footwear and have gained shares in other categories. With Camila Cabello appearing at our marketing campaigns along with a team of great sports legends and a creative pool of additional marketing campaigns, we are both product and marketing rich. We are continuing to invest in our brand and our infrastructure.

In the second half of the year, we expect to break ground on our new corporate offices and for the new distribution center in China. With inventory levels in line, a strong cash position and healthy backlogs, we are well-positioned for growth. We continue to believe that the global market poses our strongest growth potential. And with that, I would now like to turn the call over to the operator to begin the question-and-answer portion of the conference.

Operator

At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Our first question comes from the line of Jeff Van Sinderen with B. Riley.

Please proceed with your question.

Jeff Van Sinderen -- B. Riley & Co. -- Analyst

Hi, everybody. So one of the things we're looking at is that it looks like you expect domestic wholesale to return to growth in second half. Is there any more color you can give us maybe on what the progression of the domestic wholesale order flow look like or shipments look like in Q2? Just wondering kind of how it looked as near the end of the quarter? If there was a little bit of an uptick and product being pulled near the end of the quarter? Or -- and then, kind of how that's progressing in July?

David Weinberg -- Chief Operating Officer

Well, I think it came pretty much according to plan as we discussed on the last conference call. Basically, we didn't anticipate any significant pull forwards, and we certainly didn't anticipate making up to $20 million that shifted in last year's quarterly shift at the beginning. We shipped strong for June. It was still our biggest by far "Month of the quarter" and should be one of our biggest for the year.

So it continued to be solid. That's both on a domestic and in international basis. So there were no major shifts or changes, but very consistent.

Jeff Van Sinderen -- B. Riley & Co. -- Analyst

OK. Fair enough. So as we’re thinking about back-to-school, I mean, should we think that your domestic back-to-school business will probably be up this year?

David Weinberg -- Chief Operating Officer

As we said before, we anticipate our core business will be up.

Jeff Van Sinderen -- B. Riley & Co. -- Analyst

OK.

David Weinberg -- Chief Operating Officer

It won't be as strong as might we proceed because we still have, what we call, our non-core business, which is under pressure. And I don't know that we will make it up quickly. But our core business will continue to grow or grow at a nice level. And it should even pick up speed as we get into Q4 as we get some of this new product more tested and move in and fill these orders as we go along.

So we anticipate an up -- somewhat of an up in the third quarter and a more significant up in the fourth quarter.

Jeff Van Sinderen -- B. Riley & Co. -- Analyst

OK. Fair enough. And then on the gross margin just as a follow-up. Your gross margins were really strong.

Just wondering how we should think about gross margins going forward?

John Vandemore -- Cowen and Company -- Analyst

Yes, the gross margin improvement in Q2 was predominantly related to the shift to the international business. If you look at the composition of revenue this year versus last, there was a positive shift towards the margin accretive businesses. So that was about 90 to 100 basis points of the improvement. There was about an 80 basis point pickup from FX, which we don't think is going to continue given the way currencies have trended recently.

I think, in Q3, we're looking at slight improvements that are consistent with prior year at the moment, but that will ultimately depend on the mix of where the revenue comes from.

Jeff Van Sinderen -- B. Riley & Co. -- Analyst

Got it. OK, I’ll jump back in the queue. Thanks very much, and best of luck.

John Vandemore -- Cowen and Company -- Analyst

Thank you.

Operator

Our next question comes from the line of Jay Sole with UBS. Please proceed with your question.

Jay Sole -- UBS -- Analyst

Great. Thank you. David, from the 2Q guidance you gave in April, just with regarding SG&A, what changed between then and the number that you published today?

David Weinberg -- Chief Operating Officer

Well,I think the biggest things that changed, John mentioned in his prepared comments, we had a tax rate that was higher than we had anticipated by well over 200 basis points. We had foreign -- FX considerations that costs us about $7 million. And we settled that lawsuit for $6 million that it really wasn't on target for us. So if we put that altogether, we're pretty much on target to what we had said on the Q1 conference call.

And we think we had a pretty good quarter. I think business was a little tougher in the U.S. than we had thought, but our distributors came back and our international business came back. And if we had done a little better trying to recognize things like tax rate and currencies, we would have probably been closer.

