Deckers Outdoor re-affirmed guidance of 52% growth in sales and 40% EPS expansion and is on target to reach its goal of $1 billion in sales by 2012, said CFO Tom Hillebrandt during the ICR conference last week. The company also re-affirmed its previously issued guidance for 2008 calling for 52% sales growth.
Looking towards the future, Deckers has started its retail expansion strategy with 10 stores in the U.S., four of which are flagship stores and six are outlet retail stores.
The Deckers international business is about 14% of the business and all done through distribution, while over 10% of the companys business is done via e-commerce. DECK sees growing international business to 30% of total revenues by 2012. UGG has a joint venture partner in China.
There are currently ten UGG stores in the U.S., including NY (2), Chicago, San Francisco and London (2). UGG plans to expand mens, childrens and international segments (U.K. 57%); $750 million in annual sales by 2012; convert distributors to subsidiaries.
“The company does not have any debt; it's a strong cash flow generating business,” said Hillebrandt. Of the four shoe brands, he commented, “They are non-competing brands All four of them can sit in anyone's closet and not compete with each other. With that portfolio we think that we can get those brands up to $1 billion by the year 2012, broken down by $750 million from UGG, $140 million from Teva, $75 million from Simple, and $35 million from Tsubo.”
The company expects to report its ninth consecutive year of record revenue for 2008, and its eighth consecutive year of record earnings per share. They expect revenue to be near the low end of the guidance issued in October for $1.22 billion to $1.24 billion. Through the first three quarters of 2008, WWW revenue was up almost 4%. Currently just under 6% of Wolverines consolidated revenue comes from direct consumer business, either brick and mortar or e-commerce.
Wolverines outdoor brands, which include Merrell and Patagonia, contribute about 37% or $440 million of consolidated revenue. The Wolverine Footwear Group, which is Wolverine and Bates, accounts for 22% or about $260 million of revenues.
The Heritage brands group, consisting of Caterpillar, Harley-Davidson, and Sebago, is about 20% or $240 million of revenue. The Hush Puppies is an operating group unto itself that contributes about 14% or $170 million of revenue. Wolverine retail, as well as its smaller leather division, is 7% of consolidated revenue.
Over the longer-term, 1999 through 2007, EPS has grown at a compound rate of 14.7%, more than twice the rate of revenue growth. Gross margin has expanded over 700 basis points from 1999 through 2008 as it increasingly move towards more sourcing through third-party factories.
Wolverines public guidance at this point, which has not been updated since early October, is for EPS for the full year of $1.87 to $1.92 per share.
Wolverine is planning for a reduction of 450 positions, which is about 10% of its overall headcount. The charges to be recorded throughout the course of 2009 will be in the range of $31 million to $36 million. The annualized benefits, once all the initiatives are fully implemented, are about $17 million and $19 million on a go forward basis.