Deckers Raises 2010 Outlook on Robust Q3 Growth

Deckers Outdoor Corp. reported third-quarter revenues increased 21.7% to $277.9 million versus $228.4 million last year. Ugg brand sales increased 20.2% while Teva's jumped 51.7%. Earnings climbed 24.5% to $42.1 million, or $1.07,  from $33.8 million, or 86 cents, a year ago.

Other highlights of the quarter:

• Gross margin improved 420 basis points to 47.1% versus 42.9% a year ago.
• UGG brand sales increased 20.2 % to $255.8 million versus $212.8 million last year.
• Teva brand sales increased 51.7% to $13.7 million compared to $9.0 million a year ago.
• International sales increased 48.2% to $73.2 million versus $49.4 million last year.
• Retail sales increased 63.3% to $20.2 million compared to $12.3 million last year; same store sales rose 17.9%.

Angel Martinez, president, chief executive officer and chairman, stated: “The strong performance of our new fall lines helped fuel sales gains across each of our distribution channels and geographic regions compared to the third quarter of last year. We continue to successfully expand the UGG brand's market share by developing more compelling products including boots, casuals and sneakers that target a wider consumer audience. The global response to our fall collection has been very encouraging, with sell-through rates accelerating as we've moved into the fourth quarter. At the same time, the strong momentum the Teva brand experienced during the first half of the year is carrying over into the second half. This was driven by increased shipments of our fall collection, led by an expanded offering of closed toe products coupled with strong in-season demand for our sandal assortment. We are encouraged by the current trends in our business and believe we are well positioned for a very good holiday selling season.”

Full-Year 2010 Outlook

• Based on better than expected third quarter results combined with higher projected sales for the UGG and Teva brands, the Company is raising its full-year outlook.
• The company now expects its full-year revenue to increase approximately 16% over 2009 levels, compared to previous guidance of approximately 14%.
• The company now expects its full-year diluted earnings per share to increase approximately 22% over the non-GAAP diluted EPS of $2.98 in 2009, compared to previous guidance of approximately 16%. This guidance assumes a gross profit margin of approximately 49% and SG&A as a percentage of sales of approximately 25%. The non-GAAP diluted EPS of $2.98 in 2009 has been adjusted to reflect the three-for-one stock split, in the form of a stock dividend, that was distributed in July 2010, and excluded pre-tax non-cash impairment charges of $1.0 million, or $0.02 per diluted share, as discussed in the related earnings release.
• Fiscal 2010 guidance includes a reduction of net income of approximately $8.0 million pre-tax, with a diluted EPS impact of approximately $0.13, resulting from estimates of incremental expenses associated with the continuing transition to wholesale sales for the Teva brand in the Benelux region and France, and incremental expenses and a shift in sales from 2010 to 2011 associated with the expected transitions in January 2011 to wholesale sales for the UGG, Teva and Simple brands in the United Kingdom as well as the UGG and Simple brands in the Benelux region and France. Fiscal 2010 guidance also assumes an effective tax rate of 36.8% compared to 36.2% in 2009 due to the impact on international income from the aforementioned incremental expenses and shift in profit.

Fourth Quarter Outlook

The company reiterated its outlook for both the fourth quarter 2010 revenue and diluted EPS to increase approximately 8% over 2009 levels. This guidance includes incremental expenses and a shift in sales from 2010 to 2011 associated with the upcoming transitions described above and assumes a gross profit margin of approximately 52% and SG&A as a percentage of sales of approximately 21%.