Sanuk Q1 Revenue Rises 14%

Deckers Brands (NYSE: DECK), a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories, today announced financial results for the first fiscal quarter ended June 30, 2021. The Company also provided an update to its financial outlook for the full fiscal year ending March 31, 2022.

• First Quarter Fiscal 2022 Revenue Increased 78.2% to $504.7 Million
• First Quarter Fiscal 2022 Earnings Per Share Increased to $1.71
• Full Year Fiscal 2022 Outlook Raised: Earnings Per Share Now in the Range of $14.45 to $15.10

“Our portfolio of brands delivered a strong start to fiscal 2022, which propelled Deckers to its most profitable first quarter ever,” said Dave Powers, President and Chief Executive Officer. “The growing influence of HOKA, increasing year-round appeal of UGG, and continuing strength of Teva are driving progress across strategic priorities and delivering a more balanced business. While macro-economic headwinds persist throughout the supply chain, we are confident in the consumer demand for our brands and the resilience of our global omni-channel organization, and we remain dedicated to the foundational, long-term strategies driving Deckers’ success.”

First Quarter Fiscal 2022 Financial Review 

• Net sales increased 78.2% to $504.7 million compared to $283.2 million for the same period last year. On a constant currency basis, net sales increased 76.1%.
• Gross marginwas 51.6% compared to 50.3% for the same period last year.
• SG&A expenses were $198.7 million compared to $150.3 million for the same period last year.
• Operating incomewas $61.8 million compared to a loss of $7.7 million for the same period last year.
• Income tax expensewas $13.5 million compared to a benefit of $0.1 million for the same period last year.
• Diluted earnings per sharewas $1.71 compared to basic loss per share of $0.28 for the same period last year.

Brand Summary

• UGG® brand net sales for the first quarter increased 70.8% to $213.0 million compared to $124.7 million for the same period last year.
• HOKA ONE ONE® brand net sales for the first quarter increased 95.5% to $213.1 million compared to $109.0 million for the same period last year.
• Teva® brand net sales for the first quarter increased 65.9% to $58.5 million compared to $35.2 million for the same period last year.
• Sanuk® brand net sales for the first quarter increased 13.7% to $15.0 million compared to $13.2 million for the same period last year.
• Other brands, primarily composed of Koolaburra®, net sales for the first quarter increased 435.9% to $5.0 million compared to $0.9 million for the same period last year.

Channel Summary (included in the brand net sales numbers above) 

• Wholesale net sales for the first quarter increased 140.2% to $344.3 million compared to $143.3 million for the same period last year.
• Direct-to-Consumer (DTC) net sales for the first quarter increased 14.7% to $160.4 million compared to $139.8 million for the same period last year.

Geographic Summary (included in the brand and channel net sales numbers above) 

• Domestic net sales for the first quarter increased 82.3% to $336.1 million compared to $184.3 million for the same period last year.
• International net sales for the first quarter increased 70.5% to $168.6 million compared to $98.9 million for the same period last year.

Balance Sheet (June 30, 2021 as compared to June 30, 2020)

• Cash and cash equivalents were $956.7 million compared to $661.9 million.
• Inventories were $457.7 million compared to $435.0 million.
• There were no outstanding borrowings compared to $30.7 million.

Stock Repurchase Program

During the first quarter, the Company repurchased approximately 249 thousand shares of its common stock for a total of $82.2 million at an average price of $329.55. As of June 30, 2021, the Company had $728.5 million remaining under its stock repurchase authorization.

Full Year Fiscal 2022 Outlook for the Twelve Month Period Ending March 31, 2022

• Net sales are now expected to be in the range of $3.010 billion to $3.060 billion.
• Gross margin is now expected to be slightly below 53.0%.
• SG&A expenses as a percentage of sales are now projected to be approximately 35.0%.
• Operating margin is still expected to be in the range of 17.5% to 18.0%.
• Effective tax rate is still expected to be approximately 23.0%.
• Diluted earnings per share is now expected to be in the range of $14.45 to $15.10.
• The earnings per share guidance does not assume any impact from additional share repurchases.

COVID-19 Update

The Company continues to assess and modify its operations in response to the COVID-19 pandemic. The Company will continue to review expert agency guidelines, as well as information from health officials and local authorities, to determine the appropriate scope of operations and allocation of resources necessary to navigate this dynamic and unprecedented environment.

Supply Chain
The Company maintains a network of strategic sourcing partners which includes material vendors and third-party manufacturers. The Company is actively experiencing disruption and delays within its sourcing network related to COVID-19 outbreaks in various countries. The Company is also experiencing capacity constraints and cost pressures related to container shortages and port congestion that are causing shipping delays and may lead to higher usage of air freight in future periods. The full effect of disruptions and delays are not yet known, but the Company will continue to monitor the situation closely and is actively working to mitigate these pressures where possible.

The Company’s distribution center in Moreno Valley, California, as well as other third-party distribution facilities that the Company leverages to service its operations, are currently in operation and supporting ongoing logistics. However, these facilities have been operating and may continue to operate at limited capacity due to the enhanced health and safety measures that are in place. The Company anticipates operational challenges related to capacity constraints, as well as increased costs associated with warehouse employee safety and payroll expense. The Company’s third-party logistics providers are also experiencing capacity constraints, which are having an adverse effect on our operations.

Retail Stores
Approximately 66% of the Company’s global stores were open for the entire first quarter, which compares to approximately 20% in the prior year first quarter. Given the ongoing and uncertain pandemic conditions, which include meaningful local and regional differences in expert agency guidance and local authority mandates, the Company anticipates that temporary retail store closures and operating limitations in certain geographies may continue for at least a portion of the second quarter of fiscal year 2022 and potentially beyond.

Non-GAAP Financial Measures

In certain instances the Company may present non-GAAP financial measures, including constant currency, to provide information that may assist investors in understanding its financial results and assessing its prospects for future performance. The Company believes these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to, and may not be indicative of, its core operating results.

The non-GAAP financial measures presented by the Company may not necessarily be comparable to similarly titled measures of other companies and may not be appropriate measures for comparing the performance of other companies relative to Deckers. For example, in order to calculate constant currency information, the Company calculates the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period, excluding the effects of foreign currency exchange rate hedges and remeasurements in the condensed consolidated financial statements. Further, the Company reports comparable DTC sales on a constant currency basis for DTC operations that were open throughout the current and prior reporting periods, and may adjust prior reporting periods to conform to current year accounting policies. These non-GAAP financial measures are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. To the extent the Company utilizes such non-GAAP financial measures in the future, it expects to calculate them using a consistent method from period to period.

About Deckers Brands

Deckers Brands is a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high-performance activities. The Company’s portfolio of brands includes UGG®, Koolaburra®, HOKA One One®, Teva®, and Sanuk®. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has over 40 years of history building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally. For more information, please visit www.deckers.com.