Deckers Outdoor Corporation said net sales rose 14.7% to $348.0 million in the fourth quarter ended Dec. 31, 2009, largely on the strength of its direct and interenational business, which made up for weak wholesale performance.
Deckers Outdoor Corporation said net sales reached $348.0 million in the fourth quarter ended Dec. 31, 2009, up 14.7% largely on the back of its direct business and international businesses. The company said it expects sales to increase 7% in the current quarter and 11% in 2009.
The company said international sales rose 96.0% to $39.3 million, retail sales rose 88.7% to $46.6 million and e-commerce sales increase 27.0% to $45.9 million.
The company said international sales rose 96.0% to $39.3 million, retail sales rose 88.7% to $46.6 million and e-commerce sales increase 27.0% to $45.9 million.
Diluted earnings per share increased 28.9% to $5.22 versus non-GAAP diluted EPS of $4.05 a year ago, which excluded a pre-tax non-cash impairment of $20.9 million on intangible assets, or $0.98 per diluted share.
During the holiday season, we experienced robust demand for the entire UGG brand product line, with the performance of several new styles far exceeding expectations, said Angel Martinez, president, CEO and chairman of the board of directors. Sell-through was particularly strong at our company-owned retail stores and on our eCommerce websites, which helped us increase earnings substantially during the fourth quarter. Our ability to successfully develop new and compelling footwear, penetrate additional categories, profitably grow our consumer direct division, and expand internationally is driving our current performance, while at the same time creating new growth opportunities for the future.
The companys other brands, however, were hurt by a weak wholesale market.
The difficult retail environment negatively impacted our other brands as the majority of our accounts carried much less inventory and bought closer to season compared to prior years, said Martinez. That said, the Teva brand experienced better sell-through on the strength of new product introductions and was able to gain market share in a challenging year. In addition, improved inventory management led to lower closeout sales and increased margins. The Simple brand also performed well at retail, especially with major accounts like Nordstrom and Journeys. We are excited about several new product introductions for 2010 and believe a renewed emphasis on balancing style and sustainability will broaden our consumer base and enhance the brands market position.
International Direct Distribution
On January 1, 2010, the company commenced selling directly to wholesale customers for the Teva brand in the Benelux region and France. The company also has announced that, in January 2011, following the expiration of existing distribution agreements, the company will assume control of distributing the UGG, Teva and Simple brands in the United Kingdom and the UGG and Simple brands in the Benelux region and France. As part of the transition, the company plans to incur incremental expenses in 2010 and will experience a shift in sales from 2010 to 2011. The net impact of this transition in 2010 on pre-tax earnings is estimated to be approximately $8.0 million, of which approximately 65% is a one-time impact.
Most of the incremental sales and gross margin benefits resulting from this additional spend will not be realized until 2011. By selling directly to the retailers in the United Kingdom, Benelux and France, the company expects to capture the additional sales and gross margin previously provided to its distributors.
The international markets represent a significant growth opportunity, and we are excited about the incremental sales and earnings potential by selling directly to our wholesale customers,” Martinez said. “Starting in 2011, we believe that the incremental sales and gross margin benefits from selling directly to our wholesale customers will more than offset the infrastructure investments in 2010 and drive higher earnings in the future. Furthermore, with control over sales and marketing, we look forward to building on the current momentum and expanding market share for each of the brands in their respective categories.
Division Summary
UGG Brand
UGG brand net sales for the fourth quarter increased 15.7% to a record $333.3 million compared to $288.0 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 companys eCommerce websites coupled with higher shipments to international distributors versus the same period a year ago. For the full year, UGG brand sales increased 22.3% to a record $711.8 million versus $582.0 million in 2008.
Teva® Brand
Teva brand net sales decreased 14.8% to $10.5 million for the fourth quarter compared to $12.4 million for the same period last year. The decline in sales was primarily the result of lower closeout sales compared with the same period last year. For the full year, Teva brand sales decreased 10.2% to $77.7 million compared to $86.5 million in 2008.
Simple® Brand
Simple brand net sales for the fourth quarter increased 17.9% to $2.7 million compared to $2.3 million for the same period last year, primarily due to an increase in weighted-average selling prices. For the full year, Simple brand sales decreased 17.7% to $14.1 million versus $17.2 million in 2008.
Simple brand net sales for the fourth quarter increased 17.9% to $2.7 million compared to $2.3 million for the same period last year, primarily due to an increase in weighted-average selling prices. For the full year, Simple brand sales decreased 17.7% to $14.1 million versus $17.2 million in 2008.
Other Brands
Combined net sales of the companys other brands were $1.5 million and $9.6 million for the fourth quarter and full year, respectively.
Combined net sales of the companys other brands were $1.5 million and $9.6 million for the fourth quarter and full year, respectively.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 27.0% to $45.9 million for the fourth quarter compared to $36.1 million for the same period a year ago. The increase in sales resulted from higher demand for the fall line of the UGG brand, increased spend in advertising, and a favorable inventory position compared to the same period last year. For the full year, sales for the eCommerce business increased 10.0% to $75.7 million versus $68.8 million in 2008.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 88.7% to $46.6 million for the fourth quarter compared to $24.7 million for the same period a year ago, driven by 5 new stores and a same store sales increase of 29.7%. For the full year, sales for the retail store business increased 105.3% to $79.0 million versus $38.5 million in 2008. For those stores that were open during the full year of 2008 and 2009, same store sales grew by 27.6%.
