Deckers Outdoor Corporation broke $1 billion in sales last year after a strong fourth quarter, when sales rose 23.6% to $430.1 million, same-store sales rose 11.6% and gross margins expanded by 440 basis points.


The company said gross margins reached 54.2%. Diluted EPS increased 30.5% to $2.27 compared to $1.74 last year.


 

 “Our outstanding fourth quarter performance demonstrated the continuing strength of the Ugg brand across all channels and markets and helped push our annual sales beyond the $1 billion mark,” said Angel Martinez, president, CEO and chairman of the board of directors. “This past holiday season was highlighted by strong demand for our most complete product line ever with sell through of several new styles and collections exceeding initial projections.”


  • Ugg Brand: Ugg brand net sales for the fourth quarter increased 23.8% to a record $412.8 million compared to $333.3 million for the same period last year. The sales gain was primarily attributable to an increase in full price selling at company-owned retail stores and on the company’s eCommerce websites, coupled with higher shipments to global distributors versus the same period a year ago. For the full year, Ugg brand net sales increased 22.7% to a record $873.1 million compared to $711.8 million in 2009.
  • Teva Brand: Teva brand net sales for the fourth quarter increased 26.2% to $13.3 million compared to $10.5 million for the same period last year. The increase in sales was primarily the result of an increase in distributor sales into the Asia region and an increase in global shipments of the fall line compared to a year ago. For the full year, Teva brand net sales increased 30.5% to $101.3 million compared to $77.7 million in 2009.
  • Other Brands: Combined net sales of the company’s other brands decreased 2.3% to $4.1 million for the fourth quarter compared to $4.2 million for the same period last year. For the full year, combined net sales increased 11.9% to $26.5 million versus $23.7 million in 2009.
  • Retail Stores: Sales for the retail store business, which are included in the brand sales numbers above, increased 55.4% to $72.4 million for the fourth quarter compared to $46.6 million for the same period last year. This increase was driven by nine new stores and a same store sales increase of 11.6% for those stores that were open for the full three month periods ended December 31, 2009 and 2010. For the full year, sales for the retail store business increased 59.1% to $125.6 million compared to $79.0 million in 2009. For those stores that were open during the full year of 2009 and 2010, same store sales grew by 16.6%.
  • E-commerce Sales: for the eCommerce business, which are included in the brand sales numbers above, increased 29.8% to $59.5 million for the fourth quarter compared to $45.9 million for the same period last year. The increase in sales resulted from higher demand for the fall line of the Ugg brand compared to the same period last year. For the full year, sales for the eCommerce business increased 21.3% to $91.8 million compared to $75.7 million in 2009.

Balance Sheet
At Dec. 31, 2010, cash and cash equivalents and short-term investments increased 30.2% to $445.2 million compared to $342.0 million at Dec. 31, 2009. Inventories at Dec. 31, 2010 increased 46.4% to $125.0 million from $85.4 million. By brand, UGG inventory increased $24.7 million to $94.7 million, Teva inventory increased $13.4 million to $22.7 million, and other brands inventory increased $1.5 million to $7.6 million. The increase in inventories as of Dec. 31, 2010 was primarily attributable to a larger spring 2011 assortment for the UGG brand, the growth in spring orders for the UGG and Teva brands, the warehousing of spring 2011 inventory supporting our continued conversion from an international distributor model to an international wholesale model, and increased retail stores.


Full-Year 2011 Outlook


 


  • Based upon current visibility, the company expects a full year revenue growth target of approximately 20% over 2010. 
  • The company expects full year diluted earnings per share to increase approximately 10% over 2010. This guidance assumes a gross profit margin of approximately 51% and SG&A as a percentage of sales of approximately 29%. 
  • Fiscal 2011 guidance includes estimates of approximately $29 million, or 49 cents per diluted share, pertaining to incremental investments and expenses in 2011 associated with new marketing and advertising programs, increased legal spend related to intellectual property rights protection, and expenses of approximately $8 million, which is included in the $29 million above, related to the transition to wholesale sales in the United Kingdom, Benelux region and France. 
  • Without these investments, diluted earnings per share growth would be approximately 21% over 2010.

First Quarter Outlook


 


  • The company currently expects first quarter 2011 revenue to increase approximately 29% over 2010, and expects first quarter 2011 diluted earnings per share to be down approximately 5% compared to 2010. 
  • First quarter guidance includes estimates of approximately $11 million, or 19 cents per diluted share, pertaining to the investments and expenses noted under the full year outlook above. Included in this $11 million is approximately $7 million related to the transition to wholesale sales in the United Kingdom, Benelux region and France. This guidance also assumes a gross profit margin of approximately 51% and SG&A as a percentage of sales of approximately 38%. 
  • Without these investments, diluted earnings per share growth would be approximately 36% over 2010. 
  • In addition, first quarter guidance includes higher levels of fixed overhead for new retail stores, international infrastructure and other general and administrative costs. As a reminder, a significant amount of our operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter. This includes the costs associated with the nine new stores that were not open until the second half of 2010. Therefore, due to the aforementioned increases in SG&A, we expect our earnings to decline in the first half of 2011 as compared to the first half of 2010, which are typically our lowest volume sales quarters, and increase in the back half of the year.
  • In addition, our shift from distributor to direct wholesale operations in the U.K. and Benelux results in a significant impact to our second quarter, as UGG brand U.K. and Benelux sales previously recognized in the second quarter as sales to distributors will in 2011 be recorded as wholesale sales during the third and fourth quarters.