Deckers Outdoor Corporation third quarter net sales increased 19.0% to $82.3 million versus $69.2 million last year; ahead of previous guidance range of $71 million to $74 million.Diluted EPS was 83 cents; ahead of previous guidance range of 51 cents to 54 cents.

Gross margin increased 320 basis points to 45.2% compared to 42.0% a year ago. Cash and short-term investments increased to $45.3 million compared to $19.1 million a year ago. Inventories decreased to $51.5 million versus $66.8 million a year ago.

“Our strong third quarter performance was gratifying, as UGG sales once again outpaced our expectations,” commented President and Chief Executive Officer, Angel Martinez.

“These results reflect the effective execution of our strategy to diversify the product line, increase the breadth and depth of each collection, expand our target demographic, and underscore the growing lifestyle status of the brand. At the same time, our ability to control costs, primarily labor and materials, resulted in significant gross margin expansion for the quarter. However, we expect gross margins to return to more normalized levels in 2007. We are excited about our prospects and committed to capitalizing on the many opportunities that still lie ahead for all three of our brands.”

Third Quarter Segment Summary

Teva

Teva net sales for the third quarter increased to $10.0 million compared to $9.7 million for the same period last year. Teva's performance was driven by a positive reaction to a limited introduction of closed toe footwear combined with solid sales of the traditional sandal offering.

UGG

UGG net sales for the third quarter increased 18.4% to $67.9 million versus $57.3 million for the same period a year ago. Sales were fueled by robust consumer demand for the new Fall styles, including fashion boots, casuals, men's and kids, coupled with a strong reorder business for core styles.

Simple

Simple net sales increased 108.8% to $4.4 million for the third quarter compared to $2.1 million for the same period last year. Simple's core sandal and sneaker product lines were the largest contributors. Additionally, the Green Toe collection experienced strong retail sell-through across all channels of distribution and in all geographic regions.

Consumer Direct

Sales for the Consumer Direct business, which are included in the brand sales numbers above, increased 72.8% to $5.8 million compared to $3.4 million for the same period a year ago. Results for the third quarter of 2006 include sales from the Company's two new retail outlet stores, which were not in operation in the third quarter of 2005.

Full-Year 2006 Outlook

The Company raises full year sales guidance to range of $287 million to $290 million versus previous expectation of $272 million to $278 million.

The Company raises full year diluted EPS to range of $2.75 to $2.78 compared to previous expectation of $2.39 to $2.45.

Fiscal 2006 guidance includes approximately $1.9 million of stock compensation expense which includes $0.6 million of additional stock compensation expense related to the adoption of Statement of Financial Accounting Standards No. 123R, effective January 1, 2006. In addition, the guidance includes approximately $9.0 million related to the previously announced increase in selling, general and administrative expenses as part of the strategic initiatives to support future growth.

Fourth Quarter Outlook

The Company raises fourth quarter sales guidance to range of $107 million to $110 million and diluted EPS of $1.27 to $1.30 versus previous expectations of $103 to $106 million and $1.23 to $1.26, respectively.
Fourth quarter guidance includes approximately $3.0 million of expenses associated with the approximate $9.0 million increase in selling, general and administrative expenses for fiscal 2006.

                      DECKERS OUTDOOR CORPORATION
                           AND SUBSIDIARIES
              Condensed Consolidated Statements of Income
                              (Unaudited)
           (Amounts in thousands, except for per share data)


                                      Three-month   Nine-month period
                                      period ended         ended
                                      September 30,   September 30,
                                    ----------------------------------
                                       2006    2005     2006     2005
                                     ------- ------- -------- --------

Net sales                           $82,322  69,193  180,047  173,797
Cost of sales                        45,149  40,123   99,133   99,191
                                     ------- ------- -------- --------
     Gross profit                    37,173  29,070   80,914   74,606

Selling, general and administrative
 expenses                            19,865  15,052   50,684   41,512
                                     ------- ------- -------- --------
     Income from operations          17,308  14,018   30,230   33,094

Other (income) expense :
     Interest, net                     (673)    167   (1,940)     104
     Other                               30     ---       13       (3)
                                     ------- ------- -------- --------
Income before income taxes           17,951  13,851   32,157   32,993

Income taxes                          7,352   5,701   13,178   13,224
                                     ------- ------- -------- --------

Net income                          $10,599   8,150   18,979   19,769
                                     ======= ======= ======== ========

Net income per share:
     Basic                          $  0.85    0.66     1.52     1.60
     Diluted                           0.83    0.63     1.48     1.54
                                     ======= ======= ======== ========

Weighted-average shares:
     Basic                           12,531  12,358   12,503   12,333
     Diluted                         12,831  12,856   12,805   12,872
                                     ======= ======= ======== ========