Deckers Outdoor Corporation continues to benefit from the popularity of the UGG brand while at the same time many of the companys other businesses are undergoing a transition period. Both Teva and Simple are investing heavily in design and innovation while Deckers new CEO, Angel Martinez has brought in Collin Clark to head the companys international business and restructure many of the distributors around the world. These changes are designed to bring all of Deckers brands into more consistent growth.
During the fourth quarter, net sales increased 22.6% to $91.0 million versus $74.2 million in the same period last year. All of the sales growth came from the UGG brand, which reported a 30.4% increase in revenue to $78.5 million, compared to $60.2 million last year. Geographically, UGG was said to be strongest in the Northeast and Midwest this year. The company is comfortable with the brands current distribution, but will be adding a few new retailers. Most of the growth for the brand is expected to come from expanding the assortment and gaining a better foothold in the Southeast.
Teva net sales for the fourth quarter were $11.3 million compared to $11.8 million in the same period last year, a decrease of 4.2%. The decline was partially from slower international sales, where a lack of new innovative product hurt revenues in the EU. At the same time, Martinez feels that European expansion is also one of the biggest opportunities for the brand. The company is also ramping up the advertising efforts for all of its brands, with an aggressive print campaign and point of sale displays.
Martinez said that Teva is “on the ropes a little bit,” and its core audience is currently the “forty something” demographic, but the brand will become more aggressive at attracting the 19-year-old customer – not only to the Teva brand, but also to outdoor recreation as a lifestyle. Teva will continue its expansion into the closed-toe category.
Martinez expects to double the revenues of both the Teva and the UGG brands within six years and has even more ambitious growth targets for Simple. Within four to six years, Simple is expected to grow from a $7.9 million brand to a $75 million brand.
Simple sales decreased 44.4% to $1.2 million for the fourth quarter compared to $2.2 million for the same period last year. The 2004 quarter included approximately $1.0 million of sales of the Simple sheep offering, a program DECK discontinued in late 2004. Most of the new growth is expected to come from Simples new “Green toe” collection, which is marketed as 100% natural footwear. Martinez feels that the younger consumer has a “shared desire to tread lightly,” and the Simple brand can allow that.
Sales for the consumer direct business, which are included in the brand sales numbers, increased 153% to $15.2 million for Q4, compared to $6.0 million for the fourth quarter of 2004.
Net earnings for the quarter increased 31.5% to $12.1 million from $9.2 million last year, while earnings per diluted share increased 30.6% to 94 cents, versus earnings per diluted share of 72 cents in the fourth quarter of 2004. Deckers increased its guidance for fiscal 2006 and net sales are expected to range from $260 million to $270 million compared to its previous guidance of $255 million to $265 million. DECK also raised the low end of its previous earnings guidance and now expects diluted EPS of $2.05 to $2.15. First quarter of 2006 guidance remained the same with net sales in the range of $48 million to $50 million and 22 cents to 24 cents diluted EPS.
| Deckers Outdoor Corp. | |||
| Full Year Results | |||
| ($ millions) | 2005 | 2004 | Change |
| Total Sales | $264.8 | $214.8 | +23.3% |
| Teva | $85.2 | $88.2 | -3.4% |
| UGG | $171.6 | $116.2 | +47.7% |
| Simple | $7.9 | $10.3 | -23.3% |
| GM | 42.1% | 42.1% | flat |
| SG&A | 22.4% | 22.3% | +10 bps |
| Net Income | $31.8 | $25.5 | +24.7% |
| Diluted EPS | $2.48 | $2.10 | +18.1% |
| Inventories* | $33.4 | $30.3 | +10.3% |
| Receivables* | $40.9 | $40.2 | +1.7% |
| * at year-end | |||
