Finding strength across its Ugg, Teva, Sanuk and Hoka One One brand portfolio, Deckers Brands swung to a profit of $1.4 million, or 4 cents a share, in its fiscal fourth quarter ended Mar. 31.

The results eclipsed Wall Street forecasts for breakeven results and compared to a loss of $2.7 million, or 8 cents, a year earlier.

Net sales increased 15.6 percent to $340.6 million and expanded 19.1 percent in currency-neutral terms.

The quarter capped of rebound year for Deckers Brands. Sales expanded 14.4 percent to $1.82 billion. Sales on a currency-neutral basis jumped 15.6 percent. Net profits rose 13.9 percent to $161.8 million, or $4.66 a share.

“All in all, FY15 was a solid year,’ said Angel Martinez, CEO and chairman, on a conference call with analysts. “We delivered midteens top- and bottom-line growth, even in the face of some stiff foreign exchange headwinds. However, I believe the most important takeaway was the success of our new collections, and the progress diversifying our mix of business from both a product and channel perspective.”

Ugg brand net sales for the quarter increased 9.7 percent to $216.8 million. The increase in sales was driven by an increase in global wholesale and distributor sales, higher global e-commerce sales, sales contributions from new worldwide retail store openings, partially offset by a decrease in same store sales. For fiscal 2015, Ugg brand sales increased 12.6 percent to $1.49 billion.


Dave Powers, president, said that in North America, Ugg’s DTC was roughly flat. Growth in e-commerce was offset primarily by declines in sales at its tourist flagship-driven locations. The strong U.S. dollar impacted international tourist traffic to its Hawaii, Las Vegas, and New York stores, which represent a disproportionate dollar amount of both Ugg’s North American store base.

The Ugg brand's domestic wholesale business increased low single digits, fueled by sales of spring seasonal collections and winter weather boots.

“We saw success in our spring sales with our key partners who invested this year more heavily in traditional spring product,” said Powers. “Demand for weather product was also very strong coming out of holiday. In order to best capitalize on this in-season opportunity, we increased our use of air freight to avoid the delays caused by the West Coast Port slowdown.”

In international regions, the EMEA’s DTC comps increased high teens, driven by e-commerce gains and a positive store comp. A decision to convert its German distributor to a subsidiary boosted its wholesale results “and has proven very timely as we see a lot of opportunity to grow the Ugg brand across all channels in this large and important market,” said Powers.

The Asia-Pacific was Ugg’s fastest-growing region during the quarter. DTC comps increased low double digits, driven by strong e-commerce and store gains in Japan.

Looking ahead, Powers that based on the strength of its fall and holiday 2015 line, Ugg successfully shifted its women's core classics business from roughly 33 percent of Ugg revenue to under 25 percent, with growth coming from specialty classics, weather, casual boots, slippers and other categories. He noted that many of its wholesale customers sold out of their non-classic inventory this past holiday season, which led to missed replenishment opportunities.

Ugg’s backlogs are up slightly on a currency-neutral basis. Domestic orders are up mid-single digits, offset primarily by the decline in Europe where distributors' buying power has been reduced due to the strong U.S. dollar. Total company backlog was up low-single digits in constant currency.

Powers added that since retailers have pre-booked fewer Classics than in the past, Ugg now have the ability to use its Classic inventory to chase demand in season.

“This strategic shift in the makeup has also reduced the risks of cancellations since classics tend to have a higher cancellation rate than our other collections due to their sales sensitivity to cold weather,” said Powers. “Our sales teams did an excellent job working with our wholesalers and we're excited about how this shift positions the Ugg brand long-term in line with our new marketing emphasis on product launches.”


Teva brand net sales for the fourth quarter increased 13.4 percent in the quarter to $53.1 million. The increase in sales was driven by an increase in international wholesale and distributor sales, partially offset by a decrease in domestic wholesale sales. For fiscal 2015, Teva brand sales increased 13.5 percent to $126.7 million.

Powers said Teva is benefiting from a repositioning to make the brand more relevant to women and a bigger push on casual and sports sandals categories.

“Teva continues to generate strong consumer enthusiasm with its Originals collection and Originals derivatives, which are opening up new distribution and specialty accounts in family footwear chains,” said Powers. “These collections, including the newly introduced platform Original sandal and our strategic collaborations have generated significant buzz in the marketplace and are helping us expand our presence within existing partners such as Nordstrom's and Urban Outfitters.”

Powers also said Teva’s international sales are also being boosted by “refreshed product, along with concerted marketing efforts,” boosted by expansion into lifestyle retailers in EMEA and AIPAC.


Sanuk brand net sales for the quarter increased 27.9 percent to $39.2 million. The increase in sales was driven by an increase in domestic wholesale sales and higher international distributor sales. For fiscal 2015, Sanuk brand sales increased 13.1 percent to $114.7 million.

Sanuk has benefited from its shift from primarily a men's surf brand into a global lifestyle brand and in particular its expansion beyond core surf distribution into key wholesale accounts like Journeys and Tilly's, as well as all doors at Nordstrom's. Successes such as Sanuk’s yoga series of sandals has allowed Sanuk to reach a wider female-driven audience, with women now accounting for 50 percent of the brand’s sales. Said Powers, “Demand for the brand's newer non-core offering has grown significantly, led by the women's yoga sandal collection which is selling through at double-digit percentage rates on a weekly basis this spring.”

