Deckers Outdoor Corp. reported sales decreased 2.5 percent to $170.1 million in the second quarter, compared to $174.4 million for the comparable period last year. Sales declined 6.9 percent at Ugg and 8.4 percent at Teva while gaining 7.5 percent at Sanuk. The company's net loss grew to $30.6 million, or 85 cents a share, from $17.8 million, or 53 cents a share, a year ago.

Other highlights of the quarter:

  • Gross margin was 41.1 percent compared to 42.2 percent for the same period last year.
  • Diluted loss per share was 85 cents compared to a loss of 53 cents for the same period last year.
  • UGG brand sales decreased 6.9 percent to $100.4 million compared to $107.9 million for the same period last year.
  • Teva brand sales decreased 8.4 percent to $31.2 million compared to $34.1 million for the same period last year.
  • Sanuk brand sales increased 7.5 percent to $30.1 million compared to $28.0 million for the same period last year.
  • Retail sales increased 29.1 percent to $32.5 million compared to $25.2 million for the same period last year; same store sales decreased 5.3 percent for the thirteen weeks ending June 30, 2013 compared to the thirteen weeks ending July 1, 2012.
  • E-commerce sales increased 34.2 percent to $10.7 million compared to $8.0 million for the same period last year.
  • Domestic sales decreased 3.0 percent to $110.1 million compared to $113.5 million for the same period last year.
  • International sales decreased 1.6 percent to $60.0 million compared to $61.0 million for the same period last year.

“We are pleased with the second quarter, and while it is our smallest quarter it was an important transition period for the UGG brand that has positioned the company for a good back half of the year, ” stated Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. “We experienced solid sell-through of the UGG brand’s spring line in our wholesale and eCommerce channels and we believe the consumer response to the initial deliveries of our new transitional fall product has been very positive. While less than favorable weather negatively impacted sandal sales for the Teva and Sanuk brands, we reacted quickly to deliver bottom line results that were better than plan. We remain optimistic about our ability to expand sales and margins as we head into our highest volume sales quarters, and we continue to be excited about the many long-term growth opportunities that we believe exist for our business.”

Division Summary

UGG Brand
UGG brand net sales for the second quarter decreased 6.9 percent to $100.4 million compared to $107.9 million for the same period last year. Higher global retail sales from new store openings and an increase in global eCommerce sales were offset by lower domestic and international wholesale sales, lower international distributor sales and a decrease in same store sales.

Teva Brand
Teva brand net sales for the second quarter decreased 8.4 percent to $31.2 million compared to $34.1 million for the same period last year. The decrease in sales was driven by lower domestic wholesale sales, partially offset by an increase in international distributor sales, and to a lesser extent gains in domestic eCommerce sales and international wholesale sales.

Sanuk Brand
Sanuk brand net sales for the second quarter increased 7.5 percent to $30.1 million compared to $28.0 million for the same period last year. The improvement in sales was driven primarily by an increase in domestic eCommerce sales combined with gains in domestic wholesale and international distributor sales and the launch of the brand in the company’s European wholesale markets.

Other Brands
Combined net sales of the company’s other brands increased 87.0 percent to $8.3 million for the second quarter compared to $4.5 million for the same period last year. The increase was primarily attributable to the addition of the HOKA ONE ONE® brand which was acquired in September 2012.

Retail Stores
Sales for the global retail store business, which are included in the brand sales numbers above, increased 29.1 percent to $32.5 million for the second quarter compared to $25.2 million for the same period last year. This increase was driven by 36 new stores opened after the second quarter of 2012, partially offset by a 5.3 percent same store sales decrease for the thirteen weeks ended June 30, 2013 compared to the thirteen weeks ending July 1, 2012.

eCommerce
Sales for the global eCommerce business, which are included in the brand sales numbers above, increased 34.2 percent to $10.7 million for the second quarter compared to $8.0 million for the same period last year. The sales increase was driven primarily by strong domestic and international sales for the UGG brand, increased domestic sales of the Sanuk brand, and the addition of new international eCommerce websites.

Balance Sheet
At June 30, 2013, cash and cash equivalents were $49.1 million compared to $114.4 million at June 30, 2012. The company had $26.0 million in outstanding borrowings under its credit facility at June 30, 2013 and no outstanding borrowings at June 30, 2012. The decrease in cash and cash equivalents and increase in outstanding borrowings are primarily attributable to $120.7 million of cash payments for common stock repurchases and $64.5 million of cash expenditures primarily related to retail expansion and the company’s new headquarters facility, partially offset by cash provided by operations.

Inventories at June 30, 2013 increased 4.6 percent to $362.1 million from $346.3 million at June 30, 2012. By brand, UGG inventory increased $2.5 million to $311.4 million at June 30, 2013, Teva inventory increased $3.8 million to $24.9 million at June 30, 2013, Sanuk inventory increased $5.1 million to $14.4 million at June 30, 2013, and the other brands’ inventory increased $4.4 million to $11.4 million at June 30, 2013.

“UGG inventory levels were higher than originally expected as of the end of June mostly due to timing, as certain fall deliveries were accelerated to accommodate factory requests in preparation for their peak production period in the second half of the year. This product will be utilized to fulfill early season demand at key wholesale accounts and will support our expanding direct to consumer channel which includes 36 more stores compared with this time a year ago. We are very comfortable with the quality of our current UGG brand inventory which consists almost entirely of core and in-line products. The sales headwinds for the Teva and Sanuk brands this spring also contributed slightly to the growth in our overall inventory position.”

Full-Year 2013 Outlook
Based on results for the first six months of 2013 combined with higher projections for the company’s direct to consumer channel driven by stronger eCommerce sales trends and the planned opening of approximately 36 new stores, up from its previous plan of approximately 30, the company is raising its full year outlook.

The company now expects full year revenues to increase approximately 8 percent over 2012 levels, up from its previous projection of approximately 7 percent.

The company now expects full year diluted earnings per share to increase approximately 8 percent over 2012 levels, up from its previous projection of approximately 5 percent.

Third and Fourth Quarter Outlook
The company currently expects third quarter 2013 revenue to increase approximately 2.5 percent and diluted earnings per share to decrease approximately 41 percent from 2012 levels.

The company currently expects fourth quarter 2013 revenue to increase approximately 14.5 percent and diluted earnings per share to increase approximately 38 percent over 2012 levels.