Deckers Outdoor Corporation second quarter net sales increased 3.4% to $41.7 million versus $40.3 million last year; ahead of our previous guidance range of $38 million to $40 million. Gross margin increased 600 basis points to 45.6% compared to 39.6% a year ago. Diluted EPS was the same as last year at 21 cents; ahead of our previous guidance range of 3 cents to 5 cents.
Cash and short-term investments improved to $64.9 million compared to $11.1 million a year ago.
Inventories decreased to $45.2 million versus $66.7 million last year.
Angel Martinez, President and Chief Executive Officer, stated, “We are very pleased that the positive momentum in our business has continued, allowing us to once again exceed expectations. During the quarter we experienced strong full price selling across all three of our brands evidenced by the 600 basis point improvement in our gross margin. We are particularly encouraged by the performance of Teva, as consumer reaction to a limited introduction of new styles as well as improved retail presence, helped drive results.
“At the same time, our strategic investments in marketing and advertising, research & development, and our retail and international infrastructures have us well positioned to capitalize on the many opportunities that still lie ahead, both domestically and overseas. We are focused on successfully executing our business plan and are dedicated to driving increased profitability and greater shareholder value.”
As anticipated, Teva net sales for the second quarter were $22.8 million compared to $24.8 million for the same period last year. The decrease in the volume of sales was the result of fewer closeout sales, which was partially offset by an increase in full margin sales that were driven by solid sell-through of men’s, women’s and kids products including the introduction of new styles of the Dozer, Elixir and Mush.
UGG net sales for the second quarter increased 19.2% to $15.9 million versus $13.3 million for the same period a year ago. Sales were positively impacted by a strong reorder business for the UGG spring line, as well as continued demand for core products.
Simple net sales increased 39.9% to $3.0 million for the second quarter compared to $2.2 million for the same period last year. Simple experienced strong consumer demand for our recently introduced Green Toe Collection across all channels of distribution. In addition, Simple’s men’s and women’s sandal business also performed well.
Sales for the Consumer Direct business, which are included in the brand sales numbers above, increased 13.5% to $4.0 million compared to $3.5 million for the same period a year ago. Results for the second quarter of 2006 include sales from the Company’s two retail outlet stores, which were not in operation in the second quarter of 2005.
Company raises full year sales guidance to range of $272 million to $278 million versus previous expectation of $268 million to $276 million.
Company raises full year diluted EPS range to $2.39 to $2.45 compared to previous expectation of $2.21 to $2.29.
Company reiterates previously announced second-half outlook of sales between $174 million to $180 million and diluted EPS of $1.74 to $1.80.
Fiscal 2006 guidance includes approximately $2.1 million of stock compensation expense which includes $0.7 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 million related to the aforementioned increase in selling, general and administrative expenses as part of the strategic initiatives to support future growth.
Company introduces third quarter guidance of sales between $71 million to $74 million and diluted EPS of $0.51 to $0.54.
Third quarter guidance includes approximately $2.5 million of expenses associated with the $9 million increase in selling, general and administrative expenses for fiscal 2006.
Company introduces fourth quarter guidance of sales between $103 million to $106 million and diluted EPS of $1.23 to $1.26.
Fourth quarter guidance includes approximately $2.5 million of expenses associated with the $9 million increase in selling, general and administrative expenses for fiscal 2006.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
Three-month period ended Six-month period ended
June 30, June 30,
------------------------ ------------------------
2006 2005 2006 2005
------------------------- -----------------------
Net sales $ 41,721,000 40,341,000 97,725,000 104,604,000
Cost of sales 22,680,000 24,372,000 53,984,000 59,068,000
------------ ----------- ----------- -----------
Gross profit 19,041,000 15,969,000 43,741,000 45,536,000
Selling, general and
administrative
expenses 15,033,000 11,292,000 30,819,000 26,460,000
------------ ----------- ----------- -----------
Income from
operations 4,008,000 4,677,000 12,922,000 19,076,000
Other (income)
expense :
Interest, net (687,000) 6,000 (1,267,000) (63,000)
Other (17,000) (4,000) (17,000) (3,000)
------------ ----------- ----------- -----------
Income before income
taxes 4,712,000 4,675,000 14,206,000 19,142,000
Income taxes 1,981,000 1,943,000 5,826,000 7,523,000
------------ ----------- ----------- -----------
Net income $ 2,731,000 2,732,000 8,380,000 11,619,000
============ =========== =========== ===========
Net income per share:
Basic $ 0.22 0.22 0.67 0.94
Diluted 0.21 0.21 0.65 0.90
============ =========== =========== ===========
Weighted-average
shares:
Basic 12,510,000 12,351,000 12,516,000 12,320,000
Diluted 12,806,000 12,886,000 12,815,000 12,909,000
============ =========== =========== ===========
