Deckers Outdoor Corporation saw its UGG brand continue to drive overall company sales in the fourth quarter as the core boot product remains a winter staple, while newer introductions apparently performed well. In addition to the strength with that fashion product, Deckers saw its turnaround plans for the Teva brand begin to take shape with decent sales growth, while the smaller Simple brand posted strong double-digit sales growth through its eco-friendly message.  Still, the company took a hit on Wall Street as the company’s earnings estimates for the 2008 first quarter fell short of expectations.

Overall fourth quarter net sales increased 56.2% to $194.2 million from $124.4 million last year.  Total domestic sales increased 54.9% to $177.7 million compared to $114.7 million in the prior year. Total international sales increased 71.1% to $16.5 million compared to $9.7 million last year.  DECK reported “meaningful gains” in all regions of the U.S. with particular strength in the northeast.  Outside the U.S., the U.K. continued to be the fastest growing market, while Canada and the Benelux region also “contributed nicely.” The company sees both Germany and France, where it currently has no distribution, as key growth drivers going forward, following the U.K. lead.


UGG net sales for the fourth quarter increased 61.8% to $177.7 million versus $109.9 million for the same period a year ago. The “better-than-expected” performance was said to derive from the men’s and kids’ offerings that performed very well, as well as from consumer demand for the entire women’s fall line.


Teva net sales for the fourth quarter increased 6.8% to $13.9 million compared to $13.0 million for the same period last year.  DECK said the increase was primarily driven by solid sell-through of fall product. They see a big opportunity for the brand in international markets for 2008. The company will focus on further evolving the brand and penetrating new countries, most notably China, where the company recently signed its newest distribution partner. DECK plans to open 20 large format shop in shops in key department stores early in the year, followed by two Teva concept shops scheduled to open this May, one in Beijing and the other in Shanghai.


Simple brand net sales increased 76.2% to $2.6 million for the fourth quarter compared to $1.5 million for the same period last year.  Sales were fueled by strong sell-through of ecoSNEAKS throughout Q4. Overseas, DECK sees Simple's growth accelerating this year, driven by broader assortment of product at retail and increased penetration within existing markets coupled with the opening of new distributors in China and Singapore.


Sales for the Consumer Direct business increased 84.5% to $36.0 million for the fourth quarter compared to $19.5 million for the prior-year  period, including sales of $23.9 million from the company’s               e-commerce division and sales of $12.1 million from the company’s seven retail stores. The fourth quarter saw e-commerce sales jump 60.6% from $14.9 million last year, while owned-retail sales more than doubled, up 161% from last year’s $4.7 million.


For the full year, sales for the Consumer Direct business increased 78.0% to $63.9 million compared to $35.9 million a year ago. This includes sales of $45.5 million from the company’s e-commerce division and sales of $18.4 million from the company’s seven retail stores.


Looking ahead, the company expects to open two more UGG concept shops in 2008, one in San Francisco in the third quarter and another on the East Coast later in the year. 


Additionally, DECK expects to have its first company-owned international retail store open within the next 12 months, most likely in London.


Gross margin dipped 10 basis points to 48.2% of sales in Q4, while SG&A grew 20 basis points to 18.9% of sales. Nonetheless, the strong top line increases were more than enough to offset the minor back-end detriments, fueling a 189% jump in net income to $35.4 million, or $2.69 per diluted share, from $12.2 million, or 95 cents per diluted share, in Q4 2006.


UGG inventories were up 97.6% to $27.4 million at year-end; Teva inventory increased 31.4% to $20.1 million; and Simple inventory increased 32.7% to $4.3 million. The company attributed the increased inventories to the planned early delivery of spring 2008 products in Q4 to support the higher expected sales in the first half.


The company introduced a full year revenue growth target of approximately 25% over 2007 with diluted earnings per share growth of approximately 20%.   The issues arose with Q1, where DECK sees revenues up 25%, but earnings as “the same or moderately higher” than last year.


The lower-than-expected earnings growth forecast for the quarter comes from increased SG&A spending needed to grow the business. 


>>> Surprised no one noticed the higher UGG inventories…