Deckers Outdoor's Q4 Profits Soar

Deckers Outdoor Corp. reported sales in the fourth quarter increased 19.2 percent to a record $736.0 million.

Among its larger brands, sales grew 18.1 percent at Ugg, 45.2 percent at Sanuk, and 13.6 percent at Teva. Net income jumped 43.7 percent to $140.0 million, or $4.04 a share.

Fourth Quarter Review

• Net sales increased 19.2 percent to a record $736.0 million compared to $617.3 million for the same period last year.
• Gross margin improved 480 basis points to 51.1 percent compared to 46.3 percent for the same period last year.
• Diluted earnings per share increased 45.8 percent to a record $4.04 compared to $2.77 for the same period last year.
• UGG® brand sales increased 18.1 percent to $690.9 million compared to $584.8 million for the same period last year.
• Sanuk® brand sales increased 45.2 percent to $22.2 million compared to $15.3 million for the same period last year.
• Teva® brand sales increased 13.6 percent to $15.5 million compared to $13.7 million for the same period last year.
• Direct-to-Consumer comparable sales, which include worldwide retail same store sales and worldwide E-Commerce sales, increased 19.0 percent.
• Retail sales increased 31.4 percent to $178.0 million compared to $135.5 million for the same period last year; same store sales increased 6.1 percent for the thirteen weeks ending December 29, 2013 compared to the thirteen weeks ending December 30, 2012.  
• E-Commerce sales increased 33.9 percent to $117.3 million compared to $87.6 million for the same period last year.
• Domestic sales increased 14.3 percent to $510.7 million compared to $446.7 million for the same period last year.
• International sales increased 32.1 percent to $225.3 million compared to $170.6 million for the same period last year.

Fiscal 2013 Review

• Net sales increased 10.1 percent to a record $1.557 billion compared to $1.414 billion last year.
• Gross margin improved 260 basis points to 47.3 percent compared to 44.7 percent last year.
• Diluted earnings per share increased 21.2 percent to $4.18 compared to $3.45 last year.
• UGG brand sales increased 9.7 percent to $1.299 billion compared to $1.184 billion last year.
• Sanuk brand sales increased 8.2 percent to $101.7 million compared to $94.0 million last year.
• Teva brand sales increased 0.8 percent to $116.4 million compared to $115.5 million last year.
• Direct-to-Consumer comparable sales, which include worldwide retail same store sales and worldwide E-Commerce sales, increased 16.0 percent.
• Retail sales increased 32.8 percent to $326.7 million compared to $246.0 million last year; same store sales increased 2.8 percent for the 52 weeks ending December 29, 2013 compared to the 52 weeks ending December 30, 2012.  
• E-Commerce sales increased 29.8 percent to $169.5 million compared to $130.6 million last year.
• Domestic sales increased 7.1 percent to $1.042 billion compared to $973.0 million last year.
• International sales increased 16.5 percent to $514.3 million compared to $441.4 million last year.

"Our strong fourth quarter performance capped off a year of solid strategic progress," commented Angel Martinez, President, chief executive officer and chair of the Board of directors. "We believe that the concerted investments we are making in our brands, distribution platforms and infrastructure are leading to improved financial and operating results as we expand our direct-to-consumer footprint and elevate our Omni-Channel resources.  Our sales and earnings growth were driven by strong full price selling throughout each of our distribution channels and geographic regions.  The power of the UGG brand was on full display during the recent holiday season as consumers responded very positively to our most complete product line ever.  Looking ahead, we expect to be well positioned to execute our consumer centric growth strategy with compelling new product introductions, engaging store experiences and a dynamic online offering.  We are excited about the direction the company is headed and we are committed to capitalizing on the many expansion opportunities that we believe are in front of us."

Division Summary

UGG Brand

UGG brand net sales for the fourth quarter increased 18.1 percent to $690.9 million compared to $584.8 million for the same period last year.  The increase in sales was driven by sales gains across all primary channels, including the sales contribution from new retail store openings and an increase in same store sales, an increase in global E-Commerce sales, and higher domestic and international wholesale sales.  For the full year, UGG brand net sales increased 9.7 percent to $1.299 billion compared to $1.184 billion last year.

Sanuk Brand

Sanuk brand net sales for the fourth quarter increased 45.2 percent to $22.2 million compared to $15.3 million for the same period last year.  The increase in sales was primarily attributable to an increase in international distributor sales as well as higher domestic wholesale sales.  For the full year, Sanuk brand net sales increased 8.2 percent to $101.7 million compared to $94.0 million last year.