But as you can imagine, the new tax rate take a lot of studying. They will be changing year over year, month to month as we learn more about and the more things are issued. And foreign currency really did come at the back-end of the quarter. I mean, if you look the strength of the dollar that we've been talking about since whatever this the trading partners have done or what we're going to do with them has been pretty significant over the last -- week to last two months.

Jay Sole -- UBS -- Analyst

Got it.

John Vandemore -- Cowen and Company -- Analyst

And then besides that the most significant increases came in China and came in retail, right? That's the most significant driver on the G&A side. And selling, as we mentioned, was driven by international markets. The domestics were actually lower. So the composition of the investment in G&A is aligned with where we're growing the business.

Jay Sole -- UBS -- Analyst

So maybe just a follow-up on that point. If you can sort of articulate, maybe divide how much of the SG&A spending was done to drive future growth versus how much was done to drive growth in this quarter, where there was extra advertising and due to clear inventory or to move some of that product in the U.S., maybe if you could talk to that point, that would be helpful.

John Vandemore -- Cowen and Company -- Analyst

I don't know that's how we bifurcate the G&A spend, but I will just point out. Advertising -- extra advertising in Q2 building the brand and that drives sales for Q3 and beyond. So I don't know there is a fine point we can put on. And I would say that, again, the investment was significantly concentrated in the markets in which we're growing direct-to-consumer and China, and within that, the selling line in particular.

Jay Sole -- UBS -- Analyst

Got it. And then maybe just, because, obviously, trade is such a big issue. Can you just talk about how much of your product is made in China right now and how much of the production is shipped to the United States?

David Weinberg -- Chief Operating Officer

Right now, we make about 60% or 65% of our products still in China between the south and northern China, certainly. The United States, I believe, it's about -- 40% of the production to the United States is outside of China.

Jay Sole -- UBS -- Analyst

OK. Got it. And then, maybe just if you can talk about within the domestic wholesale, as you kind of went through June and July, have you seen overall the sell-through like department store channels or any particular channel, like, speed up or slow down?

David Weinberg -- Chief Operating Officer

No, it's been pretty consistent. When you do the channel checks for our core business in the United States, you'll find that we're performing quite well, and our margins are holding up quite well. So I don't perceive any inventory issues there. The only issue we have in the states is our non-core business there, the lower price alternatives that we've made on products to in the past that take big hits from -- so much from time to time.

So that's changed and that environment has changed. And there's been a lot of closeout product in the marketplace that they take. So it curtails some of the things we would make for them since we don't have and haven't had historically a significantly large closeout business. So I think that's just the way things are developing.

We do anticipate that business can start to come back next year depending on what's available in the marketplace. And we're starting to looking forward to with our core business with the higher margins and where we sell the most should continue to grow. And I think given this situation, we'll certainly increase next year.

Jay Sole -- UBS -- Analyst

OK, got it. Thanks so much.

David Weinberg -- Chief Operating Officer

OK.

Operator

Our next question comes from the line of John Kernan of Cowen & Company. Please proceed with your question.

John Kernan -- Cowen and Company -- Analyst

Hi, good afternoon, guys. Thanks for taking my question.

David Weinberg -- Chief Operating Officer

Hi, John.

John Kernan -- Cowen and Company -- Analyst

Just wanted to go back to inventory. John, I think, you quantified how much of inventory growth year over year was out of China. It's still on a consolidated basis was pretty far above sales growth. And just what's giving you confidence that the direction of gross margin can remain up? Do you feel like -- are you comfortable with where you are from a markdown perspective outside of China?

John Vandemore -- Cowen and Company -- Analyst

Yes, absolutely. I mean, again, the composition of the inventory growth is pretty significantly concentrated. Almost 80% of it is in either China additional international markets that have pretty sizable growth expectations for the back half of the year and then retail, which obviously fluctuates with the build-out of new stores. Our domestic number were -- was really quite slight.

It's -- ultimately, the growth rate in China, and then keep in mind, we're building now for events like Singles' Day in China, which are pretty sizable sell-through day in and of themselves. So we feel comfortable that the inventories in line, and there is no significant inventory issue or markdown issue pending, but it starts to grow really giving us comfort.

John Kernan -- Cowen and Company -- Analyst

OK. So you're starting the cycle with some pretty significant growth in inventory from last year. You were up 33% in the third quarter last year and 25% in the fourth quarter. Is it safe to say that inventory should potentially be flattish year over year by the back half of the year? It would ultimately mean a pretty significant cash inflows.

