Highlights of the quarter include:
- Gross margin was 46.3 percent compared to 51.0 percent for the same period last year.
- UGG brand sales increased 2.9 percent to $584.8 million compared to $568.5 million for the same period last year.
- Sanuk brand sales increased 39.2 percent to $15.3 million compared to $11.0 million for the same period last year.
- Teva brand sales decreased 29.5 percent to $13.7 million compared to $19.4 million for the same period last year.
- Retail sales increased 37.1 percent to $135.5 million compared to $98.8 million for the same period last year; same store sales decreased 3.4 percent for the thirteen weeks ending December 30, 2012 compared to the thirteen weeks ending January 1, 2012.
- E-commerce sales increased 30.6 percent to $87.6 million compared to $67.1 million for the same period last year.
- Domestic sales decreased 2.1 percent to $446.7 million compared to $456.3 million for the same period last year.
- International sales increased 15.6 percent to $170.5 million compared to $147.6 million for the same period last year.
Net sales increased 2.7 percent to a record $1.414 billion compared to $1.377 billion last year.
Gross margin was 44.7 percent compared to 49.3 percent last year.
Diluted earnings per share was $3.45 compared to $5.07 last year, which takes into account repurchases of the Company’s common stock under its stock repurchase program.
UGG brand sales decreased 1.5 percent to $1.184 billion compared to $1.202 billion last year.
Sanuk brand net sales were $94.0 million for the fiscal year ending December 31, 2012 and were $26.6 million for the six months commencing on July 1, 2011, the acquisition date, and ending December 31, 2011.
Teva brand sales decreased 7.4 percent to $115.5 million compared to $124.8 million last year.
Retail sales increased 30.1 percent to $246.0 million compared to $189.0 million last year; same store sales decreased 3.4 percent for the 52 weeks ending December 30, 2012 compared to the 52 weeks ending January 1, 2012.
E-commerce sales increased 22.6 percent to $130.6 million compared to $106.5 million last year.
Domestic sales increased 2.9 percent to $973.0 million compared to $945.1 million last year.
International sales increased 2.1 percent to $441.4 million compared to $432.2 million last year.
“There are several aspects of our fourth quarter performance that we believe underscore the health and relevancy of the UGG brand,” stated Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. “We experienced strong sales for the UGG brand on our eCommerce websites while at the same time it was widely reported that “UGG” was one of the most searched terms on the internet during the holiday season. Our fourth quarter retail store performance improved versus third quarter trends, while at the same time, weekly sell-through in our domestic wholesale channel accelerated as the fourth quarter progressed culminating in a period of robust full-price selling in late December 2012. While cancellations were higher as a result of the late start to the season, we believe the improved trends we witnessed as temperatures got colder helped our customer account base with improved inventory levels versus a year ago. In the U.K., wholesale sales grew double digits as better than expected sell-through resulted in a meaningful level of reorders during the quarter. Lastly, we are pleased with the performance of the Sanuk brand as demonstrated by double digit sales growth in the fourth quarter.”
Division Summary
UGG Brand
UGG brand net sales for the fourth quarter increased 2.9 percent to $584.8 million compared to $568.5 million for the same period last year. The increase in sales was driven by higher sales from new retail store openings and an increase in global eCommerce sales, partially offset by lower domestic and international wholesale sales and a decline in same store sales. For the full year, UGG brand net sales decreased 1.5 percent to $1.184 billion compared to $1.202 billion last year.
Sanuk Brand
Sanuk brand net sales for the fourth quarter increased 39.2 percent to $15.3 million compared to $11.0 million for the same period last year. The increase in sales was primarily attributable to higher domestic wholesale and eCommerce sales. Sanuk brand net sales were $94.0 million for the fiscal year ending December 31, 2012 and were $26.6 million for the six months commencing on July 1, 2011, the acquisition date, and ending December 31, 2011.
Teva Brand
Teva brand net sales for the fourth quarter decreased 29.5 percent to $13.7 million compared to $19.4 million for the same period last year. The sales decline was driven primarily by a decrease in international distributor sales. For the full year, Teva brand sales decreased 7.4 percent to $115.5 million compared to $124.8 million last year.
Other Brands
Combined net sales of the Company’s other brands decreased 29.6 percent to $3.5 million for the fourth quarter compared to $5.0 million for the same period last year. The decrease in sales was primarily attributable to the impact of phasing out the Simple® brand, which we ceased distributing at the end of 2011. For the full year, combined net sales of the Company’s other brands decreased 11.4 percent to $21.3 million compared to $24.1 million last year. Excluding the impact of the Simple brand, combined net sales of the Company’s other brands increased 43.2 percent to $3.5 million for the fourth quarter compared to $2.5 million for the same period last year and full year combined net sales increased 69.4 percent to $21.2 million.
