Deckers Outdoor Corporation saw company-wide net sales jump 72.8% to $91.1 million versus $52.7 million last year. A write-down of Teva trademarks, however, caused the company to report a net loss of 3.8 million after net income of $2.3 million last year. Excluding the write-down, net income would have been $5.2 million. UGG brand sales increased 130.6% to $60.6 million, while Teva sales increased 4.8% to $25.2 million and Simple sales increased 94.0% to $4.7 million.


Angel Martinez, president, CEO and chairman of the board of directors, stated, “The positive momentum that the UGG brand experienced at the start of the year continued into the second quarter which allowed us to once again exceed expectations. A significant increase in fall orders both domestically and overseas, combined with solid sell-through of spring product in our direct to consumer business contributed to the brand’s outperformance. The very challenging retail environment for the Teva brand contributed to our inability to support a portion of the value of the Teva trademarks on our balance sheet for accounting purposes. However, given the circumstances and compared to our competition, we are still encouraged with the Teva brand’s results, as sales rose modestly driven by increased shelf space at retail and consumer demand for several new styles from our spring collection. At the same time, Simple® brand sales increased and continued to benefit from strong sell-through of the spring 2008 product line, increased distribution, and enhanced awareness of the brand. We also recently announced a number of important initiatives that we believe will strengthen our market position and enhance our global prospects, namely the acquisition of TSUBO®, LLC, two new UGG brand concept stores opening in the U.K. and our joint-venture in China for the UGG brand. As we move into the back half of the year, we remain very confident about our prospects evidenced by our heightened outlook for the UGG brand and our increased sales and earnings expectations for 2008.”

Division Summary


UGG


UGG brand net sales for the second quarter increased 130.6% to $60.6 million compared to $26.3 million for the same period last year. The significant sales gain was primarily attributable to an increase in global shipments of fall product versus the same period a year ago.


Teva


Teva brand net sales increased 4.8% to $25.2 million for the second quarter compared to $24.1 million for the same period last year. A solid fill-in business for key spring styles helped offset a lower pre-book schedule as retailers were cautious with their future orders during the spring season.


Simple


Simple brand net sales for the second quarter increased 94.0% to $4.7 million compared to $2.4 million for the same period last year. The increase was driven by strong sell-through of the entire spring product line coupled with the initial orders of PlanetWalkers® shipping for the collection’s launch in the third quarter.


TSUBO


The TSUBO brand was acquired in the second quarter and did not have a material amount of net sales for the quarter.


eCommerce


Sales for the eCommerce business, which are included in the brand sales numbers above, increased 31.7% to $6.4 million for the second quarter compared to $4.9 million for the same period a year ago.


Retail Stores


Sales for the retail store business, which are included in the brand sales numbers above, increased 143.2% to $3.1 million for the second quarter compared to $1.3 million for the same period a year ago.


Inventories


At June 30, 2008, inventories increased to $112.8 million, versus $66.3 million a year ago. By brand, UGG increased $38.6 million to $90.6 million, Teva increased $2.9 million to $14.0 million and Simple increased $3.7 million to $6.9 million. The addition of the TSUBO brand in the second quarter added $1.1 million in inventory. It is also important to note that the majority of the UGG brand’s business is pre-booked and the increase in UGG inventory is necessary to fulfill the volume of orders currently on the books.


Full-Year 2008 Outlook


Based upon the company’s second quarter results coupled with improved visibility into the second half of the year, the company currently expects its full year revenue to increase approximately 43% over 2007, up from previous guidance of approximately 31%.
The company currently expects its full year diluted earnings per share, excluding the impact of the non-cash charge related to the write-down of the Teva trademarks discussed above, to increase approximately 34% over 2007, up from previous guidance of approximately 27%. This guidance assumes a gross profit margin of approximately 45% and SG&A as a percentage of sales of approximately 23%, both consistent with previous expectations.


Fiscal 2008 guidance includes approximately $10.6 million of stock compensation expense.

 

Third and Fourth Quarter Outlook

The company currently expects third quarter 2008 revenue and diluted earnings per share to increase approximately 34% and 12%, respectively, over 2007 levels. This guidance assumes a gross profit margin of approximately 44% and SG&A as a percentage of sales of approximately 23% due to additional distribution center costs, higher stock compensation, and costs for new retail stores that were not open in the third quarter of 2007.


The company currently expects fourth quarter 2008 revenue and diluted earnings per share to increase approximately 45% and 42%, respectively, over 2007 levels. This guidance assumes a gross profit margin of approximately 47% and SG&A as a percentage of sales of approximately 18%.

 







































































































































































































































































































































































































DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
           
Three-month period ended Six-month period ended
June 30, June 30,
2008 2007 2008 2007
 
Net sales $ 91,116 52,730 $ 188,651 125,305
Cost of sales 54,776   31,041   106,163   70,199  
Gross profit 36,340 21,689 82,488 55,106
 
Selling, general and administrative expenses 28,384 18,825 57,472 37,170
Loss from impairment 14,900  

 

—-  

 

14,900

 

  —  
(Loss) income from operations (6,944 ) 2,864 10,116 17,936
 
Other (income) expense, net:
Interest income (663 ) (1,487 ) (2,052 ) (2,653 )
Interest expense 39 197 71 496
Other, net (6 ) 38   (257 ) 78  
(Loss) income before income taxes (6,314 ) 4,116 12,354 20,015
 
Income tax (benefit) expense (2,494 ) 1,849   4,880   8,297  
 
Net (loss) income $ (3,820 ) 2,267   $ 7,474   11,718  
 
Net (loss) income per share:
Basic $ (0.29 ) 0.18 $ 0.57 0.92
Diluted (0.29 ) 0.17   0.57
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