On the men’s side, efforts to gain share in the casual shoe category are gaining traction for Sanuk. The Boulevard collection, the brand's first casual shoe offering, has become the second best selling men's collection on, behind only the iconic Sidewalk Surfer collection. Added Powers, “The brand's expanded distribution, strong digital trend, as well as a more robust product offering that now includes casual shoes, has positioned the brand well to compete in the large casual sandal and shoe market against key players such as Toms and Havaianas.”


Other Brands (Hoka and Ahnu) net sales increased 60.9 percent to $31.5 million. The increase was primarily attributable to an $8.8 million increase in sales for Hoka compared to the same period last year. For fiscal 2015, combined net sales of the company's Other Brands increased 69.5 percent to $82.4 million.

Powers noted that Hoka exceeded $50 million in sales in FY15. He added, ”This is a remarkable achievement for a brand that has only been in the market for a few years and operates in the highly competitive running industry. Hoka’s share of the neutral cushioning space in the specialty and running channel is now larger than several well-known brands like New Balance and Adidas.”

Powers also noted that the growth has come despite having its distribution limited to the specialty running channel. Hoka recently began initial expansion into more mainstream running and sporting good retailers like Sports Authority and Finish Line to reach a wider audience.

Hoka’s growth will be supported by updates to award-winning styles such as the Clifton and the Bondi, while also expanding into new footwear categories, including hiking. Said Powers, “Hoka is now a credible and meaningful player in the running community with strong acceptance by female runners. This acceptance and expansion beyond ultra-running gives us confidence in our aggressive growth plans for the brand.”

Wholesale and distributor sales for the quarter increased 16.6 percent to $205.1 million. The increase was driven by an increase in both domestic wholesale sales and international wholesale and distributor sales. For fiscal 2015, wholesale and distributor sales increased 12.9 percent to $1.2 billion.

Direct-to-Consumer (DTC) sales for the quarter increased 14.1 percent to $135.5 million. DTC comparable sales for the quarter, which include store and e-commerce sales, increased 4.7 percent. For fiscal 2015, DTC sales increased 17.6 percent to $617.4 million with comparable sales increasing 7.8 percent.

For the quarter, sales for the global retail store business increased 7.7 percent to $86.3 million, driven by 30 new stores opened after March 31, 2014, partially offset by a same store sales decrease of 6.5 percent in the quarter. For fiscal 2015, global retail store sales increased 12.0 percent to $384.3 million.

For the fourth quarter, global e-commerce revenues increased 27.4 percent to $49.2 million, driven primarily by an increase in global Ugg brand sales. For fiscal 2015, global e-commerce sales increased 28.4 percent to $233.1 million.

Geographically, domestic sales for the quarter increased 9.8 percent to $217.7 million. For fiscal 2015, domestic sales increased 10.2 percent to $1.165 billion. International sales for the quarter jumped 27.5 percent to $122.9 million and grew 38.3 percent on a currency-neutral basis. For fiscal 2015, international sales increased 23.0 percent to $651.7 million and gained 26.6 percent on a currency-neutral basis.


Gross margins plunged 420 basis points to 44.7 percent compared to 48.9 percent for the same period last year. The decline was driven by a 160 basis point impact from changes in foreign currency exchange rates, namely the strengthening of the U.S. dollar versus the British Pound, Euro and Yen compared to the same period last year. The remaining 260 basis point change is attributable to a higher proportion of closeout sales including inventory associated with the Tsubo brand for which the company is currently seeking strategic alternatives, as well as higher air freight charges in order to avoid the West Coast port delays and deliver scheduled fourth quarter shipments on-time.

SG&A expenses as a percentage of sales, however, shrunk to 44.5 percent compared to 49.1 percent for the same period last year.

Inventories at Mar. 31 increased 12.9 percent. By brand, Ugg inventory increased 11.0 percent, Teva decreased 19.9 percent, Sanuk surged 93.2 percent, and the Other Brands' inventory increased 37.9 percent.

For the current fiscal year, Deckers Brands expects revenues to increase 8 percent on a reported basis and 10.5 percent on a currency-neutral basis. Gross profit margin for fiscal 2016 is expected to be approximately 48 percent, down 30 basis points from fiscal 2015 as a result of expectations regarding a stronger U.S. dollar, partially offset by lower input costs and favorable changes in the company's channel mix. SG&A expenses as a percentage of sales are projected to be approximately 35.8 percent, compared to 36.0 percent in fiscal 2015.

EPS is expected to reach approximately $5.60 in c-n terms, reflecting an increase of 20 percent over the year-ago period. On a reported basis, EPS are expected to be $5.09, or an increase of 9 percent.

For its current first quarter, the company expects flat revenues on a reported basis and a slight gain on a currency-neutral basis. The company expects a diluted loss per share of approximately $1.52 on both a currency-neutral and reported basis compared to a diluted loss per share of $1.07 for the same period last year.

Deckers noted that a significant amount of its operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter, with the first quarter being a lower volume period. The majority of its earnings increase in fiscal 2016 is projected to come in the third and fourth quarters.