Net income dropped to $5.9m (£4.2m) for the year ended December 2015, down 23 per cent from $7.6m the year before, although net sales rose to $266.3m, up seven per cent from $247.8m
Meanwhile, for the company's fourth quarter, net income fell to $6.1m, down 17 per cent from $7.4m the year before, and net sales dipped slightly to $96.1m, down 0.8 per cent from $96.8m.
Shares in Skullcandy dropped 0.6 per cent in after-hours trading to $3.56.
"We are certainly disappointed that our strong sell-through performances didn't translate into better top and bottom line results in the fourth quarter," said Hoby Darling, chief executive and president of Skullcandy.
"While the US audio headphone market was unexpectedly down in the fourth quarter, and we are still working to improve certain international markets, we remain cautiously optimistic about our near-term growth prospects and feel very good about our long-term growth, particularly for our gaming and wireless businesses based on recent market share gains and a strong pipeline of innovative new products."