And can you give us some detail on where you think inventory might start to end at -- might start to be at year-end?

David Weinberg -- Chief Operating Officer

That's a tough one. That is a long one as well. We feel pretty good about -- I don't think -- you talk about the inventory builds year over year. And I think none of that has come back to impact margins overall.

And we're not sitting on a significantly larger inventory in most places in the world. I think the answer to your question is, it would be dependent on our store growth rate, including our third-party store growth rate since we buy for them and keep it in China and predominantly in India until it's necessary at the franchise level. And how quickly we're growing in some other marketplaces, I would tell you that I'd anticipate that there will be no major change in the inventory in the United States year over year. But I do anticipate more significant growth in Europe, in China and even in South America as we continue to open stores there.

So -- and there is always a possibility. As hard as we're, some of the retail marketplaces in our stores are doing, that will step-up the pace and maybe increase inventory for even more positive Q1. But it's too early to say that. So inventory will continue to grow.

I think you have to understand also we know the biggest piece of our growth was China. And China has been doing catch-up for inventory for quite a while. They've -- in chasing inventory, we could see the size of their growth and we finally got the production standards. So we're building that for a very big franchise business and now we're also building for a very big online business.

So when you put the two of them together, we've got some catch up to do. I don't anticipate China will grow at the same rate once this is all absorbed and we start to comp it next year.

John Kernan -- Cowen and Company -- Analyst

All right. So I guess, my final question is a bigger picture question. There has been well over $1 billion in total top line growth. The past couple of years just there has not been much growth in EBIT.

So I'm just wondering at what point do you think you will trade top line growth with ability to start growing top line in a more significant rate? Do you think -- if you pull back on G&A expenses, do you think the top line would decelerate significantly in line with that?

David Weinberg -- Chief Operating Officer

We just don't necessarily think that way. We're into growth. We think that transition to sacrificing top line growth for EBIT will happen when a marketplace tell us -- as we get into -- closer to a saturation point. Right now, we are built for growth.

We have the capital for growth. We wouldn't leave anything on the table. And we still, like we said, have significant areas where we're underpenetrated such as South America, such as Japan, such as India, which is starting to grow very nicely and will contribute to EBITDA by the back half of this year. So there's a lot of positive things happen.

I think we will have better results from it if you look at an EBITDA basis as we get through the end of the year and into next year because a lot of the heavy lifting will be done. We still have something to do with the distribution center in China, which will be a benefit -- which will benefit the EBITDA line in China and make them more efficient. So we still got some ways to go, but we do think, as we get through the end of this year into next year, we should start to leverage unless there is some outgrowth averages growth in a couple of big territories that we have to invest in.

John Kernan -- Cowen and Company -- Analyst

OK. Thanks, guys.

Operator

Our next question is from the line of Laurent Vasilescu with Macquarie Group. Please proceed with your question.

Laurent Vasilescu -- Macquarie Capital -- Analyst

Good afternoon. Thanks for taking my question. I think in the prepared remarks, it was noted that international in the back half should grow low double-digits. I was just curious to know, how you should think -- we should think about that for the third quarter?

John Vandemore -- Cowen and Company -- Analyst

Yes. I mean, I think that's a low double-digit number for the third quarter is appropriate as well. I mean, just the quarters mix up a little bit. Obviously, China's significant in Q4.

That's hard to replicate any other quarters. So that certainly drives Q4 international performance. But I'd say for Q3 and Q4, we're definitely looking low double-digits.

Laurent Vasilescu -- Macquarie Capital -- Analyst

OK. Thank you, John. And I think last year comps were running positive mid-single digits in July to date last year. And I think you had something with regards to prepared [mark stuff], comp store running positive.

Any color on how comps are running so far?

John Vandemore -- Cowen and Company -- Analyst

Yes. I mean, July today, we've had some shift and some promotional activity. So they're relatively flattish at the moment on the whole, international up, domestic just a little bit down, but, again, that's more than anything else [owning] to timing of some promotional activities that are going to occur now in the back half of July or previously in prior years slotted in the first half of July.