Teva Brand

Teva brand net sales for the fourth quarter increased 13.6 percent to $15.5 million compared to $13.7 million for the same period last year.  The increase in sales was driven primarily by higher domestic and international wholesale sales and higher international distributor sales.  For the full year, Teva brand net sales increased 0.8 percent to $116.4 million compared to $115.5 million last year.

Other Brands

Combined net sales of the company's other brands increased 110.1 percent  to $7.4 million for the fourth quarter compared to $3.5 million for the same period last year.  The increase was attributable to the addition of the HOKA ONE ONE® brand and to a 100.0 percent increase in sales for the Ahnu® brand compared to the same period last year.  For the full year, combined net sales of the company's other brands increased 85.8 percent to $39.7 million compared to $21.3 million last year.

Retail Stores

Sales for the global retail store business, which are included in the brand sales numbers above, increased 31.4 percent to $178.0 million for the fourth quarter compared to $135.5 million for the same period last year.  This increase was driven by 40 new stores opened after the fourth quarter of 2012 and by a same store sales increase of 6.1 percent for the thirteen weeks ending December 29, 2013 compared to the thirteen weeks ending December 30, 2012.  For the full year, sales for the retail store business increased 32.8 percent to $326.7 million compared to $246.0 million last year.

E-Commerce

Sales for the global E-Commerce business, which are included in the brand sales numbers above, increased 33.9 percent to $117.3 million for the fourth quarter compared to $87.6 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 E-Commerce websites.  For the full year, sales for the E-Commerce business increased 29.8 percent to $169.5 million compared to $130.6 million last year.

Balance Sheet

At December 31, 2013, cash and cash equivalents were $237.1 million compared to $110.2 million at December 31, 2012.  The company had $9.7 million in outstanding borrowings under its credit facility at December 31, 2013 compared to $33.0 million at December 31, 2012.  The increase in cash and cash equivalents and the decrease in outstanding borrowings are primarily attributable to improved inventories and cash provided by operations, partially offset by $79.8 million of cash payments for capital assets primarily related to retail expansion and the company's new headquarters facility. 

Inventories at December 31, 2013 decreased 13.1 percent to $260.8 million from $300.2 million at December 31, 2012.  By brand, UGG inventory decreased $43.6 million to $204.7 million at December 31, 2013, Teva inventory increased $0.4 million to $28.3 million at December 31, 2013, Sanuk inventory decreased $1.1 million to $13.4 million at December 31, 2013, and the other brands' inventory increased $4.9 million to $14.4 million at December 31, 2013.

Fiscal Year Change

The company's Board of Directors has authorized a change in its fiscal year end to March 31 from December 31.  This change will be effective March 31, 2014.  Based on the seasonality of the business and the timing of the fall pre-book process, the change in fiscal year gives the company greater visibility into projecting revenue growth, planning expenses, and incorporating the results from the holiday season into product, merchandising and marketing initiatives for the upcoming year.  The company will report results for the three-month transition period of January 1, 2014 through March 31, 2014.  The first 12-month fiscal year will run from April 1, 2014 through March 31, 2015.

Full Calendar Year Outlook For the 12-Month Period Ending December 31, 2014

• Based upon current visibility, the company expects full calendar year revenues to increase approximately 10 percent over 2013 levels.
• The company expects full calendar year diluted earnings per share to increase approximately 8 percent over 2013 levels. This guidance assumes a gross profit margin of approximately 49 percent and an operating margin of approximately 13 percent.
• The company expects full calendar year SG&A expenses as a percentage of sales to be approximately 36 percent. Among other items, these expenses include increased marketing costs, investments in IT infrastructure, international supply chain and distribution, expenses related to management reorganization and costs associated with opening 40 new stores in 2013 as well as the addition of new store openings in 2014.
• The company expects full calendar year UGG brand revenues to increase approximately 9 percent over 2013 levels.
• The company expects full calendar year Teva brand revenues to increase approximately 5 percent over 2013 levels.
• The company expects full calendar year Sanuk brand revenues to increase approximately 10 percent over 2013 levels.
• Combined full calendar year net sales of the company's other brands are expected to be approximately $65 million.
• Calendar year 2014 guidance also assumes that the company's effective tax rate will be approximately 29 percent.

First Quarter Outlook

• The company currently expects first calendar quarter 2014 revenues to increase approximately 6 percent over first quarter 2013 levels, and expects to report a first calendar quarter 2014 diluted loss per share of approximately $(0.16) compared to a diluted earnings per share of $0.03 reported in the first quarter of 2013.
• 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 28 new stores that were not open until the second half of 2013. Therefore, we expect our earnings to decline in the first half of 2014 as compared to the first half of 2013, which are typically our lowest volume sales quarters, and increase over 2013 in the back half of the calendar year.

By press release


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