Deckers Brands Inc. again raised its earnings guidance for the year after reporting results for the third quarter ended December 31 that easily topped its outlook. Sales grew 2.6 percent at Ugg and jumped 63.6 percent for Hoka One One. Teva and Sanuk both suffered double-digit declines.

“Our third-quarter results were driven by three of our brands experiencing record levels of quarterly revenue, resulting in an updated outlook that reflects another year of strong top-line growth and earnings expansion,” said Dave Powers, president and chief executive officer. “Heading into the fourth quarter, our brands are intent on maintaining the momentum seen throughout this fiscal year as we are planning continued investment in consumer engagement opportunities and compelling product introductions.”

Third Quarter Fiscal 2020 Financial Review

  • Net sales increased 7.4 percent to $938.7 million compared to $873.8 million for the same period last year.
  • On a constant-currency basis, net sales increased 8.4 percent.
  • Gross margin was 54.1 percent compared to 53.8 percent for the same period last year.
  • SG&A expenses were $251.9 million compared to GAAP SG&A expenses last year of $225.4 million.
  • Non-GAAP SG&A expenses last year of $227.8 million.
  • Operating income was $255.8 million compared to GAAP operating income of $244.7 million for the same period last year and non-GAAP operating income of $242.3 million for the same period last year.
  • Income tax expense was $55.0 million compared to GAAP income tax expense of $48.3 million for the same period last year and non-GAAP income tax expense of $48.4 million for the same period last year.
  • Diluted earnings per share were $7.14 compared to the GAAP diluted earnings per share of $6.68 for the same period last year and the non-GAAP diluted earnings per share of $6.59 for the same period last year.

Revenues at $938.7 million came in above guidance calling for sales in the range of $885 million to $900 million. EPS of $7.14 also easily topped guidance calling for EPS in the range of $6.30 to $6.40.

Brand Summary

  • Ugg brand net sales for the third quarter increased 2.6 percent to $781.1 million compared to $761.0 million for the same period last year.
  • Hoka One One brand net sales for the third quarter increased 63.6 percent to $93.1 million compared to $56.9 million for the same period last year.
  • Teva brand net sales for the third quarter decreased 25.1 percent to $17.2 million compared to $22.9 million for the same period last year.
  • Sanuk brand net sales for the third quarter decreased 34.5 percent to $8.5 million compared to $12.9 million for the same period last year.

Channel Summary (included in the brand sales numbers above)

  • Wholesale net sales for the third quarter increased 8.9 percent to $525.1 million compared to $482.2 million for the same period last year.
  • Direct-to-consumer (DTC) net sales for the third quarter increased 5.6 percent to $413.7 million compared to $391.6 million for the same period last year. DTC comparable sales for the third quarter increased 4.7 percent over the same period last year.

Geographic Summary (included in the brand and channel sales numbers above)

  • Domestic net sales for the third quarter increased 12.7 percent to $645.7 million compared to $573.0 million for the same period last year.
  • International net sales for the third quarter decreased 2.6 percent to $293.1 million compared to $300.8 million for the same period last year.

Balance Sheet (December 31, 2019, as compared to December 31, 2018)

  • Cash and cash equivalents were $616.9 million compared to $515.9 million.
  • Inventories were $365.9 million compared to $342.0 million.
  • Outstanding borrowings were $37.1 million compared to $31.7 million.

Stock Repurchase Program

During the third quarter, the company did not repurchase any shares of its common stock. As of December 31, 2019, the company had $160 million remaining under its stock repurchase authorizations.

Full Year Fiscal 2020 Outlook for the Twelve Month Period Ending March 31, 2020

  • Net sales are now expected to be in the range of $2.150 billion to $2.160 billion.
  • Gross margin is now expected to be approximately 51.5 percent.
  • SG&A expenses, as a percentage of sales, are projected to be slightly lower than 36.0 percent.
  • Operating margin is now expected to be at, or slightly better than, 15.5 percent.
  • Effective tax rate expected to be approximately 20.5 percent.
  • Diluted earnings per share now expected to be in the range of $9.40 to $9.50.
  • The earnings per share guidance exclude any impact from additional share repurchases.

Previously, Deckers Brands had expected sales for the year to be in the range of $2.115 billion to $2.140 billion; gross margin to be approximately 50.8 percent, SG&A expenses, as a percentage of sales, to be slightly lower than 36.0 percent, operating margin to be approximately 15.0 percent, and EPS to be in the range of $8.90 to $9.05.

Fourth Quarter Fiscal 2020 Outlook for the Three Month Period Ending March 31, 2020

  • Net sales are expected to be in the range of $392 million to $402 million.
  • Diluted earnings per share are expected to be in the range of 35 to 45 cents per share.
  • The earnings per share guidance exclude any impact from additional share repurchases.

Photo courtesy Ugg