Deckers Inc. surged past its original forecast
in the first quarter as continued demand of the UGG brand was able to offset slight revenue declines at Teva that were attributed to the later spring and a tough retail environment. The $97.5 million achieved for the quarter came in about $7 million above expectations, while earnings per share for the period blew past estimates of “flat to up slightly” versus Q1 last year.
International sales for all three brands increased 11.2% to $18.8 million, compared to $16.9 million in the first quarter of last year. Domestic sales increased 41.4% to $78.7 million, compared to $55.6 million in 2007.
The strength of the UGG brand was cited as the primary driver for the improvement in the gross margin line. In a conference call with analysts, company President and CEO Angel Martinez said the 84% increase in UGG revenues for the quarter was due to strong sell-through at retail, including sandals, boots and slippers, exceeded expectations. The Fluffie flip-flop product got particular attention, but winter weather that lasted deep into the quarter certainly helped clear out any boot inventory as well. Martinez said they had pre-booked a substantial increase in boots and slippers for January and both “performed very well.”
Teva sales were “down slightly” in the first quarter, a decline Martinez attributed to “the delay in shipments of both domestic and international accounts” as well as “lower than expected fill-in orders late in the quarter.” He said the impact on Teva was due primarily to “external factors” such as the “challenging economic conditions” that have created a “difficult retail environment for the entire industry.” He said that while most outdoor retailers fed back mostly negative input on the quarter, the “specific feedback on Teva has been encouraging.”
Martinez revealed that Teva sales at REI were up in high-single-digits compared with a year go, despite REI's overall sandal business being “flat to slightly down.”
Simple sales broke the $5 million mark for the quarter, fueled by “strong demand” for ecoSNEAKS, which made up more than 40% of Simple sales during the period, as well as strong sell through of the Spring Green Toe collection. Martinez said they saw double-digit gains for the brand across all channels of distribution, including key accounts such as Dillards, Nordstrom, Urban Outfitters, REI and Whole Food. Traffic and sales on Simple's website Simpleshoes.com were up 100% and 50% respectively, versus the same time a year ago.
Overall consumer direct sales for all brands increased approximately 89% to $21 million. E-commerce sales were up 75.4% to $15.6 million from $8.6 million in the year-ago period, while seven retail locations produced revenues of $5.3 million, up 145.4% from $2.2 million in Q1 2007.
Deckers expects to open a concept store in San Francisco during the third quarter, which will be located near Union Square and a second location in New York during the fourth quarter, which will be located near Lincoln Center. An outlet store will open in New Jersey in Q4.
Mr. Martinez said on the conference call that retail sales for Teva have begun to “pick up” over the past few weeks as the weather has begun to warm. He said they expect the trend to “accelerate through late spring and early summer,” resulting in an increase of approximately 10% in the second quarter versus the comp period last year. He said Teva sales are expected to increase approximately 20% in the back half of the year, due primarily the launch of closed toe and toe protective footwear.
Full year revenue is expected to increase approximately 31% over 2007, up from previous guidance of approximately 25%, while diluted EPS is expected to increase approximately 27% over 2007, up from previous guidance of approximately 20%. Second quarter revenue and diluted EPS are now seen increasing approximately 50% and 30%, respectively.
At quarter-end, inventory at UGG was up 84.6% to $26.9 million, while Teva grew 15.8% to $18.3 million and Simple inventory increased 11.7% to $4.2 million.
>>> Word from the market indicates clear support for the product direction at Teva. With solid new product Teva can win the game at specialty even as it expands into the mid-tier
>>> The question regarding UGG is how much of the Q1 bump was weather and how much is a true move to a year round brand…
