Deckers Brands Q4 Blows Past Wall Street Targets

Deckers Brands reported earnings vaulted 106 percent in the fiscal fourth quarter ended March 31 as sales gained 31.2 percent. Sales gained 24.7 for Ugg and 59.7 percent for Hoka One One. Sales for the year grew 24 percent, and the company guided FY23 growth to be in the range of 10 percent to 11 percent.

“Fiscal year 2022 was another record year for Deckers, as we delivered both revenue and earnings per share growth above twenty percent,” said Dave Powers, president and chief executive officer. “Over the last two years, our portfolio of brands has added more than one billion dollars of revenue while making progress towards key long-term strategies and maintaining top-tier levels of profitability, despite navigating unprecedented disruption across the global supply chain. I am incredibly proud of our performance over the last couple of years, but with the power of our brands and our people, I am even more excited about the opportunities ahead.”

Fourth Quarter Fiscal 2022 Financial Review
(compared to the same period last year) 

• Net sales increased 31.2 percent to $736.0 million compared to $561.2 million. On a constant-currency basis, net sales increased 31.7 percent.
• Wholesale net sales increased 37.6 percent to $448.8 million compared to $326.1 million.
• Direct-to-Consumer (DTC) net sales increased 22.2 percent to $287.2 million compared to $235.1 million. Comparable DTC net sales increased 19.3 percent.
• Domestic net sales increased 37.4 percent to $521.0 million compared to $379.2 million.
• International net sales increased 18.2 percent to $215.1 million compared to $181.9 million.
• Gross margin was 48.7 percent compared to 53.2 percent. 
• Selling, general, and administrative (SG&A) expenses were $277.4 million compared to $244.0 million.
• Operating income was $81.3 million compared to $54.6 million.
• Diluted earnings per share were $2.51 compared to $1.18.

Earnings of $2.51 were well above Wall Street’s consensus estimate, calling for EPS of $1.32. Sales of $736 million were well above the consensus target of $639.2 million.

Fourth Quarter Fiscal 2022 Brand Summary
(compared to the same period last year)

• Ugg brand net sales increased 24.7 percent to $374.6 million compared to $300.5 million.
• Hoka One One brand net sales increased 59.7 percent to $283.5 million compared to $177.5 million.
• Teva brand net sales decreased 8.8 percent to $54.8 million compared to $60.2 million.
• Sanuk brand net sales decreased 1.7 percent to $11.9 million compared to $12.1 million.
• Net sales of Other brands, primarily composed of Koolaburra, increased 2.4 percent to $11.2 million compared to $10.9 million.

Full Fiscal Year 2022 Financial Review
(compared to the same period last year) 

• Net sales increased 23.8 percent to $3.150 billion compared to $2.546 billion. On a constant-currency basis, net sales increased 23.2 percent.
• Wholesale net sales increased 31.0 percent to $1.937 billion compared to $1.479 billion.
• DTC net sales increased 13.8 percent to $1.214 billion compared to $1.067 billion. Due to the disruption of its retail store base for closures during the prior fiscal year, the company is not reporting a comparable DTC sales metric for the fiscal year ended March 31, 2022.
• Domestic net sales increased 23.1 percent to $2.168 billion compared to $1.761 billion.
• International net sales increased 25.3 percent to $982.5 million compared to $784.2 million.
• Gross margin was 51.0 percent compared to 54.0 percent. 
• SG&A expenses were $1.043 billion compared to $869.9 million.
• Operating income was $564.7 million compared to $504.2 million.
• Diluted earnings per share were $16.26 compared to $13.47.

Full Fiscal Year 2022 Brand Summary
(compared to the same period last year) 

• Ugg brand net sales increased 15.4 percent to $1.982 billion compared to $1.717 billion.
• Hoka One One brand net sales increased 56.1 percent to $891.6 million compared to $571.2 million.
• Teva brand net sales increased 17.3 percent to $162.7 million compared to $138.8 million.
• Sanuk brand net sales increased 3.0 percent to $43.1 million compared to $41.8 million.
• Net sales of Other brands decreased 7.5 percent to $70.9 million compared to $76.7 million.

Balance Sheet
(March 31, 2022 as compared to March 31, 2021) 

• Cash and cash equivalents were $843.5 million compared to $1.089 billion. 
• Inventories, including amounts in-transit, were $506.8 million compared to $278.2 million.
• The company had no outstanding borrowings.

Stock Repurchase Program
During the fourth quarter, the company repurchased approximately 308 thousand shares of its common stock for $90.0 million at an average price paid per share of $292.51.

During the full fiscal year 2022, the company repurchased approximately 1.044 million shares of its common stock for $356.7 million at an average price paid per share of $341.77. As of March 31, 2022, the company had $454.0 million remaining under its stock repurchase authorization.

“We have delivered two consecutive years of exceptional revenue growth, with accelerating increases over the prior year of 23.8 percent and 19.4 percent, for fiscal years 2022 and 2021, respectively,” said Steve Fasching, CFO. “Despite facing significant incremental costs related to supply chain disruption, our teams were able to nimbly respond to these changing market dynamics to manage costs and deliver an operating margin of 17.9 percent in fiscal year 2022, at the top end of our original guidance range. With our in-demand brands, flexible operating model, and strong balance sheet, Deckers is well-positioned to drive continued top-line growth and high levels of profitability.”

Full Fiscal Year 2023 Outlook For Twelve Month Period Ending March 31, 2023
The company’s full fiscal year 2023 outlook is forward-looking, reflecting its expectations as of May 19, 2022, and is subject to significant risks and uncertainties that limit its ability to forecast results accurately. 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 business and operations, including supply chain disruptions, constraints and related expenses; labor shortages; changes in economic conditions, inflationary pressures, consumer confidence and discretionary spending; and geopolitical tensions.

• Net sales are expected to be in the range of $3.45 billion to $3.50 billion.
• Gross margin is expected to be approximately 51.5 percent.
• SG&A expenses, as a percentage of sales, are projected to be roughly 34 percent.
• Operating margin is expected to be in the range of 17.5 percent to 18.0 percent.
• Effective tax rate is expected to be approximately 22 percent to 23 percent.
• Diluted earnings per share are expected to be in the range of $17.40 to $18.25.
• The earnings per share guidance do not assume any impact from additional share repurchases.