Deckers Ups Revenue Outlook on Strong UGG Performance

Deckers Outdoor Corporation said net sales increased 37.6% to $134.2 million for the first quarter ended March 31, 2009, versus $97.5 million last year.

Angel Martinez, President, CEO and Chairman of the Board of Directors, stated: “We are pleased by our recent performance and proud of our ability to deliver excellent operating results in this challenging economic environment. Our first quarter sales and earnings exceeded plan, driven by higher than expected domestic and international demand for UGG products as the brand’s spring collection of boots, sandals, and casual footwear sold through very well at retail. Sales of Teva products experienced a slight shortfall versus a year ago as a result of the general retail environment combined with the bankruptcy of some accounts. Importantly, we effectively controlled our inventories and expenses and we continue to monitor the financial health of our customers. We believe that the Teva brand is well positioned as we head into the summer selling season. Similarly, a higher level of cancellations and lower reorders during the first quarter negatively impacted our Simple brand’s business.”

“Again, we are pleased with our start to 2009,” continued Martinez. “Our UGG brand’s momentum continues to grow and we are now more optimistic about the brand’s prospects evidenced by our improved outlook for the full year. Furthermore, our entire organization has done an excellent job managing the business during these difficult recessionary conditions, which allowed us to grow inventories to meet our sales while improving our cash, cash equivalents and short-term investments position by nearly $47 million to $230 million compared to a year ago.”

Division Summary

UGG brand net sales for the first quarter increased 66.9% to $91.4 million compared to $54.8 million for the same period last year. The significant sales increase was attributable to strong domestic demand for the expanded spring line coupled with increased shipments of spring product to international distributors.

Teva brand net sales decreased 5.7% to $35.6 million for the first quarter compared to $37.7 million for the same period last year. The decline in sales was the result of lower pre-booked orders scheduled for delivery in the first quarter compared with the year ago period and to a lesser extent the bankruptcies of three wholesale accounts.

Simple brand net sales for the first quarter decreased 13.0% to $4.4 million compared to $5.1 million for the same period last year. Simple sales were negatively impacted by a higher than normal rate of order cancellations due to the general retail environment combined with lower reorders and the loss of international sales, partly as a result of the termination of the brand’s distributor in Japan.

Combined net sales of the company’s other brands, TSUBO and Ahnu, were $2.9 million for the first quarter of 2009. The company acquired TSUBO in the second quarter of 2008 and Ahnu in the first quarter of 2009.

Sales for the e-commerce business, which are included in the brand sales numbers above, increased 3.5% to $16.2 million for the first quarter compared to $15.6 million for the same period a year ago.

Sales for the retail store business, which are included in the brand sales numbers above, increased 161.9% to $13.9 million for the first quarter compared to $5.3 million for the same period a year ago. For those stores that were open during the full three months ended March 31, 2008 and 2009, same store sales grew by 29.3%.

The company’s gross profit margin for the first quarter was 43.9% compared to 47.3% for the first quarter of last year. Gross profit margin decreased primarily due to the wholesale business growing at a higher rate than the e-commerce business for the first quarter of 2009 as well as higher levels of closeout sales than in the first quarter of 2008. First quarter 2008 margins were also positively impacted by a reduction in the estimate for sales returns.

Full-Year 2009 Outlook

Based upon the UGG brand’s better than expected first quarter results partially offset by lower projected sales forecasts for Teva, Simple, and TSUBO, Deckers is adjusting its full year revenue outlook. The company now expects its full year revenue to increase approximately 7% to 9% over 2008, compared to previous guidance of approximately 6% to 9%.

Second Quarter Outlook

The company currently expects second quarter 2009 revenue to increase approximately 10% over 2008 levels, and expects to report a diluted loss per share of approximately 15 cents to 10 cents for the second quarter 2009. This guidance assumes a gross profit margin of approximately 39% and SG&A as a percentage of sales of approximately 43% due to the shift of approximately $2 million in expenses, consisting primarily of marketing costs, into the second quarter from the first quarter. A significant amount of the company’s operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter, resulting in the greatest impact on earnings in the lowest volume sales quarter, which has historically been the second quarter.