Deckers Brands reported a surprise profit in the first quarter ended June 30 as sales surged 78.2 percent. Ugg’s sales grew 70.8 percent and Hoka One One soared 95.5 percent. The company slightly raised its guidance for the year.
Highlights of the quarter include:
- First-quarter fiscal 2022 revenue increased 78.2 percent to $504.7 million;
- First-quarter fiscal 2022 earnings per share increased to $1.71; and
- Full-year fiscal 2022 outlook raised earnings per share now in the range of $14.45 to $15.10.
“Our portfolio of brands delivered a strong start to fiscal 2022, which propelled Deckers to its most profitable first quarter ever,” said Dave Powers, president and CEO. “The growing influence of Hoka, the increasing year-round appeal of UGG, and the continuing strength of Teva are driving progress across strategic priorities and delivering a more balanced business. While macro-economic headwinds persist throughout the supply chain, we are confident in the consumer demand for our brands and the resilience of our global omnichannel organization, and we remain dedicated to the foundational, long-term strategies driving Deckers’ success.”
First Quarter Fiscal 2022 Financial Review
- Net sales increased 78.2 percent to $504.7 million compared to $283.2 million for the same period last year. On a constant-currency basis, net sales increased 76.1 percent.
- Gross margin was 51.6 percent compared to 50.3 percent for the same period last year.
- SG&A expenses were $198.7 million compared to $150.3 million for the same period last year.
- Operating income was $61.8 million compared to a loss of $7.7 million for the same period last year.
- Income tax expense was $13.5 million compared to a benefit of $0.1 million for the same period last year.
- Diluted earnings per share were $1.71 compared to basic loss per share of $0.28 for the same period last year.
Brand Summary
- UGG brand net sales for the first quarter increased 70.8 percent to $213.0 million compared to $124.7 million for the same period last year.
- Hoka One One brand net sales for the first quarter increased 95.5 percent to $213.1 million compared to $109.0 million for the same period last year.
- Teva brand net sales for the first quarter increased 65.9 percent to $58.5 million compared to $35.2 million for the same period last year.
- Sanuk brand net sales for the first quarter increased 13.7 percent to $15.0 million compared to $13.2 million for the same period last year.
- Other brands, primarily composed of Koolaburra, net sales for the first quarter increased 435.9 percent to $5.0 million compared to $0.9 million for the same period last year.
Channel Summary
(included in the brand net sales numbers above)
- Wholesale net sales for the first quarter increased 140.2 percent to $344.3 million compared to $143.3 million for the same period last year.
- Direct-to-Consumer (DTC) net sales for the first quarter increased 14.7 percent to $160.4 million compared to $139.8 million for the same period last year.
Geographic Summary
(included in the brand and channel net sales numbers above)
- Domestic net sales for the first quarter increased 82.3 percent to $336.1 million compared to $184.3 million for the same period last year.
- International net sales for the first quarter increased 70.5 percent to $168.6 million compared to $98.9 million for the same period last year.
Balance Sheet
(June 30, 2021 as compared to June 30, 2020)
- Cash and cash equivalents were $956.7 million compared to $661.9 million.
- Inventories were $457.7 million compared to $435.0 million.
- There were no outstanding borrowings compared to $30.7 million.
Stock Repurchase Program
During the first quarter, the company repurchased approximately 249 thousand shares of its common stock for a total of $82.2 million at an average price of $329.55. As of June 30, 2021, the company had $728.5 million remaining under its stock repurchase authorization.
Full Year Fiscal 2022 Outlook for the Twelve Month Period Ending March 31, 2022
- Net sales are now expected to be in the range of $3.010 billion to $3.060 billion.
- Gross margin is now expected to be slightly below 53.0 percent.
- SG&A expenses, as a percentage of sales, are now projected to be approximately 35.0 percent.
- Operating margin is still expected to be in the range of 17.5 percent to 18.0 percent.
- Effective tax rate is still expected to be approximately 23.0 percent.
- Diluted earnings per share are now expected to be in the range of $14.45 to $15.10.
- The earnings per share guidance do not assume impact from additional share repurchases.
Previously, Deckers projected sales for the year to be in the range of $2.950 billion to $3.000 billion. Diluted earnings per share were expected to be in the range of $14.05 to $14.65.
COVID-19 Update
The company continues to assess and modify its operations in response to the pandemic. It will continue to review agency guidelines and information from health officials and local authorities to determine the appropriate scope of operations and allocation of resources to navigate this dynamic and unprecedented environment.
Supply Chain
The company maintains a network of strategic sourcing partners, which includes material vendors and third-party manufacturers. The company is actively experiencing disruption and delays within its sourcing network related to COVID-19 outbreaks in various countries. It is also experiencing capacity constraints and cost pressures related to container shortages and port congestion causing shipping delays and could lead to higher usage of air freight in future periods. The full effect of disruptions and delays is not yet known, but it will continue to monitor the situation and is actively working to mitigate pressures where possible.
The company’s distribution center in Moreno Valley, CA, and other third-party distribution facilities that it leverages to service its operations, are currently in operation and supporting ongoing logistics; however, these facilities have been operating and may continue to operate at limited capacity due to the enhanced health and safety measures that are in place. It anticipates operational challenges related to capacity constraints and increased costs associated with warehouse employee safety and payroll expenses. The company’s third-party logistics providers are also experiencing capacity constraints, which are having an adverse effect on its operations.
Retail Stores
Approximately 66 percent of its global stores were open for the first quarter, which compares to approximately 20 percent in the prior year first quarter. Given the ongoing and uncertain pandemic conditions, which includes local and regional differences in expert agency guidance and local authority mandates, the company anticipates that temporary retail store closures and operating limitations in certain geographies could continue for at least a portion of the second quarter of fiscal year 2022 and potentially beyond.
Photo courtesy Deckers Brands/Ugg