Deckers Outdoor Corporation reported that second quarter net sales were $40.3 million compared to $40.5 million in the same period last year. Net earnings for the quarter were $2.7 million, or 21 cents per diluted share, compared to net earnings of $5.1 million year, or 43 cents per diluted share, in the same period last year.
For the six months ended June 30, 2005, net sales increased 23% to $104.6 million compared to $84.8 million in the same period last year. Net earnings for the first half of fiscal 2005 increased 11% to $11.6 million, compared to net earnings of $10.5 million in the same period last year. Diluted earnings per share were $0.90 compared to diluted earnings per share of $0.91 in the same period of fiscal 2004.
Douglas Otto, Chairman of Deckers Outdoor, stated, “As expected, Teva's dependency on open toe sandals combined with the lingering cold weather during the Spring 2005 season negatively impacted our domestic Teva business during the quarter, while weakness in certain international markets affected Teva's overseas business. However, demand for UGG remained strong and as we enter our key selling period for UGG we are very excited about the opportunities we continue to see in the marketplace. The UGG orders for our Fall season have come in strong and we expect another record year for our UGG brand in 2005.”
Including sales from both the wholesale divisions and the Internet and catalog retailing business, Teva sales for the second quarter decreased to $24.8 million from $27.1 million in the same period a year ago, while UGG sales increased to $13.3 million compared to $11.7 million for the second quarter last year. Simple sales increased to $2.2 million compared to $1.8 million for the second quarter last year. Sales for the Internet and catalog retailing business, which are included in the brand sales numbers above, aggregated approximately $3.5 million for the second quarter of 2005, compared to $4.9 million for the second quarter of 2004.
Mr. Otto continued, “Our UGG business for the first half of 2005 was very positive, with sales more than doubling compared to the first half of 2004. We feel very good about UGG's performance year to date and expect this momentum to continue this Fall. For the upcoming Fall season, we have substantially broadened our product offerings and increased the number of slipper and casual footwear styles. We also introduced new collections including the Metropolitan Collection, which includes the Cargo Boot and the Uptown Mukluk, while continuing to deliver the popular Classic and Ultra styles that have been the mainstay of the UGG brand. Based on our strong bookings, current sell-through rates and positive retailer response, we feel very encouraged about both the near- and long-term prospects for the brand. We believe that, over time, we have a tremendous opportunity to increase our geographic penetration and expand our footwear and non-footwear categories and we are dedicated to taking full advantage of the significant growth prospects that lie ahead.”
“With regard to Teva, we have put in place a number of strategic initiatives to further strengthen our position in the market both domestically and abroad,” Mr. Otto stated. “We are re-engineering our product line with a heightened focus on innovation and a renewed dedication to capitalizing on proprietary technologies. We are also developing a more comprehensive line of non-weather dependent footwear. Finally, for our Spring 2006 season, we plan to significantly increase our marketing and advertising efforts in order to reinvigorate and sharpen our worldwide message for the brand.”
Overall, inventories increased to $66.7 million at June 30, 2005 from $19.6 million at June 30, 2004 primarily related to Fall 2005 UGG inventory. The Company made a strategic decision to bring in its Fall UGG inventories much earlier in the year this year than it did last year in order to ensure more timely deliveries to customers in 2005. UGG inventories were $55.6 million at June 30, 2005 compared to $10.0 million at June 30, 2004; Teva inventories were $8.6 million at June 30, 2005 compared to $7.3 million at June 30, 2004; and, Simple inventories were $2.5 million at June 30, 2005 compared to $2.3 million at June 30, 2004. The Company's management stated that it expects the inventory level to be reduced substantially by the end of the year.
Deckers reaffirmed the higher end of its previous guidance for net sales and earnings for fiscal 2005. For the year, Deckers now expects net sales between $251 million to $258 million and diluted earnings per share between $2.35 to $2.43. For the third quarter, Deckers expects net sales of $68 million to $71 million and diluted earnings per share of $0.58 to $0.61. For the fourth quarter, Deckers currently forecasts net sales to range from $78 million to $82 million and diluted earnings per share to range from $0.87 to $0.92.
Deckers now expects 2005 Teva sales to be $88 million to $89 million, Simple sales to be $10 million to $11 million and UGG sales to be $153 million to $158 million.
Angel Martinez, President and Chief Executive Officer, commented, “I remain extremely confident about the vitality of our brands and I am very excited about our future prospects. Our entire team is committed to taking the necessary steps to improve our business at Teva, while at the same time, we are focused on fully capitalizing on the tremendous opportunities that exist with UGG and Simple.”
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
Three-month period ended Six-month period ended
June 30, June 30,
-------------------------------------------------
2005 2004 2005 2004
----------- ----------- ------------ -----------
Net sales $40,341,000 40,546,000 104,604,000 84,818,000
Cost of sales 24,372,000 21,640,000 59,068,000 45,506,000
----------- ----------- ------------ -----------
Gross profit 15,969,000 18,906,000 45,536,000 39,312,000
Selling, general and
administrative
expenses 11,292,000 9,632,000 26,460,000 20,410,000
----------- ----------- ------------ -----------
Earnings from
operations 4,677,000 9,274,000 19,076,000 18,902,000
Other expense
(income):
Interest, net 6,000 1,171,000 (63,000) 2,289,000
Other (4,000) 1,000 (3,000) (5,000)
----------- ----------- ------------ -----------
Earnings before
income tax expense 4,675,000 8,102,000 19,142,000 16,618,000
Income tax expense 1,943,000 3,015,000 7,523,000 6,149,000
----------- ----------- ------------ -----------
Net earnings $ 2,732,000 5,087,000 11,619,000 10,469,000
=========== =========== ============ ===========
Net earnings per
share:
Basic $ 0.22 0.47 0.94 1.02
Diluted 0.21 0.43 0.90 0.91
