Deckers Brands reported earnings and sales both exceeded analyst targets in the second quarter ended September 30 and maintained its outlook for sales and EPS for the fiscal year despite margin pressures. Sales of Hoka surged 58.3 percent year over year in the quarter while sales of Ugg gained 6.3 percent.
Earnings in the quarter of $3.80 topped analysts’ consensus estimate of $3.66. Revenue of $876 million beat the consensus estimate of $808 million.
“Deckers’ strong performance in the first half of fiscal year 2023 is a testament to our team’s execution, despite a challenging macroeconomic backdrop,” said Dave Powers, President and Chief Executive Officer. “As we head into the UGG brand’s peak selling season and continue to fuel expanding demand for Hoka performance footwear, we are confident in our ability to deliver our maintained full year guidance.”
Second Quarter Fiscal 2023 Financial Review
(compared to the same period last year)
- Net sales increased 21.3 percent to $875.6 million compared to $721.9 million. On a constant currency basis, net sales increased 24.8 percent.
- Channel
- Wholesale net sales increased 16.7 percent to $636.5 million compared to $545.2 million.
- Direct-to-Consumer (DTC) net sales increased 35.3 percent to $239.1 million compared to $176.7 million. Comparable DTC net sales increased 38.2 percent.
- Geography
- Domestic net sales increased 20.0 percent to $617.7 million compared to $514.6 million.
- International net sales increased 24.4 percent to $257.9 million compared to $207.3 million.
- Channel
- Gross margin was 48.2 percent compared to 50.9 percent.
- Selling, general, and administrative (SG&A) expenses were $294.1 million compared to $238.9 million.
- Operating income was $127.8 million compared to $128.2 million.
- Diluted earnings per share was $3.80 compared to $3.66.
Second Quarter Fiscal 2023 Brand Summary
(compared to the same period last year)
- Ugg brand net sales increased 6.3 percent to $476.5 million compared to $448.4 million.
- Hoka brand net sales increased 58.3 percent to $333.0 million compared to $210.4 million.
- Teva brand net sales increased 4.3 percent to $30.1 million compared to $28.8 million.
- Sanuk brand net sales decreased 25.2 percent to $7.5 million compared to $10.1 million.
- Other brands, primarily composed of Koolaburra®, net sales increased 17.9 percent to $28.5 million compared to $24.2 million.
Balance Sheet
(September 30, 2022 compared to September 30, 2021)
- Cash and cash equivalents is $419.3 million compared to $746.2 million.
- Inventories, which include amounts in-transit, is $925.0 million compared to $636.3 million.
- The company has no outstanding borrowings.
Stock Repurchase Program
During the second quarter, the company repurchased approximately 173 thousand shares of its common stock for a total of $50.2 million at a weighted average price paid per share of $290.01. As of September 30, 2022, the company had approximately $1.5 billion remaining under its stock repurchase authorization.
The Full Fiscal Year 2023
(outlook for the twelve-month period ending March 31, 2023)
The company’s full fiscal year 2023 outlook is forward-looking in nature, reflecting our expectations as of October 27, 2022, and is subject to significant risks and uncertainties that limit our ability to accurately forecast results. This outlook assumes no meaningful changes to the company’s business prospects or risks and uncertainties identified by management that could impact future results, which include but are not limited to: the impact of the COVID-19 pandemic on our business and operations, including supply chain disruptions, constraints and related expenses; labor shortages; changes in economic conditions including foreign currency fluctuation, inflationary pressures, consumer confidence and discretionary spending; and geopolitical tensions.
- Net sales are still expected to be in the range of $3.45 billion to $3.50 billion.
- Gross margin is now expected to be approximately 50.5 percent (approximately 51.5 percent previously)
- SG&A expenses as a percentage of sales are now projected to be approximately 33 percent (approximately 34 percent previously).
- Operating margin is still expected to be in the range of 17.5 percent to 18.0 percent.
- Effective tax rate is now expected to be approximately 22 percent (approximately 22 percent to 23 percent previously)
- Diluted earnings per share is still expected to be in the range of $17.50 to $18.35.
- The earnings per share guidance does not assume any impact from additional share repurchases.
Photo courtesy Hoka