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 27.0% to $45.9 million for the fourth quarter compared to $36.1 million for the same period a year ago. The increase in sales resulted from higher demand for the fall line of the UGG brand, increased spend in advertising, and a favorable inventory position compared to the same period last year. For the full year, sales for the eCommerce business increased 10.0% to $75.7 million versus $68.8 million in 2008.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 88.7% to $46.6 million for the fourth quarter compared to $24.7 million for the same period a year ago, driven by 5 new stores and a same store sales increase of 29.7%. For the full year, sales for the retail store business increased 105.3% to $79.0 million versus $38.5 million in 2008. For those stores that were open during the full year of 2008 and 2009, same store sales grew by 27.6%.
Balance Sheet
At Dec. 31, 2009, cash and cash equivalents and short-term investments increased 75.6% to $342.0 million compared to $194.8 million at December 31, 2008. Inventories at December 31, 2009 decreased 8.0% to $85.4 million from $92.7 million at December 31, 2008.
At Dec. 31, 2009, cash and cash equivalents and short-term investments increased 75.6% to $342.0 million compared to $194.8 million at December 31, 2008. Inventories at December 31, 2009 decreased 8.0% to $85.4 million from $92.7 million at December 31, 2008.
Full-Year 2010 Outlook
Based upon current visibility, the Company introduced a full year revenue growth target of approximately 11% over 2009.
The company expects full year diluted earnings per share to increase approximately 5% over the non-GAAP diluted EPS of $8.94 in 2009. This guidance assumes a gross profit margin of approximately 47% and SG&A as a percentage of sales of approximately 25%.
Fiscal 2010 guidance includes estimates of incremental expenses in 2010 associated with the transition to wholesale sales for the Teva brand in the Benelux region and France and estimates of incremental expenses and a shift in sales from 2010 to 2011 associated with the upcoming transitions in January 2011 to wholesale sales in the United Kingdom, Benelux region and France of approximately $8.0 million, or approximately $0.38 per diluted share. Fiscal 2010 guidance also assumes an effective tax rate of approximately 37% compared to 36.2% in 2009 due to the impact on international income from the aforementioned incremental expenses and shift in profit.
First Quarter Outlook
The company currently expects first quarter 2010 revenue to increase approximately 7% over 2009, and expects first quarter 2010 diluted earnings per share to be down approximately 6% compared to 2009.
The company currently expects first quarter 2010 revenue to increase approximately 7% over 2009, and expects first quarter 2010 diluted earnings per share to be down approximately 6% compared to 2009.
First quarter guidance includes estimates of $2.0 million for incremental investments associated with the distribution transitions, which results in reducing diluted EPS by approximately $0.10. First quarter guidance also includes improved gross margins compared to 2009 due to a higher retail mix and improved brand margins. In addition, first quarter guidance includes higher levels of fixed overhead for new retail stores, international infrastructure and other general and administrative costs.
| DECKERS OUTDOOR CORPORATION | |||||||||||||
| AND SUBSIDIARIES | |||||||||||||
| Condensed Consolidated Statements of Income | |||||||||||||
| (Unaudited) | |||||||||||||
| (Amounts in thousands, except for per share data) | |||||||||||||
| Three-month period ended | Twelve-month period ended | ||||||||||||
| December 31, | December 31, | ||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||
| Net sales | $ | 347,989 | 303,506 | 813,177 | 689,445 | ||||||||
| Cost of sales | 174,548 | 166,016 | 442,087 | 384,127 | |||||||||
| Gross profit | 173,441 | 137,490 | 371,090 | 305,318 | |||||||||
| Selling, general and administrative expenses | 67,825 | 52,843 | 188,843 | 152,574 | |||||||||
| Impairment loss | — | 20,925 | 1,000 | 35,825 | |||||||||
| Income from operations | 105,616 | 63,722 | 181,247 | 116,919 | |||||||||
| Other (income) expense, net: | |||||||||||||
| Interest income | (37 | ) | (683 | ) | (1,010 | ) | (3,190 | ) | |||||
| Interest expense | 40 | (227 | ) | (875 | ) | (142 | ) | ||||||
| Other, net | (37 | ) | (14 | ) | (91 | ) | (251 | ) | |||||
| Income before income taxes | 105,650 | 64,646 | 183,223 | 120,502 | |||||||||
| Income tax expense | 37,602 | 24,306 | 66,304 | 46,631 | |||||||||
| Net income | 68,048 | 40,340 | 116,919 | 73,871 | |||||||||
Less: Net (income) loss attributable to the noncontrolling interest | (306 | ) | 120 | (133 | ) | 77 | |||||||
Net income attributable to Deckers Outdoor Corporation | $ | 67,742 | 40,460 | 116,786 | |||||||||