Laurent Vasilescu -- Macquarie Capital -- Analyst

OK, very helpful. And then very helpful for -- to break out that China G&A of $29 million. It just looks like it implies that, that was the majority with international G&A expense. Can you tell us what that number was for 1Q '18 or just the anticipations of run rate for the full year for China G&A?

John Vandemore -- Cowen and Company -- Analyst

Yes,I don't know that we want to be that precise about it, but I'd say, this quarter G&A growth in China was probably a little bit outside what we normally expect. There was some temporal spend, particularly on the advertising side. The balance of it really was in the distribution side. And there was a pretty fundamental and dynamic shift in the business to the e-com side.

And I think, we -- as David mentioned, as we look to bring online our own distribution center, we'll be able to albeit some of those cost pressures. In the meantime, we're working to make that as efficient as possible. So I'd say, at the [Inaudible] we'd normally would expect to be growing in line or slightly slower than the top line. This quarter that wasn't the case, but again, there were some temporal elements.

And admittedly, there are some things we need to work on the efficiency side and the distribution, in particular on e-com, but we're putting time and attention to that. I think the more significant number out of China that was plus 40% top-line growth, which is again a fantastic outcome.

Laurent Vasilescu -- Macquarie Capital -- Analyst

OK, very helpful. And then my last question on domestic G&A spend. It's been running in the high-teen million rate for the last two quarters. I understood that there was -- there were some legal costs one-time, but then the domestic wholesale -- warehouse expense of $7 million.

How do we think about the domestic G&A overall for the next two quarters?

David Weinberg -- Chief Operating Officer

Yes, I think this quarter is a little bit more -- much like Q1, a little bit faster than we thought. We think that slows down in the back half. That doesn't sound slowdown to 0, but it slows down in the back half of the year. I mean some of that also there will be the volume dependent.

I think what we saw in the quarter was a little bit of the hangover on increasing capacity that we talked about in Q1. So there's a limit bit of a hangover into Q2 on that. But I'd still expect growth in the back half just not as robust that we -- as we've seen of late.

Laurent Vasilescu -- Macquarie Capital -- Analyst

Thank you. Best of luck.

David Weinberg -- Chief Operating Officer

Thanks.

Operator

Our next question comes from the line of Sam Poser with Susquehanna. Please proceed with your question.

Sam Poser -- Susquehanna International Group, LLP -- Analyst

Good afternoon. I’ve got a few. Thanks for taking my question. Dave, what were those legal costs first of all?

David Weinberg -- Chief Operating Officer

We're not going to be too precise about it, but let's call them unusual and that's why we call them out. It was a settlement in lieu of continuing litigation. So we deem that better to make a settlement, and have a one-time fee rather than to continue even though we've had -- thought we had good issues going forward than spend the money for litigation. Litigation starts to get very expensive.

As you get closer to the court date depending on the size and scope of it, you can run up somewhere between $700,000 and $1 million a month, maybe up to $1.5 million depending on the complexity of it. So sometimes it's just a better part of valor to take settlement and that was -- the biggest piece of that was a one-time settlement.

Sam Poser -- Susquehanna International Group, LLP -- Analyst

Thank you. And then the inventory levels now basically on a year-over-year basis like today not at the end of the quarter given that there was probably a bunch of orders to your domestic wholesale that got held. Can you give us some idea of what those -- what that inventory looks like -- what the total inventory sort of look like now as you start to ship back-to-school?

David Weinberg -- Chief Operating Officer

Well, obviously, we've made a dent in it because not only do we ship here in the states for some of that stuff and we're having a very good shipping month. Certainly, we will show increases to last year. But it's even more predominant in Europe where July kicks off the whole selling season, there is never a question of June. And we've had a very good first two shipping weeks in June.

So we're pretty much where we anticipated being. China on the other hand doesn't have the major ship piece what they're growing as they go through the franchise period. And July is a bigger shipping to the franchises than June. So we've made a lot of, if you call progress, we like keeping -- we continued to buy and move the inventory.

But the inventory is very solid. We have no delays on shipments so all of those increases of shipments are certainly impactful.

Sam Poser -- Susquehanna International Group, LLP -- Analyst

All right. And then, you talked about low double-digit increase in Q3 in the back half of the year for international. Why are we seeing such a deceleration in the back half of the year?

