Press Release:
GOLETA, Calif.–(BUSINESS WIRE)–Deckers Outdoor Corporation (NASDAQGS: DECK – News) today announced financial results for the second quarter ended June 30,2010.
Second Quarter Highlights
Net sales increased 33.7% to $137.1 million versus $102.5 million last year.
Gross margin improved 450 basis points to 44.3% versus 39.8% a year ago.
Diluted EPS increased 155.6% to $0.23 compared to non-GAAP diluted EPS of $0.09 a year ago, which excluded a pre-tax non-cash impairment of $1.0 million on intangible assets, or $0.02 per diluted share.
The Company completed a three-for-one stock split, in the form of a stock dividend paid on July 2, 2010. All share and per share data in this release and accompanying tables have been adjusted to reflect the impact of such split for all periods presented.
UGG® brand sales increased 34.6% to $100.2 million versus $74.4 million last year.
Teva® brand sales increased 38.4% to $31.2 million compared to $22.6 million last year.
International sales increased 54.8% to $71.8 million versus $46.4 million a year ago.
Retail sales increased 63.1% to $10.0 million compared to $6.1 million last year; same store sales rose 19.2%.
Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: “Our business continued to perform very well during the second quarter with sales, margins and earnings all coming in above plan. We were particularly pleased with the pace of sales for the UGG brand overseas. After a solid spring season, we began shipping the fall line to distributors and we are confident that our diversified product offering is gaining important traction in international markets.
“At the same time, the strong momentum Teva experienced to start the year carried forward into the second quarter, especially in our domestic wholesale channel as the brand continues to benefit from a more complete collection of open and closed toe footwear and improved shelf space. The performance of our retail stores was also very encouraging with the growing year round demand for the UGG brand driving higher sell-through rates. We are excited with exceeding our financial objectives for the first six months of the year, and as we pass the half-way mark of 2010, we are confident we can continue to drive earnings growth as our sales base increases.”
Division Summary
UGG® Brand
UGG brand net sales for the second quarter increased 34.6% to $100.2 million compared to $74.4 million for the same period last year. The sales gain was primarily attributable to an increase in global shipments of fall product versus the same period a year ago, combined with solid sales of the spring line at company owned retail stores.
Teva® Brand
Teva brand net sales increased 38.4% to $31.2 million for the second quarter compared to $22.6 million for the same period last year. The increase in sales was driven by higher reorders of the expanded spring line of open and closed toe footwear in the second quarter compared with the year ago period, as well as from the Company assuming control of direct distribution in the Benelux region.
Other Brands
Combined net sales of the Company’s other brands were $5.6 million for both the second quarter of 2010 and 2009.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, were $5.2 million for the second quarter of 2010 compared to $5.3 million for the same period last year.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 63.1% to $10.0 million for the second quarter compared to $6.1 million for the same period last year, driven by five new stores and a same store sales increase of 19.2% for those stores that were open for the full three month periods ended June 30, 2009 and 2010.
Full-Year 2010 Outlook
Based on better than expected second quarter results combined with higher projected sales for the UGG and Teva brands, the Company is raising its full-year outlook.
The Company now expects its full-year revenue to increase approximately 14% over 2009 levels, compared to previous guidance of approximately 13%.
The Company now expects its full-year diluted earnings per share to increase approximately 16% over the non-GAAP diluted EPS of $2.98 in 2009, compared to previous guidance of approximately 11%. This guidance assumes a gross profit margin of approximately 49% and SG&A as a percentage of sales of approximately 26%. The non-GAAP diluted EPS of $2.98 in 2009 has been adjusted to reflect the three-for-one stock split, in the form of a stock dividend, that took effect in July 2010, and excluded pre-tax non-cash impairment charges of $1.0 million, or $0.02 per diluted share, as discussed in the related earnings release.
Fiscal 2010 guidance includes estimates of incremental expenses and a shift in sales of approximately $8.0 million, or approximately $0.13 per diluted share, associated with the transition to wholesale sales for the Teva brand in the Benelux region and France, and incremental expenses and a shift in sales from 2010 to 2011 associated with the upcoming transitions for the UGG and Simple brands in January 2011 to wholesale sales in the United Kingdom, the Benelux region and France. Fiscal 2010 guidance also assumes an effective tax rate of 36.5% compared to 36.2% in 2009 due to the impact on international income from the aforementioned incremental expenses and shift in profit.
Third and Fourth Quarter Outlook
The Company currently expects third quarter 2010 revenue and diluted EPS to increase approximately 15% and 4%, respectively, over 2009 levels. This guidance assumes a gross profit margin of approximately 46% and SG&A as a percentage of sales of approximately 25%.
The Company currently expects fourth quarter 2010 revenue and diluted EPS to increase approximately 8% and 8%, respectively, over 2009 levels. This guidance assumes a gross profit margin of approximately 52% and SG&A as a percentage of sales of approximately 21%.
The Company’s conference call to review second quarter fiscal 2010 results will be broadcast live over the internet today, Thursday, July 22, 2010 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com and www.earnings.com.
Deckers Outdoor Corporation strives to be a premier lifestyle marketer that builds niche brands into global market leaders by designing and marketing innovative, functional and fashion-oriented footwear developed for both high performance outdoor activities and everyday casual lifestyle use. Teva®, Simple® Shoes, UGG® Australia, TSUBO®, and Ahnu® are registered trademarks of Deckers Outdoor Corporation.
