Deckers Outdoor Corp. reported net sales in the second
quarter increased 12.5% to $102.5 million versus $91.1 million a year ago. The
owner of Uggs and Teve netted a profit of $2.9 million, or 22 cents a share, against a
loss of $3.8 million, or 29 cents a year ago. Excluding non-cash, pre-tax
tradename/trademark write-downs in each period of $1.0 million related to the TSUBO
brand in 2009) and $14.9 million for the Teva brand in 2008, non-GAAP diluted
EPS decreased 33.3% to 26 cents a share from 39 cents a year ago.
Among the highlights were international sales increased
36.8% to $46.5 million compared to $34.0 million for the same period last year.
UGG brand sales increased 22.9% to $74.4 million versus $60.6 million for the
same period last year.
Angel Martinez, president, chief executive officer and chairman,
stated: “Our solid performance throughout this challenging economic period
highlights the desirability of our brands and underscores our disciplined
distribution strategy and ability to control expenses. Our second quarter
earnings were ahead of our guidance primarily due to lower than projected
operating expenses, a shift in certain marketing expenses to the second half of
the year, and to a lesser extent, higher sales. The UGG brand delivered strong
second quarter results, fueled primarily by shipments of fall product to our
international distributors. In addition, our spring line of sandals, flip
flops, fashion wedges and boots continued to retail well, an indication of the
progress we have made evolving the UGG brand into a year-round brand. While our
Teva brand has not been immune to the difficult market conditions, our strategy
of developing broader lines of open and closed toe footwear with more
compelling price points is resonating with consumers and allowing us to capture
market share. Simple brand sales continue to be driven by increased awareness
of ecoSNEAKS and greater distribution for the collection with accounts such as
Nordstrom and Journeys. We remain optimistic about our near and long-term
growth prospects and approach the second half of the year having improved our
cash, cash equivalents and short-term investments position by over $50 million
to over $175 million compared to nearly $125 million as of June 30, 2008.”
Division Summary
UGG Brand
UGG brand net sales for the second quarter increased 22.9%
to $74.4 million compared to $60.6 million for the same period last year. The
sales gain was primarily attributable to an increase in global shipments of
fall product versus the same period a year ago.
Teva Brand
Teva brand net sales decreased 10.6% to $22.6 million for
the second quarter compared to $25.2 million for the same period last year. The
decline in sales was the result of lower reorders in the second quarter
compared with the year ago period combined with lower closeout sales due to an
improved inventory position versus last year.
Simple Brand
Simple brand net sales for the second quarter decreased
25.2% to $3.5 million compared to $4.7 million for the same period last year.
Simple brand sales were higher in the second quarter of 2008 in part due to the
launch of Planet Walkers, and a lower than normal rate of reorder business in
the second quarter of 2009.
Other Brands
Combined net sales of the companys other brands, TSUBO and
Ahnu, were $2.1 million for the second quarter of 2009 compared to $0.7 million
in TSUBO brand sales for the same period last year. The company acquired the
TSUBO brand in the second quarter of 2008 and the Ahnu brand in the first
quarter of 2009. Accordingly, 2008 only reflects a partial quarter of TSUBO
brand sales activity. As of June 30, 2009, the company conducted an impairment
evaluation of the TSUBO brand trademarks included in intangible assets on its
condensed consolidated balance sheet. Based on the results of the evaluation,
the company wrote down the value of the trademarks and recorded a non-cash,
pre-tax charge of $1.0 million for the second quarter ended June 30, 2009.
eCommerce
Sales for the eCommerce business, which are included in the
brand sales numbers above, decreased 18.1% to $5.3 million for the second
quarter compared to $6.4 million for the same period a year ago. The decrease
in sales resulted from more first quarter backorders carried into and shipped
in the second quarter of 2008 than 2009 for the UGG brand, a decline in our
conversion rates for all brands and lower average selling prices for Teva and
Simple brand products.
Retail Stores
Sales for the retail store business, which are included in
the brand sales numbers above, increased 100.0% to $6.1 million for the second
quarter compared to $3.1 million for the same period a year ago, primarily as a
result of more store locations in 2009. For those stores that were open during
the full three months ended June 30, 2008 and 2009, same store sales grew by
8.4%.
Inventories
At June 30, 2009, inventories increased 29.1% to $145.6
million versus $112.8 million for the same period a year ago. By brand, the UGG
brand increased by $39.7 million to $130.3 million compared to $90.6 million
for the same period last year, the Teva brand decreased by $6.3 million to $7.9
million compared to $14.1 million for the same period last year and the Simple
brand decreased by $3.1 million to $3.8 million compared to $6.9 million for
the same period last year. TSUBO and Ahnu brand inventory totaled $3.7 million
at June 30, 2009. It is important to note that the majority of the UGG brands
business is pre-booked and the increase in the UGG brands inventory is
necessary to fulfill the volume of orders currently on the books. In addition,
$6.8 million of the increase in UGG brand inventory was from the companys
retail store inventory, due in part to the companys additional retail stores
at June 30, 2009 compared to a year ago.
Full-Year 2009 Outlook
* Based upon the
UGG brands second quarter performance coupled with increased visibility into
the second half of the year, the company is raising its full year revenue
outlook. The company now expects its full year revenue to increase
approximately 9% to 10% over 2008, compared to previous guidance of
approximately 7% to 9%.
* The company
reiterated its previous outlook for full year non-GAAP diluted earnings per
share to be flat to up slightly over the $7.27 non-GAAP diluted EPS in 2008,
which excludes pre-tax impairment charges of $1.0 million for 2009 and $35.8
million for 2008 as described in our earnings release for the fourth quarter
ended December 31, 2008. This guidance assumes a gross profit margin of
approximately 44.5% compared to its previous expectation of approximately 45.0%
and SG&A as a percentage of sales of approximately 24.5% compared to its
previous expectation of approximately 25.0%.
Third and Fourth Quarter Outlook
* The company
currently expects third quarter 2009 revenue and diluted earnings per share to
increase approximately 14.0% and 10.0%, respectively, over 2008 levels. This
guidance assumes a gross profit margin of approximately 43.0% and SG&A as a
percentage of sales of approximately 22.5%.
* The company
currently expects fourth quarter 2009 revenue to decrease slightly and non-GAAP
diluted earnings per share to decrease approximately 4% from 2008 levels, which
excludes pre-tax impairment charges of $20.9 million for the fourth quarter
ended December 31, 2008 as described in our earnings release for that period.
The projected sales and earnings decline for the fourth quarter is being driven
by a shift of sales to the third quarter to accommodate customer requests for
early deliveries of the UGG brand. This guidance assumes a gross profit margin
of approximately 47.5% and SG&A as a percentage of sales of approximately
20.0%.