John Vandemore -- Cowen and Company -- Analyst

Well, I think we talked about it relative to Q3 in particular. Again, Q4 will be highly influenced one way or another on how Singles' Day performs. But I think we're looking at low double-digits, that's relatively can measure with where we've been.

David Weinberg -- Chief Operating Officer

We have to understand that we had a major increase in Europe last year in Q3, that's very difficult to double up on. We have a more mature business but we are getting into the winter business and we will show growth in Europe, but not that significant as last year. And then, as John mentioned, China is obviously stronger in Q4. They only make up so much ground as they continue to grow.

So those are the two big growth initiatives. But I'd think the biggest piece we think the distributors are coming back and it will be positive in the third quarter, so that will be somewhat of enhancing, but very difficult to match anywhere near the comps we saw in Europe last year, which if you remember back with a major growth piece for us getting a new season to a very large distribution network.

Sam Poser -- Susquehanna International Group, LLP -- Analyst

Let me just follow-up on that, David. Could you give us a rather than low -- what -- could you define what low double-digit mean? Because -- I mean, are we -- is low double-digit mean 10% to 12%? Or does it mean in the 20s because it's still way far from triple digits?

John Vandemore -- Cowen and Company -- Analyst

I think when we talk about low double-digits, we're looking at something that's at the low-end, high-teens, at the high-end in the 20s. That's again, pretty consistent on a segment basis where we've been when you include the distributors, the subsidiaries and joint ventures together.

Sam Poser -- Susquehanna International Group, LLP -- Analyst

Gotcha. And then, for long term -- your investments that you need to make in -- to build-out the distribution center over time to do what you're doing with your headquarters in the states and anything else to sort of foundation for your longer-term plans. Could you give us some idea of sort of the magnitude of those investments? And how long you think they're going to take so you're setup because I mean, you did a good job in the past when you took a lot of build-out value but you did it. And then, it started to really kick-in the same things through in Europe.

But now you're talking about China and that's expensive. And in the mean -- so there'll be some of those distribution costs followed by the way. So could you give us some idea of sort of the magnitude of the spend? And then -- and over what period of time? That's until you get to a place where you foresee the efficiency?

David Weinberg -- Chief Operating Officer

OK. So that's a two-fold question. I think we mentioned that we have no final numbers and we're still working on the automation for China. Although, we're ready to break ground and the building seems [Inaudible] to set.

I would guesstimate and I think the number we put on the Street before is somewhere in the neighborhood of $150 million to spend on China. And it's probably over an 18 month to 2-year period depending on construction and delivery of the items that are ordered. As far as the rest, the rest is obviously, which would be The United States, Europe, we're building some -- we have some third-party people we may convert in South America. We have Chile that we run now.

We have our own distribution center in Japan. I'd tell you that would depend on how quickly we grow and our unit volume distribution and how bigger retail piece is for that as compared to wholesale. So if you would ask me two or three years ago, I would've told you that there is no way I'd have to expand capacity in Merino Valley yet, but our growth has been higher than anticipated, certainly our unit growth. Some of these comp stores I guess is with domestic wholesale in real dollar terms.

It's got pricing choices for consumers have come down some. So our growth in units is significantly -- is higher than our growth in dollars. So we continue to get shelf space. Our stores continued to do well so -- and how many stores we open and how fast the unit growth is that we need to complete.

The current plan calls for some expansion in our distribution center. In California, we will take probably a year, or a year and a half to consider an expansion or a second facility that we can use. Europe, not quite as intense. We will increase some space that should be completed and we rent it so that there's no real cost or any additional rental by the end of the year.

And we're anticipating because of our growth in our franchise business and our wholesale business and our own retail business in Europe that we will add somewhere in the $20 million to $25 million range, maybe somewhat more in automation to smooth out that process as we move through the next year as well.

John Vandemore -- Cowen and Company -- Analyst

And then just to top it off, the office and campus work that we have done here, we said previously is $125 million to $150 million and that's again probably over 18 months to 24 months.

Operator

Our next question comes from the line of Tom Nikic with Wells Fargo. Please proceed with your question.

Tom Nikic -- Wells Fargo Securities -- Analyst

Hey, everybody. So David, in your prepared remarks, you made a comment about having a tough compare in Q3. But when I look out, your compares are a lot more difficult in Q4 both in domestic wholesale and in international wholesale and on your retail comps. Can -- you sort of mentioned trying to navigate through a tough compare in Q3.

