Deckers Outdoor Corporation fourth quarter Net sales increased 36.7% to $124.4 million versus $91.0 million last year; ahead of previous guidance range of $107.0 million to $110.0 million. Gross margin increased 790 basis points to 48.5% compared to 40.6% a year ago. Preliminary diluted EPS increased 93.6% to $1.82 versus 94 cents last year; ahead of previous guidance range of $1.27 to $1.30.
Fiscal 2006 net sales increased 15.0% to $304.4 million versus $264.8 million in 2005; ahead of previous guidance range of $287.0 million to $290.0 million. Gross margin increased 430 basis points to 46.4% compared to 42.1% last year. Preliminary diluted EPS increased 33.1% to $3.30 versus $2.48 in 2005; ahead of previous guidance range of $2.75 to $2.78. Cash and short-term investments increased to $98.9 million compared to $53.2 million a year ago. Inventories decreased to $32.4 million versus $33.4 million last year.
Deckers also announced that it recently conducted its annual impairment evaluation of the intangible assets on its balance sheet. Based on preliminary results, the Company expects to record a non-cash, pre-tax charge in the fourth quarter in the range of $14 million to $16 million, reflecting the write-down of the intangible asset related to Teva's trademarks. The exact amount of the charge will be recorded when the Company completes its analysis and files its Form 10-K with the Securities & Exchange Commission on or prior to March 16, 2007.
Angel Martinez, President and Chief Executive Officer, stated, “Our fourth quarter was highlighted by strong full price selling of our entire UGG® Brand fall collection throughout the holiday season and across the country which, combined with a meaningful reorder business, allowed us to once again exceed expectations. We are very pleased with our recent performance, particularly our top and bottom line growth. We achieved some key milestones in 2006 including surpassing the $300 million mark in sales, generating more than $3.00 in diluted earnings per share on an operational basis, and finishing the year with nearly $100 million in cash and short term investments on our balance sheet. Throughout the past twelve months we took a number of important steps to better position our Company for the future. And as we enter the new year, we are committed to further investing in all three of our brands, evolving our growth strategy, and fully maximizing the many opportunities that still exist going forward.”
Teva Brand net sales for the fourth quarter increased 15.5% to $13.0 million compared to $11.3 million for the same period last year. Sales of Teva products were driven by solid sell-through of fall product and pull-forwards on several spring 2007 models. For the full year, Teva product sales decreased 5.6% to $80.5 million compared to $85.2 million in the prior year.
UGG Brand net sales for the fourth quarter increased 40.1% to $109.9 million versus $78.5 million for the same period a year ago. Consumer demand for the entire women's, men's, and kids' fall collection, including boots, slippers, casuals, fashion and surf contributed to the UGG Brand's better than expected performance. For the full year, UGG Brand sales increased 23.2% to a record $211.5 million versus $171.6 million in 2005.
Simple Brand net sales increased 18.8% to $1.5 million for the fourth quarter compared to $1.2 million for the same period last year. Simple product sales were on-plan for the quarter, with Green Toe® product sales continuing to gain traction and further solidifying the brand's leadership position in sustainable footwear. For the full year, the Simple Brand's sales increased 58.01% to $12.5 million compared to $7.9 million a year ago.
Sales for the Consumer Direct business, which are included in the brand sales numbers above, increased 28.4% to $19.5 million compared to $15.2 million for the same period a year ago. Results for the fourth quarter of 2006 include sales from the Company's new UGG Brand flagship store in New York City and two new retail outlet stores in Wrentham, MA and Riverhead, NY, which were not in operation in the fourth quarter of 2005.
The Company reiterated its full year revenue growth target of approximately 15%.
The Company also introduced its full year diluted earnings per share target of approximately 5% growth over 2006 before the impairment charge. It is important to note, that the fiscal 2006 gross margin of 46.4% was above normal due primarily to labor and material cost containment. The Company expects gross margin to return to a more normalized level of approximately 44% in fiscal 2007.
Fiscal 2007 guidance includes approximately $4.3 million of stock compensation expense.
The Company currently expects first quarter 2007 revenue to increase approximately 15% and diluted earnings per share to increase approximately 15% over 2006.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended Year ended
December 31, December 31,
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2006 2005 2006 2005
----------- ----------- -------- ---------
Net sales $ 124,376 90,963 304,423 264,760
Cost of sales 64,091 54,047 163,224 153,238
----------- ----------- -------- ---------
Gross profit 60,285 36,916 141,199 111,522
Selling, general and
administrative expenses 23,305 17,742 73,989 59,254
----------- ----------- -------- ---------
Income from operations 36,980 19,174 67,210 52,268
Other (income) expense
Interest, net (432) (75) (2,372) 29
Other (12) (1) 1 (4)
----------- ----------- -------- ---------
Income before income taxes 37,424 19,250 69,581 52,243
Income taxes 13,929 7,174 27,107 20,398
----------- ----------- -------- ---------
Net income $ 23,495 12,076 42,474 31,845
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Net income per share:
Basic $ 1.87 0.97 3.39 2.58
Diluted 1.82 0.94 3.30 2.48
=========== =========== ======== =========
Weighted-average shares:
Basic 12,565 12,406 12,519 12,349
Diluted 12,922 12,900 12,882 12,866
=========== =========== ======== =========
