Deckers Brands Q1 Powered By Big Gains At Hoka One One

Deckers Brands raised its outlook for the year after reporting a slightly lower year-over-year loss in the first quarter ended June 30 on a 10.5 percent revenue gain. Hoka led the way, with a 67 percent sales hike. Ugg’s sales grew 1.5 percent.

“The Deckers organization experienced a strong start to the fiscal year 2020,” said Dave Powers, president and chief executive officer. “I am proud of the positive momentum that our portfolio of brands continues to build as we remain focused on the strategies that have proven successful in strengthening our operations over the past few years. The Deckers team continues to drive excitement behind innovative product introductions and remains disciplined in delivering top-tier levels of profitability. With the first quarter now behind us, we are firmly committed to our strategies and remain confident in our abilities to deliver on them.”

First Quarter Fiscal 2020 Financial Review

• Net sales increased 10.5 percent to $276.8 million compared to $250.6 million for the same period last year. On a constant currency basis, net sales increased 11.6 percent.
• Gross margin was 47.0 percent compared to 45.9 percent for the same period last year.
• SG&A expenses were $161.4 million compared to GAAP SG&A expenses last year of $154.4 million and Non-GAAP SG&A expenses last year of $153.9 million.
• Operating loss was $31.4 million compared to GAAP operating loss of $39.4 million for the same period last year and Non-GAAP operating loss of $38.9 million for the same period last year.
• Income tax benefit was $10.3 million compared to GAAP income tax benefit of $8.6 million for the same period last year and Non-GAAP income tax benefit of $8.7 million for the same period last year.
• Basic loss per share was $0.67 compared to the GAAP basic loss per share of $1.00 for the same period last year and the Non-GAAP basic loss per share of $0.98 for the same period last year.

When it reported fourth-quarter earnings on May 23, Deckers predicted sales for the first quarter would come in the range of $250.0 million to $260.0 million and non-GAAP diluted loss per share to be in the range of a ($1.25) to ($1.15).

Brand Summary

• Ugg brand net sales for the first quarter increased 1.5 percent to $138.5 million compared to $136.5 million for the same period last year.
• Hoka One One brand net sales for the first quarter increased 69.2 percent to $79.5 million compared to $47.0 million for the same period last year.
• Teva brand net sales for the first quarter decreased 4.3 percent to $38.3 million compared to $40.0 million for the same period last year.
• Sanuk brand net sales for the first quarter decreased 23.5 percent to $18.7 million compared to $24.4 million for the same period last year.

Channel Summary | included in the brand sales numbers above

• Wholesale net sales for the first quarter increased 10.7 percent to $196.6 million compared to $177.6 million for the same period last year.
• DTC net sales for the first quarter increased 10.0 percent to $80.3 million compared to $73.0 million for the same period last year. DTC comparable sales increased 16.2 percent over the same period last year.

Geographic Summary | included in the brand and channel sales numbers above

• Domestic net sales for the first quarter increased 18.1 percent to $167.3 million compared to $141.7 million for the same period last year.
• International net sales for the first quarter increased 0.6 percent to $109.5 million compared to $108.9 million for the same period last year.

Balance Sheet | June 30, 2019, as compared to June 30, 2018

• Cash and cash equivalents were $502.6 million compared to $417.9 million.
• Inventories were $473.4 million compared to $435.6 million.
• Outstanding borrowings were $31.4 million compared to $31.9 million.

Stock Repurchase Program

During the first quarter, the company repurchased approximately 227 thousand shares of its common stock for a total of $35 million at an average price of $154.36. As of June 30, 2019, the company had $315 million remaining under its stock repurchase authorizations.

Full Year Fiscal 2020 Outlook for the Twelve Month Period Ending March 31, 2020

• Net sales are now expected to be in the range of $2.100 billion to $2.125 billion.
• Gross margin expected to be approximately 50.5 percent.
• SG&A expenses as a percentage of sales are projected to be at or slightly better than 36.0 percent.
• Operating margin expected to be approximately 14.5 percent.
• Effective tax rate now expected to be approximately 20.5 percent, which includes the impact of the tax refund recorded in the first quarter and an updated assessment of the income tax rate for the full year.
• Non-GAAP diluted earnings per share now expected to be in the range of $8.40 to $8.60.
• The earnings per share guidance exclude any charges that may occur from one-time or non-recurring amounts. It also does not assume any impact from additional share repurchases.

When it reported fourth-quarter earnings on May 23, Deckers projected sales for the year would be in the range of $2.095 billion to $2.120 billion, gross margin in the range of 50.0 percent to 50.5 percent, operating margin in the range of 14.2 percent to 14.5 percent, and non-GAAP diluted EPS in the range of $8.20 to $8.40. The effective tax rate was expected to be approximately 21 percent. No adjusted was made to expectations around SG&A expenses as a percentage of sales.

Second Quarter Fiscal 2020 Outlook for the Three Month Period Ending September 30, 2019

• Net sales are expected to be in the range of $515 million to $525 million.
• Non-GAAP diluted earnings per share are expected to be in the range of $2.15 to $2.25.
• The earnings per share guidance exclude any charges that may occur from one-time or non-recurring amounts. It also does not assume any impact from additional share repurchases.

Photo courtesy Hoka