Deckers Outdoor reported sales increased 2.7 percent in the third quarter, to $386.7 million compared to $376.4 million for the same period last year with modest gains from Ugg, Teva and Sanuk. Earnings slid 23.2 percent to $33.1 million, or 95 cents a share, from $43.1 million, or $1.18, a year ago. The company raised its earnings guidance for the year due to third quarter results, which included a tax benefit,
combined with current visibility.

Third Quarter Review

  • Net sales increased 2.7 percent to $386.7 million compared to $376.4 million for the same period last year.
  • Gross margin improved 90 basis points to 43.2 percent compared to 42.3 percent for the same period last year.
  • SG&A expenses as a percent of net sales were 31.1 percent compared to 26.5 percent for the same period last year.
  • Diluted earnings per share was $0.95 compared to $1.18 for the same period last year.
  • Ugg® brand sales increased 1.3 percent to $337.0 million compared to $332.8 million for the same period last year.
  • Teva® brand sales increased 0.6 percent to $18.0 million compared to $17.9 million for the same period last year.
  • Sanuk® brand sales increased 0.5 percent to $18.4 million compared to $18.3 million for the same period last year.
  • Retail sales increased 34.5 percent to $52.6 million compared to $39.1 million for the same period last year; same store sales increased 1.9 percent for the thirteen weeks ending September 29, 2013 compared to the thirteen weeks ending September 30, 2012.
  • eCommerce sales increased 12.2 percent to $14.9 million compared to $13.3 million for the same period last year.
  • Domestic sales decreased 1.4 percent to $238.8 million compared to $242.2 million for the same period last year.
  • International sales increased 10.3 percent to $147.9 million compared to $134.2 million for the same period last year.

“The Ugg brand has shown great resiliency over the past year driven by innovative new products and advancements in our marketing, merchandising and selling strategies,” stated Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. “The fall selling season started well led by demand for our expanded collection of casual shoes and boots. As we move further into the back half of the year, sell-through of our core Classic and slipper collections is accelerating. We are pleased with our current business trends and believe the company is well positioned for the upcoming holiday period. More importantly, we believe the investments we are making in our brands, distribution platforms and supply chain will strengthen our growth profile and enhance our profitability over the long-term.”

Division Summary

Ugg Brand
Ugg brand net sales for the third quarter increased 1.3 percent to $337.0 million compared to $332.8 million for the same period last year. The increase in sales was primarily driven by higher global Direct to Consumer sales, resulting from new store openings and the launch of new eCommerce websites, partially offset by lower domestic wholesale sales.

Teva Brand
Teva brand net sales for the third quarter increased 0.6 percent to $18.0 million compared to $17.9 million for the same period last year. The increase in sales was driven by higher worldwide wholesale and Direct to Consumer sales, partially offset by a decrease in international distributor sales.

Sanuk Brand
Sanuk brand net sales for the third quarter increased 0.5 percent to $18.4 million compared to $18.3 million for the same period last year. The increase in sales was driven primarily by gains in worldwide wholesale sales, as well as an increase in domestic Direct to Consumer sales, offset by a decrease in distributor sales primarily in the Asia Pacific region, as well as in Canada.

Other Brands
Combined net sales of the company’s other brands increased 81.3 percent to $13.3 million for the third quarter compared to $7.3 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 34.5 percent to $52.6 million for the third quarter compared to $39.1 million for the same period last year. This increase was driven by 37 new stores opened after the third quarter of 2012, and a 1.9 percent same store sales increase for the thirteen weeks ended September 29, 2013 compared to the thirteen weeks ending September 30, 2012.

eCommerce
Sales for the global eCommerce business, which are included in the brand sales numbers above, increased 12.2 percent to $14.9 million for the third quarter compared to $13.3 million for the same period last year. The sales increase was driven primarily by strong international sales for the Ugg brand, and the addition of new international eCommerce websites.

Balance Sheet
At September 30, 2013, cash and cash equivalents were $84.1 million compared to $61.6 million at September 30, 2012. The company had $245.5 million in outstanding borrowings under its credit facility at September 30, 2013 and $275.0 million at September 30, 2012. The increase in cash and cash equivalents and decrease in outstanding borrowings are primarily attributable to improved inventories and cash provided by operations, partially offset by $75.2 million of cash payments for capital assets primarily related to retail expansion and the company’s new headquarters facility, and also $36.0 million of cash payments for common stock repurchases made in the fourth quarter 2012.

Inventories at September 30, 2013 decreased 8.6 percent to $444.6 million from $486.2 million at September 30, 2012. By brand, Ugg inventory decreased $52.7 million to $399.1 million at September 30, 2013, Teva inventory increased $2.4 million to $21.6 million at September 30, 2013, Sanuk inventory increased $3.9 million to $12.5 million at September 30, 2013, and the other brands’ inventory increased $4.8 million to $11.4 million at September 30, 2013.

Full-Year 2013 Outlook
Based on results for the third quarter of 2013 which included a tax benefit of approximately $2 million related to a lower, non-recurring tax rate combined with current visibility, the company updated its full year outlook.
The company still expects full year revenues to increase approximately 8 percent over 2012 levels.
The company now expects full year diluted earnings per share to increase approximately 10 percent over 2012 levels, up from its previous projection of approximately 8 percent.

Fourth Quarter Outlook
Based on results for the third quarter of 2013 which included the shift of certain SG&A expenses into the fourth quarter combined with current visibility, the company updated its fourth quarter 2013 outlook.
The company still expects fourth quarter 2013 revenue to increase approximately 14.5 percent over 2012 levels.
The company now expects fourth quarter 2013 diluted earnings per share to increase approximately 32 percent over 2012 levels, compared to its previous projection of approximately 38 percent.