Can you sort of help us understand how you navigate through that in Q4 as well? And you also mentioned, U.S. also being positive in the back half. Does that mean in both quarters, Q3, Q4? Does it only mean one quarter? Any help there would be great? Thank you.

David Weinberg -- Chief Operating Officer

OK.We have more -- I don't know which way to start. I'll start from one or the other. We think -- I think anyway, Q3 is a more difficult compare that I just mentioned in Sam's question that Europe was such a big up that you can't get that. So that part when we're talking about overall growth of the company is there.

China also I don't believe will grow at the same rate in Q3 as Q4 because it's single, Sam. We anticipate that -- even more -- almost the same increase in dollars in units over last year. So that's a very positive. So we do believe that our business in Europe will be increasing for first quarter and some of that shipments are anticipated to move in June, which makes that piece easier.

Singles' Day makes it easier. And domestically as we mentioned that the one fluctuation that moves it around more than our core business is our non-core business. And one of those big promotions is come up for fourth quarter and we've already booked it so that in and of itself will power through the domestic piece for Q4.

Tom Nikic -- Wells Fargo Securities -- Analyst

So does that mean Q4 should be positive in U.S. wholesale as well?

David Weinberg -- Chief Operating Officer

Yes, overall because our core business we anticipate will continue. And this one customer or group will make up this shortfall from Q3 and Q4 as they run their loan receipts.

John Vandemore -- Cowen and Company -- Analyst

Tom, I'd -- we generally think about Q3 as slightly positive growth on the domestic side. I think that what we see at the moment and then Q4 being much stronger for the reason David just mentioned, that shift that we had foretold in Q2 coming back to us in Q4.

Tom Nikic -- Wells Fargo Securities -- Analyst

All right, thanks.

Operator

Our next question comes from the line of Chris Svezia with Wedbush. Please proceed with your question.

Chris Svezia -- Wedbush Securities -- Analyst

Hey, thanks for taking my questions. I guess, first just on the domestic comp for Q2. Maybe share a little color as to up the 2.5% or what it was like? Is that Easter? Or just any color as to why it was as well or any color about how the quarter progressed on domestic comp, would be helpful?

John Vandemore -- Cowen and Company -- Analyst

Yes, I mean, April was weak in the retail comp environment and that was definitely an Easter comp issue. Each month thereafter got better. And so it really was a drag coming out of the first month of the year, which obviously is more sizable because of the holiday. So what you saw is that April weaker than May, May weaker than June.

And the net effect of that was it average out to a low single-digit comp.

Chris Svezia -- Wedbush Securities -- Analyst

OK. And just on I'm curious how you guys think about FX? And in your international markets whether euro based. I know in the U.K. you took a pricing about a year ago, just how you're thinking about in the face of what's going on the currency.

Is it just too early to think about that at this point?

John Vandemore -- Cowen and Company -- Analyst

Yes, I mean, it's a tough environment in particular when you have as much volatility as we've seen literally over the last six months. Based on what we see today, return from FX being -- in Q1 was a significant tailwind to becoming a slight headwind going into three and four. And if things don't change then we probably actually start to face more significant headwind in Q1. It's just -- it's hard to tell when you have in particular the yuan and the euro behaving in a similar fashion.

Those are the two biggest markets for us. If things continue, if the dollar continues to weaken, we may have to look at how we're pricing. But I think at this moment, we're just being vigilant on where things stand given the volatility. And I think in part to see what happens out of the trade tensions that are currently -- at least a significant factor in the foreign currency markets that matter to us.

Chris Svezia -- Wedbush Securities -- Analyst

OK. And then, just on China and as you prepare for Singles' Day. And I know it's a big e-commerce or direct-to-consumer and you're shipping a lot of pairs. How do you think about the efficiencies or productivity or the costs for that advantage if you go into the fourth quarter? In fourth quarter last year, there were some elevated expense related to -- that was moving a lot of pairs and you have substantial growth.

How are you preparing it for this year? How should we think about that?

David Weinberg -- Chief Operating Officer

Well, I think this year is very close to last year, we have no significant automation. And it's one of those things that you have to do outside of a big automation base because you can't build a system that would peak on that day and be 50% off every other day of the year. So there is always a plan. We have a better plan for the product mix.

