Deckers Outdoor Corporation reported that third quarter net sales increased 124% to a record $55.8 million compared to $24.9 million in the same period last year. Net earnings for the quarter increased to $5.8 million or 46 cents per diluted share, compared to net earnings of $481,000, or four cents per diluted share for the third quarter of last year.
For the nine months ended September 30, 2004, net sales increased 65% to $140.6 million compared to $85.3 million in the same period last year. Net earnings for the first nine months of fiscal 2004 increased to $16.3 million or $1.37 per diluted share, compared to net earnings of $6.7 million, or $0.57 per diluted share last year.
Mr. Douglas Otto, Chairman and CEO stated, “Our ability to once again deliver record results underscores the strength of our brands and reflects the disciplined execution of our key strategies. Strong sales for all three brands, coupled with continued operating margin expansion, allowed us to exceed expectations. We are excited as the strong momentum continues, giving us the ability to raise our outlook for the remainder of the year.”
Including sales from both the wholesale divisions and the Internet and catalog retailing business, Teva sales for the third quarter increased 32% to $11.9 million from $9.0 million in the same period a year ago, while UGG sales were up dramatically to $39.2 million versus $14.1 million last year. Simple sales increased 165% to $4.6 million compared to $1.8 million a year ago. Sales for the Internet and catalog retailing business, which are included in the brand sales numbers above, aggregated approximately $5.4 million for the third quarter of 2004, up 241% from $1.6 million for the third quarter of 2003.
“After a record spring season, Teva's robust performance continued into the fall, primarily driven by strong demand for our core sandal category as well as our expanded closed-toe offering,” continued Mr. Otto. “Our UGG business remains very strong as sales of all styles, including our classic boots, slippers and fall collection, continue to perform well. In addition, we recently signed a licensing agreement with Fownes Brothers, Inc. for UGG cold weather accessories, including hats, scarves and gloves and believe this represents a tremendous opportunity to enhance the brand's presence in the luxury goods market. We are also encouraged by the results of Simple, in particular the strong retail performance of our new clog and Sugar sneaker, as well as the positive reaction to the brand's spring 2005 sneaker collection.”
Gross margin for the third quarter increased to 39.8% from 38.2% for the third quarter last year due to a combination of factors, including the strong increase in the higher gross margin Internet and catalog sales, the addition of $0.4 million of net license revenues from UGG handbags and outerwear, a reduced impact of inventory write-downs and lower overhead costs per pair. Selling, general and administrative expenses decreased to 23.1% of net sales for the current quarter compared to 31.0% for the third quarter last year, largely due to the continued leverage of operating costs on the higher sales volume. The resulting operating earnings improved to 16.7% of net sales for the quarter compared to 7.2% for the third quarter last year.
Deckers updated its guidance for the fourth quarter ending December 31, 2004. The Company currently expects net sales for the fourth quarter to range between $55 million and $60 million and diluted earnings per share to range from $0.47 to $0.51.
The Company also raised its guidance for the fiscal year ending December 31, 2004. The Company now expects 2004 net sales to range between $196 million and $201 million, up from the previous guidance of $182 million to $190 million, and diluted earnings per share to range from $1.84 to $1.88, up from the previous guidance of $1.70 to $1.75 per diluted share. The Company expects its sales from Teva to be approximately $89 million to $90 million, Simple to be approximately $10 million to $11 million and UGG to be approximately $97 million to $100 million.
The Company is introducing guidance for fiscal 2005. Deckers currently anticipates its fiscal 2005 net sales to be in the range of $220 million to $230 million, including sales of $97 million to $100 million for Teva, $13 million to $15 million for Simple and $110 million to $115 million for UGG. Deckers currently expects its diluted earnings per share for fiscal 2005 to range from $2.15 to $2.25.
Mr. Otto concluded, “Looking ahead, we remain focused on expanding our reach and further building on our leadership positions in the market. We have a well developed infrastructure to support our growth, both domestically and overseas, and remain dedicated to successfully executing our long-term strategy and capitalizing on the many opportunities that lie ahead.”
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
Three-month period ended Nine-month period ended
September 30, September 30,
------------------------ ------------------------
2004 2003 2004 2003
----------- ----------- ------------ -----------
Net sales $55,797,000 24,894,000 140,615,000 85,338,000
Cost of sales 33,562,000 15,392,000 79,068,000 47,764,000
----------- ----------- ------------ -----------
Gross profit 22,235,000 9,502,000 61,547,000 37,574,000
Selling, general and
administrative
expenses 12,877,000 7,720,000 33,287,000 23,527,000
Litigation income ----- ----- ----- (500,000)
----------- ----------- ------------ -----------
Earnings from
operations 9,358,000 1,782,000 28,260,000 14,547,000
Other expense (income):
Interest, net (28,000) 981,000 2,261,000 3,412,000
Other 5,000 (1,000) ----- (15,000)
----------- ----------- ------------ -----------
Earnings before
income tax expense 9,381,000 802,000 25,999,000 11,150,000
Income tax expense 3,559,000 321,000 9,708,000 4,460,000
----------- ----------- ------------ -----------
Net earnings $ 5,822,000 481,000 16,291,000 6,690,000
=========== =========== ============ ===========
Net earnings per
share:
Basic $ 0.50 0.05 1.52 0.70
Diluted 0.46 0.04 1.37 0.57