Retail Stores
Sales for the global retail store business, which are included in the brand sales numbers above, increased 37.1 percent to $135.5 million for the fourth quarter compared to $98.8 million for the same period last year. This increase was driven by 30 new stores opened after the fourth quarter of 2011, partially offset by a same store sales decrease of 3.4 percent for the thirteen weeks ending December 30, 2012 compared to the thirteen weeks ending January 1, 2012. For the full year, sales for the retail store business increased 30.1 percent to $246.0 million compared to $189.0 million last year.
eCommerce
Sales for the global eCommerce business, which are included in the brand sales numbers above, increased 30.6 percent to $87.6 million for the fourth quarter compared to $67.1 million for the same period last year. The sales increase was driven primarily by strong domestic and international sales for the UGG brand, increased domestic sales of the Sanuk brand, plus the addition of new international eCommerce websites. For the full year, sales for the eCommerce business increased 22.6 percent to $130.6 million compared to $106.5 million last year.
Stock Repurchase Program
During the fourth quarter of 2012, the Company repurchased approximately 932,000 shares of its common stock, at an average price per share of $38.64, for a total of $36.0 million under its stock repurchase program. This brings the Company’s total stock repurchases over the past year to $220.7 million. As of December 31, 2012, the Company had $79.3 million authorized repurchase funds remaining under its $200.0 million stock repurchase program announced in July 2012. Depending on market conditions and other factors, such repurchases may be commenced or suspended at any time without prior notice.
Balance Sheet
At December 31, 2012, cash and cash equivalents were $110.2 million compared to $263.6 million at December 31, 2011. The Company had $33.0 million in outstanding borrowings under its credit facility at December 31, 2012 and no outstanding borrowings at December 31, 2011. The decrease in cash and cash equivalents and the increase in outstanding borrowings are primarily attributable to $220.7 million of cash payments for stock repurchases and $61.6 million of cash expenditures primarily related to retail expansion and the Company’s new headquarters facility, offset in part by cash provided by operations.
Inventories at December 31, 2012 increased 18.5 percent to $300.2 million from $253.3 million at December 31, 2011. By brand, UGG inventory increased $46.5 million to $248.3 million at December 31, 2012, Teva inventory decreased $1.4 million to $27.8 million at December 31, 2012, Sanuk inventory decreased $1.6 million to $14.5 million at December 31, 2012, and the other brands’ inventory increased $3.4 million to $9.6 million at December 31, 2012.
Full-Year 2013 Outlook
Based upon current visibility, the Company expects full year revenues to increase approximately 7 percent over 2012 levels.
The Company expects full year diluted earnings per share to increase approximately 5 percent over 2012 levels. This guidance assumes a gross profit margin of approximately 46.5 percent and an operating margin of approximately 12.5 percent.
The Company expects full year UGG brand revenues to increase approximately 4 percent over 2012 levels.
The Company expects full year Teva brand revenues to increase approximately 6 percent over 2012 levels.
The Company expects full year Sanuk brand revenues to increase approximately 15 percent over 2012 levels.
Combined full year net sales of the Company’s other brands are expected to be approximately $40 million.
Fiscal 2013 guidance also assumes that the Company’s effective tax rate will be approximately 32 percent.
First Quarter Outlook
The Company currently expects first quarter 2013 revenues to remain flat as compared to first quarter 2012 levels, and expects to report a first quarter 2013 diluted loss per share of approximately $(0.12) compared to a diluted earnings per share of $0.20 reported in the first quarter of 2012.
As a reminder, a significant amount of our operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter. This includes the costs associated with the 24 new stores that were not open until the second half of 2012. Therefore, we expect our earnings to decline in the first half of 2013 as compared to the first half of 2012, which are typically our lowest volume sales quarters, and increase over 2012 in the back half of the year.
Martinez concluded, “We exited a very challenging year with valuable insights that we believe will serve the Company well in 2013 and beyond. We’ve made modifications to the UGG brand footwear collections to broaden accessibility, reduce exposure to sheepskin price fluctuations, and better bridge the summer and holiday selling seasons. We’ve adjusted receipts and reduced future purchase commitments as we continue to work diligently to better align inventory and sales growth. At the same time, we’re making strategic investments that we believe are integral to our long-term success. These include expanding our global retail footprint, adding key personnel to our Asian subsidiaries, and enhancing our sales and marketing programs. We believe continued focus on the success of the Sanuk brand in 2013 will help improve overall margins. As always, creating shareholder value remains our top priority and we believe the combination of our growth strategies and recent share repurchases will yield positive returns.”
( Source SortsOneSource )
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