Press Release:
Deckers Outdoor Corporation Reports Record First Quarter 2011 Financial Results
Company Reports First Quarter Sales Increased 31.4% to a Record $204.9 Million
First Quarter Diluted EPS Increased 6.5% to a Record $0.49 on a Post-Split Basis, Compared to $0.46 a Year Ago on a Post-Split Basis
Company Raises 2011 Sales and Earnings Outlook
GOLETA, Calif.–(BUSINESS WIRE)– Deckers Outdoor Corporation (NASDAQGS:DECK – News) today announced financial results for the first quarter ended March 31, 2011.
First Quarter Highlights
Net sales increased 31.4% to $204.9 million compared to $155.9 million last year.
Diluted EPS increased 6.5% to $0.49 compared to $0.46 last year. 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 42.2% to $148.4 million compared to $104.4 million last year.
Teva® brand sales increased 16.8% to $50.4 million from $43.2 million last year.
Domestic sales increased 26.6% to $148.1 million from $117.0 million last year.
International sales increased 45.8% to $56.7 million compared to $38.9 million last year.
Retail sales increased 52.8% to $35.4 million compared to $23.1 million last year.
eCommerce sales increased 27.3% to $23.5 million compared to $18.4 million last year.
“We delivered a good start to the year,” said Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. “We believe that our strategies to diversify our merchandise assortments and extend the global reach of our brands are being executed successfully. The favorable response to the UGG brand’s spring line of fashion sandals, sneakers, slippers and boots drove gains in our domestic wholesale, consumer direct, and international distribution channels. We achieved solid results with the Teva brand as well, with our new collection of closed toe footwear and expanded sandal offerings resonating with consumers. The first quarter was also highlighted by the commencement of our conversion to wholesale operations in our largest international market, the United Kingdom, and expansion of our existing business in our second largest market, Benelux. For the most part, these transitions have gone smoothly, and in addition to the immediate financial benefits, we are optimistic about the long-term growth opportunities these conversions will create for our Company. Furthermore, we are also optimistic that the brand investments we are currently making will also fuel domestic and international market share gains in the years ahead.”
Division Summary
UGG® Brand
UGG brand net sales for the first quarter increased 42.2% to $148.4 million compared to $104.4 million for the same period last year. The sales increase was primarily attributable to the conversion to a wholesale business model in the United Kingdom, Benelux and France, strong sales of the spring line at company-owned retail stores, and increased shipments of spring product to domestic wholesale accounts.
Teva® Brand
Teva brand net sales for the first quarter increased 16.8% to $50.4 million compared to $43.2 million for the same period last year. The sales growth was primarily the result of increased domestic demand for the expanded spring line of open and closed toe footwear, as well as from the conversion to a wholesale business model in the United Kingdom.
Other Brands
Combined net sales of the Company’s other brands decreased 28.3% to $6.0 million for the first quarter compared to $8.4 million for the same period last year. The decline in sales was primarily the result of lower sell-in of the Simple® and Ahnu® brands during the first quarter compared with the same period last year.
See Page 2 for more details
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 52.8% to $35.4 million for the first quarter compared to $23.1 million for the same period last year. This increase was driven by nine new stores and a same store sales increase of 2.6% for those stores that were open for the full three-month periods ended March 31, 2010 and 2011.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 27.3% to $23.5 million for the first quarter compared to $18.4 million for the same period last year. This increase was primarily attributable to higher demand for the UGG brand driven by new product introductions and enhanced marketing efforts combined with the launch of the UGG brand’s United Kingdom website.
Balance Sheet
At March 31, 2011, cash and cash equivalents increased 22.5% to $437.9 million compared to $357.3 million at March 31, 2010. Inventories at March 31, 2011 increased 55.6% to $107.1 million from $68.8 million at March 31, 2010. By brand, UGG inventory increased $24.5 million to $68.9 million at March 31, 2011, Teva inventory increased $12.0 million to $30.7 million at March 31, 2011, and other brands inventory increased $1.9 million to $7.5 million at March 31, 2011. The increase in inventories as of March 31, 2011 was primarily attributable to a larger spring 2011 assortment for the UGG brand, the growth in spring orders for the UGG and Teva brands, the warehousing of spring 2011 inventory supporting our continued conversion from an international distributor model to an international wholesale model, and increased retail stores.
Full-Year 2011 Outlook
Based on better than expected first quarter results the Company is raising its full-year outlook. The Company now expects its full-year revenue to increase approximately 21% over 2010, compared to previous guidance of approximately 20%.
The Company now expects full year diluted earnings per share to increase approximately 13% over 2010, compared to previous guidance of approximately 10%. This guidance assumes a gross profit margin of approximately 51% and SG&A as a percentage of sales of approximately 29%.
Fiscal 2011 guidance includes estimates of approximately $29 million, or $0.50 per diluted share, pertaining to incremental investments and expenses in 2011 associated with new marketing and advertising programs, increased legal spend related to intellectual property rights protection, and expenses of approximately $8 million, which is included in the $29 million, related to the transition to a wholesale business model in the United Kingdom, Benelux and France.
Second Quarter Outlook
The Company currently expects second quarter 2011 revenue to increase approximately 4% over 2010 levels. It is important to note that due to the conversion to a wholesale model for certain brands in the United Kingdom and the UGG and Simple brands in Benelux approximately $50 million in projected sales on a distributor basis that normally would have shipped during the second quarter under the previous distributor business model will now ship on a higher wholesale basis in the third quarter of 2011.
The Company currently expects to report a second quarter 2011 diluted loss per share of approximately $(0.25) compared to second quarter 2010 diluted EPS of $0.23.
In addition to the impact from the aforementioned revenue shift, second quarter guidance includes estimates of approximately $7.5 million, or $0.13 per diluted share, pertaining to the investments and expenses noted under the full year outlook above.
Second quarter guidance also includes higher levels of fixed overhead for new retail stores, international operating expenses for the Company’s direct subsidiaries in the United Kingdom, Benelux and France and other general and administrative and international infrastructure costs. As a reminder, a significant amount of the Company’s operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter, resulting in the greatest impact on earnings in the lowest volume sales quarter, which has historically been the second quarter.
The Company’s conference call to review first quarter 2011 results will be broadcast live over the internet today, Thursday, April 28, 2011 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com. You can access the broadcast by clicking on the “Investors” tab and then clicking on the microphone icon on the right side of the screen. The broadcast will be available for at least 30 days following the conference call. You can also access the broadcast at 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®, Ahnu® and MOZO® are registered trademarks of Deckers Outdoor Corporation.