And preorganizing the product so it's easier to move and ship, but I do think it's going to put a strain. Now, it will increase the G&A certainly just given the order of magnitude of the number of single pairs. But we do anticipate that this time there will be no deterioration in the EBIT line for that particular piece. I understand that's a promotional day.

So you get somewhat less margins and it does put somewhat pressure on the EBIT line, but I don't think it will be significantly different than last year.

Chris Svezia -- Wedbush Securities -- Analyst

OK. Last question I had is just as you think about the guidance you've given for Q3. And I know there were some initial items in Q2 that you called out. But in all fairness and selling expense, G&A expense was somewhat maybe higher than you thought or at least what we had thought.

As you think about Q3 and the guidance that you gave, how many variables or how did you think about or plan for potentially some of these higher costs either relating to marketing or shipping costs or just unusual items that can crop up so that you'll have more protection on the bottom [Inaudible].

OK. Thank you very much, gentlemen, and all the best in the third quarter.

Operator

Our next question comes from the line of Jim Chartier with MCH. Please proceed with your question.

Jim Chartier -- Monness, Crespi, Hardt -- Analyst

Yes, thanks for taking my question.

David Weinberg -- Chief Operating Officer

Hi, Jim.

Jim Chartier -- Monness, Crespi, Hardt -- Analyst

It's helpful to kind of bridge the -- some of the non-unexpected items in the second quarter, the legal expense and tax rate. In terms of your third quarter, how much impact did the -- is the higher tax rate going to have on EPS versus what you thought may be three weeks -- three months ago? And then, FX, how much of an impact is that having on the third-quarter EPS guidance versus where you thought it might have been three months ago?

OK. And then, on the domestic wholesale business, last quarter you guys talked about that's a close to $20 million shifting between the quarters. So in the third quarter are you getting the benefit of the $20 million shift it back, but then that's offset by some loss sales to this noncore business, is that the right way to think about then?

John Vandemore -- Cowen and Company -- Analyst

Yes, I think that's a constructive way to think about it. I'd point out in line of that, that you asked. If you take out that shift from last year, we're flat -- essentially flat to last year. David mentioned the off-price category giving us some pits in last quarter and a little bit more in Q3.

But it definitely comes back to us in Q4. So that's how we're looking at the back half and saying obviously domestic wholesale is going to be up and upwards, better than it has been year to date. Where that falls out in Q3 or Q4 might be a timing matter. But again, what we're looking at is flat to up slightly in Q3 with a more pronounced positive in Q4.

Jim Chartier -- Monness, Crespi, Hardt -- Analyst

On the off-price, is that going to be a similar level for the year to what it was last year? Or is it -- it's still going to be down?

John Vandemore -- Cowen and Company -- Analyst

No, it’ll be below last year.

Jim Chartier -- Monness, Crespi, Hardt -- Analyst

OK, that’s all I have. Thanks for taking my questions.

John Vandemore -- Cowen and Company -- Analyst

Thank you.

Operator

We have time for one last question and that question comes from the line of Sam Poser with Susquehanna. Please proceed with your question.

Sam Poser -- Susquehanna International Group, LLP -- Analyst

Well, I think, all my questions have been answered from the other questions. So thank you and good luck.

David Weinberg -- Chief Operating Officer

Thanks, Sam.

Operator

[Operator signoff]

Unknown Speaker

Thank you, again, for joining us on the call today. We would just like to note that today's call may have contain forward-looking statements. As a result of various risk factors, actual results could differ materially from those projected in such statements. These risk factors are detailed in Skechers filings with the SEC.

Again, thank you, and have a great day.

Duration: 60 minutes

Call Participants:

Unknown Speaker

David Weinberg -- Chief Operating Officer

John Vandemore -- Cowen and Company -- Analyst

Jeff Van Sinderen -- B. Riley & Co. -- Analyst

Jay Sole -- UBS -- Analyst

John Kernan -- Cowen and Company -- Analyst

Laurent Vasilescu -- Macquarie Capital -- Analyst

Sam Poser -- Susquehanna International Group, LLP -- Analyst

Tom Nikic -- Wells Fargo Securities -- Analyst

Chris Svezia -- Wedbush Securities -- Analyst

Jim Chartier -- Monness, Crespi, Hardt -- Analyst

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