Deckers Q4 Revenues Vault 56.3%, Propelled by Ugg

Driven by continued demand for Ugg, Deckers Outdoor Corp.'s fourth quarter sales surged 56.3% to $303.5 million from $194.2 million a year ago. Earnings improved to $40.5 million, or $3.07 a share, from $35.4 million, or $2.69, a year ago. Excluding a pre-tax non-cash write down of $20.9 million, non-GAAP income jumped 50.6% to $4.05 a share.

The company said its domestic sales increased 59.5% to $283.4 million compared to $177.7 million last year. International sales increased 21.3% to $20.1 million versus $16.5 million a year ago. UGG brand sales increased 62.0% to $288.0 million compared to $177.7 million last year.

As part of the company's annual goodwill and indefinite lived asset impairment testing, the Company recognized an impairment charge for the entire balance of $11.9 million of the Teva brand's goodwill as well as the entire balance of $3.5 million of the TSUBO brand's goodwill in the fourth quarter of fiscal 2008. These impairment charges resulted primarily from a significant decrease in the company's market capitalization as the stock market as a whole has declined, as well as reduced forecasts for the Teva brand. In addition, the company recognized an impairment loss of $5.5 million on the Teva brand's trademarks, leaving a balance of $15.3 million as of December 31, 2008.

This impairment charge resulted primarily from the reduced forecasts for the Teva brand.

Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: “Our UGG business, both in the U.S. and internationally, performed very well during the fourth quarter. We experienced robust consumer demand for our expanded product assortment across all geographic regions and throughout our wholesale accounts, company-owned stores, and on our eCommerce website. This allowed us to exceed expectations and represented a strong finish to another record year. While the macroeconomic conditions did impact Teva and Simple's fourth quarter performance, we are pleased with the progress both brands made during the past twelve months. For Teva, this included targeting a younger audience, improving retail placement, and introducing a fall line of closed-toe footwear. And for Simple, it was expanding the product assortment, increasing distribution, and broadening consumer awareness of the brand and its collections. We begin 2009 fully cognizant of the challenges confronting our industry and this is reflected in our modest growth assumptions for the full year. That said, we remain confident about our long-term prospects and believe that the current retail environment is creating new opportunities for market share gains. Therefore, we plan to take advantage of our positive momentum and strong balance sheet by making strategic investments in our brands and infrastructure to ensure we are best positioned for the future.”

Division Summary

UGG

UGG brand net sales for the fourth quarter increased 62.0% to $288.0 million compared to $177.7 million for the same period last year. The significant sales gain was driven by increased orders for fall and holiday product from domestic retailers, international distributors, and higher sell-through rates at company-owned retail locations and on its eCommerce website versus a year ago. For the full year, UGG brand sales increased 67.5% to a record $582.0 million versus $347.6 million in 2007.

Teva

Teva brand net sales were $12.4 million for the fourth quarter compared to $13.9 million for the same period last year, a decrease of 11.1%. The sales decline was primarily attributable to a lower level of pull-forwards on spring product compared with last year, partially offset by demand for new fall closed-toe product. For the full year, Teva brand sales decreased 1.6% to $86.5 million compared to $87.9 million in 2007.

Simple

Simple brand net sales for the fourth quarter were $2.3 million compared to $2.6 million for the same period last year, a decrease of 12.3%, primarily due to lower reorders from retailers. For the full year, Simple brand sales increased 27.4% to $17.2 million versus $13.5 million in the prior year.

TSUBO

TSUBO brand net sales were $0.9 million for the fourth quarter and $3.8 million for the full year. TSUBO was acquired by the Company in the second quarter of 2008.

eCommerce

Sales for the eCommerce business, which are included in the brand sales numbers above, increased 51.2% to $36.1 million for the fourth quarter compared to $23.9 million for the same period a year ago. For the full year, sales for the eCommerce business increased 51.2% to a record $68.8 million versus $45.5 million in 2007.

Retail Stores

Sales for the retail store business, which are included in the brand sales numbers above, increased 103.1% to $24.7 million for the fourth quarter compared to $12.1 million for the same period a year ago. For the full year, sales for the retail store business increased 109.2% to $38.5 million versus $18.4 million a year ago. For those stores that were open during the full year of 2007 and 2008, same store sales grew by 32.7%.

Fiscal 2008 Highlights

For the full year, sales increased 53.6% to $689.4 million versus $448.9 million last year. Diluted EPS of $5.60 on a GAAP basis, or $7.27 excluding the pre-tax non-cash write down of $14.9 million incurred in the second quarter of fiscal 2008 and the $20.9 million incurred in the fourth quarter of fiscal 2008. The non-GAAP * diluted EPS of $7.27 represents an increase of 43.7% over diluted EPS of $5.06 a year ago.

Domestic sales increased 50.4% to $581.5 million compared to $386.6 million last year. International sales increased 73.1% to $107.9 million versus $62.3 million a year ago.
 
Cash, cash equivalents and short-term investments increased to $194.8 million compared to $168.1 million a year ago, or on a non-GAAP * basis $14.76 per diluted share compared to $12.80 per diluted share a year ago.

Full-Year 2009 Outlook

The company introduced a full year revenue growth target of approximately 6% to 9% over 2008. The company also introduced its full year diluted earnings per share target of approximately the same as to slightly down from the $7.27 non-GAAP diluted EPS in 2008, based on a gross margin being the same as to slightly up from 2008, SG&A expenses as a percentage of sales of approximately 25% to 26% and an effective tax rate of approximately 38%.

Fiscal 2009 guidance includes additional marketing investments in the Simple and TSUBO divisions of approximately $10.0 million in an effort to increase consumer brand awareness and market share, and approximately $10.5 million of stock compensation expense.

First Quarter Outlook

The company currently expects first quarter 2009 revenue to increase approximately 22% over 2008, and expects first quarter 2009 diluted earnings per share to be approximately 28% down from 2008.

First quarter guidance includes additional marketing investments in the Simple and TSUBO divisions of $2 million, lower gross margins compared to 2008 due to higher levels of wholesale and international distributor sales as a percentage of total sales expected this year and higher levels of fixed overhead for new retail stores, warehouse operations, international infrastructure and general administrative costs.