Deckers Outdoor Corporation saw net sales increase 22.6% to a record $91.0 million for the fourth quarter versus $74.2 million in the same period last year. Net earnings for the quarter increased 31.5% to $12.1 million from $9.2 million last year, while earnings per diluted share increased 30.6% to 94 cents, versus earnings per diluted share of 72 cents in the fourth quarter of 2004.
For the year ended December 31, 2005, net sales increased 23.3% to a record $264.8 million versus $214.8 million last year. Net earnings for the year increased to $31.8 million, compared to net earnings of $25.5 million a year ago, and earnings per diluted share increased 18.1% to $2.48, versus earnings per diluted share of $2.10 in fiscal 2004.
The results for both the fourth quarter and the year ended December 31, 2005 include incremental income tax expense of approximately $300,000 related to the Company's repatriation of overseas earnings under Section 965 of the American Jobs Creation Act of 2004.
Angel Martinez, President & Chief Executive Officer, stated, “Our fourth quarter results were much stronger than we anticipated and represent a great finish to another record year for our Company. Our top-line performance was once again driven by robust sales of our entire UGG product line, including our heritage Classic and Ultra styles, our new Metropolitan Collection, our men's and women's slippers and casuals, and our kids' product. In addition, our improved inventory position versus a year ago allowed us to significantly reduce shipping costs which helped contribute to the 170 basis point gain in gross margin for the fourth quarter.”
Including sales from both the wholesale divisions and the consumer direct (our Internet, catalog and retail outlet division) business, Teva net sales for the fourth quarter were $11.3 million compared to $11.8 million in the same period last year. UGG net sales increased 30.4% to $78.5 million versus $60.2 million a year ago, driven by strong sales across the board. Simple sales decreased 44.4% to $1.2 million for the fourth quarter compared to $2.2 million for the same period last year, as the fourth quarter of 2004 included approximately $1.0 million of sales of the Simple sheep offering, a program which the Company discontinued in late 2004. Sales for the consumer direct business, which are included in the brand sales numbers above, increased 153.4% to $15.2 million for the fourth quarter of 2005 compared to $6.0 million for the fourth quarter of 2004 due to greater availability of UGG product in 2005, the addition of our first true retail outlet store, and consumers' increased reliance on the Internet as a source for holiday purchases.
For the year ended December 31, 2005, Teva net sales were $85.2 million compared to $88.2 million in 2004, UGG net sales in 2005 increased 47.7% to $171.6 million versus $116.2 million last year, and Simple net sales were $7.9 million compared to $10.3 million a year ago. Net sales for the consumer direct business, which are included in the brand sales numbers above, aggregated approximately $27.1 million for the year ended December 31, 2005, up 36.2% from $19.9 million for 2004.
Mr. Martinez further stated, “Fiscal 2005 was a tremendous year for UGG as the brand delivered its eighth consecutive year of double digit growth. This was achieved through several important initiatives, including significantly diversifying our product offering with the introduction of new collections, expanding our penetration within our key channels of distribution, and more effectively managing our inventories. Looking ahead, we are focused on building on our positive momentum as we look to increase UGG's selling season, further enhance our men's offering, and broaden our presence overseas.”
“While Teva's sales were down slightly year-over-year, we are very encouraged by our initial results aimed at reducing the brand's dependency on warm weather,” continued Mr. Martinez. “To that end, we have had good response to our Fall 2006 product offering and will continue to make key investments in research and development in order to more effectively leverage our proprietary technologies and create a more complete line of closed-toe footwear. In addition, for 2006 we have increased our worldwide marketing expenditures as we look to revitalize our presentation at retail and attract a younger consumer to the brand, building on our foundation as an authentic outdoor performance brand.”
“With regard to Simple, we experienced meaningful gains in gross margins in 2005 driven by strong retail sell through of our original sneakers and clogs. For 2006, we are expecting double digit growth for the brand as we introduce new athletically inspired casual products, launch our new “9 to 5″ collection of leather casual footwear and begin deliveries of our highly-anticipated Green Toe collection of environmentally friendly footwear.”
Gross margin was comparable at 42.1% for the years ended December 31, 2005 and 2004. Selling, general and administrative expenses (“SG&A”) increased to $59.3 million in 2005 compared $48.0 million in 2004 and was comparable as a percentage of sales at 22.4% in 2005 compared to 22.3% in 2004. The resulting operating margins were 19.7% in fiscal 2005 versus 19.8% in 2004.
Overall, inventories decreased to $33.4 million at December 31, 2005 from $66.8 million at September 30, 2005, and compared to $30.3 million at December 31, 2004. UGG inventories were $17.7 million at December 31, 2005 compared to $13.0 million at December 31, 2004; Teva inventories decreased to $11.3 million at December 31, 2005 compared to $14.9 million at December 31, 2004; and, Simple inventories increased to $4.4 million at December 31, 2005 compared to $2.3 million at December 31, 2004. In addition, the Company ended fiscal 2005 with approximately $50.7 million in cash on the balance sheet compared to $10.4 million at the end of fiscal 2004.
Deckers also increased its guidance for fiscal 2006. The Company now expects net sales to range from $260 million to $270 million compared to its previous guidance of $255 million to $265 million. The Company also raised the low end of its previous earnings per diluted share guidance and now expects to report earnings of $2.05 to $2.15 per diluted share. The Company also reiterated its comfort with its previous guidance for the first quarter of 2006 of net sales in the range of $48 million to $50 million and earnings per diluted share of $0.22 to $0.24.
The fiscal 2006 guidance includes approximately $700,000 of additional stock compensation expense related to the adoption of Statement of Financial Accounting Standards No. 123R, effective January 1, 2006.
Mr. Martinez concluded, “Over the past 12 months we implemented a number of key initiatives to better position Deckers for the future. These included solidifying our management team, restructuring our international business, and making important investments to our operating platform. We move forward with three powerful brands, a strong balance sheet, and an organization more focused than ever on executing our strategic plan in order to take this Company to the next level.”
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
Three-month period ended Year ended
December 31, December 31,
---------------------------------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net sales $90,963,000 74,172,000 264,760,000 214,787,000
Cost of sales 54,047,000 45,286,000 153,238,000 124,354,000
------------ ------------ ------------ ------------
Gross profit 36,916,000 28,886,000 111,522,000 90,433,000
Selling, general
and administrative
expenses 17,742,000 14,684,000 59,254,000 47,971,000
------------ ------------ ------------ ------------
Earnings from
operations 19,174,000 14,202,000 52,268,000 42,462,000
Other expense
(income):
Interest, net (75,000) (25,000) 29,000 2,236,000
Other (1,000) 3,000 (4,000) 3,000
------------ ------------ ------------ ------------
Earnings before
income tax expense 19,250,000 14,224,000 52,243,000 40,223,000
Income tax expense 7,174,000 4,976,000 20,398,000 14,684,000
------------ ------------ ------------ ------------
Net earnings $12,076,000 9,248,000 31,845,000 25,539,000
============ ============ ============ ============
Net earnings per
share:
Basic $ 0.97 0.78 2.58 2.32
Diluted 0.94 0.72 2.48 2.10
============ ============ ============ ============
Weighted-average
shares:
Basic 12,406,000 11,894,000 12,349,000 11,005,000
Diluted 12,900,000 12,817,000 12,866,000 12,142,000
============ ============ ============ ============
