Deckers Brands reported earnings and sales in the fourth quarter ended March 31 came in well above  Wall Street’s consensus targets. Sales grew 49.7 percent with sales ahead 53.1 percent at Ugg and 74.2 percent at Hoka One One.

“Fiscal 2021 was an exceptional year for Deckers, led by the global growth of the Hoka brand, and broad-based demand for the head-to-toe assortment of Ugg brand products,” said Dave Powers, president and CEO. “While our fourth quarter benefited from certain macro tailwinds as well as lapping last year’s disruption, the health of our brands, the strength of our omnichannel organization, and our digitally focused long-term strategies provided the foundation for success over the past year, accelerating our growth trajectory. We are excited for the year ahead as we invest in the long-term evolution of Deckers to drive sustainable top- and bottom-line growth.”

Fourth Quarter Fiscal 2021 Financial Review

  • Net sales increased 49.7 percent to $561.2 million compared to $374.9 million for the same period last year. On a constant-currency basis, net sales increased 47.9 percent. Wall Street’s consensus estimate was $437.1 million.
  • Gross margin was 53.2 percent compared to 51.5 percent for the same period last year.
  • SG&A expenses were $244.0 million compared to $176.3 million for the same period last year.
  • Income from operations was $54.6 million compared to $16.7 million for the same period last year.
  • Income tax expense was $19.6 million compared to $0.6 million for the same period last year.
  • Diluted earnings per share were $1.18 compared to $0.57 for the same period last year. Wall Street’s consensus estimate was 64 cents a share.

Full Fiscal Year 2021 Financial Review

  • Net sales increased 19.4 percent to $2.546 billion compared to $2.133 billion for the same period last year. On a constant-currency basis, net sales increased 18.4 percent.
  • Gross margin was 54.0 percent compared to 51.8 percent for the same period last year.
  • SG&A expenses were $869.9 million compared to $765.5 million for the same period last year.
  • Income from operations was $504.2 million compared to $338.1 million for the same period last year.
  • Income tax expense was $118.9 million compared to $64.7 million for the same period last year.
  • Diluted earnings per share were $13.47 compared to $9.62 for the same period last year.

Brand Summary

  • Ugg brand net sales for the fourth quarter increased 53.1 percent to $300.5 million compared to $196.3 million for the same period last year. For fiscal year 2021, net sales increased 12.9 percent to $1.717 billion.
  • Hoka One One brand net sales for the fourth quarter increased 74.2 percent to $177.5 million compared to $101.9 million for the same period last year. For fiscal year 2021, net sales increased 62.0 percent to $571.2 million.
  • Teva brand net sales for the fourth quarter increased 1.0 percent to $60.2 million compared to $59.6 million for the same period last year. For fiscal year 2021, net sales increased 0.6 percent to $138.8 million.
  • Sanuk brand net sales for the fourth quarter decreased 8.8 percent to $12.1 million compared to $13.3 million for the same period last year. For fiscal year 2021, net sales decreased 18.2 percent to $41.8 million.
  • Other brands net sales, primarily composed of Koolaburra, for the fourth quarter increased 178.5 percent to $10.9 million compared to $3.9 million for the same period last year. For fiscal year 2021, net sales increased 9.4 percent to $76.7 million.

Channel Summary
included in the brand net sales numbers above

  • Wholesale net sales for the fourth quarter increased 41.4 percent to $326.1 million compared to $230.7 million for the same period last year. For fiscal year 2021, wholesale net sales increased 6.0 percent to $1.479 billion.
  • Direct-to-consumer (DTC) net sales for the fourth quarter increased 63.0 percent to $235.1 million compared to $144.2 million for the same period last year. DTC comparable sales in the fourth quarter increased 76.3 percent over the same period last year, for which the final two weeks of retail store sales are excluded due to COVID-19 impacts in the prior year. For fiscal year 2021, DTC net sales increased 44.8 percent to $1.067 billion. Due to the meaningful disruption of our retail store base for closures, we are not reporting a comparable DTC sales metric for the year ended March 31, 2021.

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

  • Domestic net sales for the fourth quarter increased 64.3 percent to $379.2 million compared to $230.8 million for the same period last year. For fiscal year 2021, domestic net sales increased 25.7 percent to $1.761 billion.
  • International net sales for the fourth quarter increased 26.2 percent to $181.9 million compared to $144.1 million for the same period last year. For fiscal year 2021, international net sales increased 7.3 percent to $784.2 million.

Balance Sheet
March 31, 2021 as compared to March 31, 2020

  • Cash and cash equivalents were $1.089 billion compared to $649.4 million.
  • Inventories were $278.2 million compared to $311.6 million.
  • Due to repayment in full of the company’s outstanding mortgage on its corporate headquarters, there were no outstanding borrowings compared to $30.9 million.

Stock Repurchase Program

  • During the fourth quarter, the company repurchased approximately 307 thousand shares of its common stock for a total of $99.1 million at an average price of $322.87. As of March 31, 2021, the company had $60.7 million remaining under its stock repurchase authorization.
  • In addition, the Board of Directors has approved an increase of $750.0 million to the company’s stock repurchase authorization.

Full Fiscal Year 2022 Outlook for the Twelve Month Period ending March 31, 2022

  • Net sales are expected to be in the range of $2.950 billion to $3.000 billion.
  • Gross margin is expected to be approximately 53.3 percent.
  • SG&A expenses as a percentage of sales are projected to be approximately 35.5 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 23.0 percent.
  • Diluted earnings per share is expected to be in the range of $14.05 to $14.65.
  • The earnings per share guidance do not assume any impact from additional share repurchases.

COVID-19 Update
The company continues to modify and evolve its operations in response to COVID-19. The company will continue to review agency guidelines and information from health officials and local authorities while assessing and evolving the appropriate scope of operations and allocation of resources necessary to navigate this environment.

Retail Stores
Approximately 77 percent of the company’s global stores were open for the entire fourth quarter; however, stores continue to operate with limited capacity due to enhanced health and safety protocols. Given the ongoing and uncertain pandemic conditions, which include local and regional differences in restrictions imposed on retail store operations, the company anticipates that temporary retail store closures in certain geographies will continue for at least a portion of the first quarter of fiscal year 2022 and that there is a risk of ongoing or additional retail store closures and operating limitations based on agency guidance and local mandates.

Supply Chain
The company’s distribution center in Moreno Valley, CA and other third-party distribution facilities that the company leverages to service its operations, are currently in operation and supporting ongoing logistics; however, these facilities may continue to operate at a limited capacity due to the enhanced health and safety measures that are in place. The company anticipates operational challenges related to capacity constraints and increased costs associated with warehouse employee safety and payroll expense. The company’s third-party logistics providers are also experiencing capacity constraints, which are having an adverse effect on our operations.

The company maintains a network of strategic sourcing partners which includes material vendors and third-party manufacturers. The company experienced certain capacity constraints within its sourcing network during the fiscal year 2021. While the effects of these disruptions were largely mitigated over the last year, it is possible that there may be future disruptions as there have been recent COVID-19 outbreaks in various countries. These impacts include potential shipping delays and container shortages from congestion at port facilities.

Photo courtesy Deckers