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Sanuk's parent company Deckers reports Q1 increase

 

 

Industry Updates

Sanuk brand reports 0.8% decrease while Deckers is up

Surfersvillage Global Surf News, 28 April, 2014 - Deckers Outdoor Corporation announced financial results for the three month transition period ended March 31, 2014. Please note the Company recently changed its fiscal year from December 31 to March 31, and, as a result, throughout this news update, we refer to the three month period ended March 31, 2014 as the transition period.

Three Month Transition Period 2014 Review

Net sales increased 11.7% to $294.7 million compared to $263.8 million for the same period last year. Gross margin improved 210 basis points to 48.9% compared to 46.8% for the same period last year.

Diluted loss per share was $(0.08) compared to an earnings per share of $0.03 for the same period last year.

UGGâ brand sales increased 15.8% to $197.6 million compared to $170.6 million for the same period last year.

Tevaâ brand sales decreased 9.2% to $46.8 million compared to $51.6 million for the same period last year.

Sanukâ brand sales decreased 0.8% to $30.7 million compared to $30.9 million for the same period last year.

Direct-to-Consumer comparable sales, which include worldwide retail same store sales and worldwide comparable E-Commerce sales, increased 16.9% over the same period last year.

Retail sales increased 26.1% to $80.1 million compared to $63.6 million for the same period last year; same store sales increased 4.0% for the thirteen weeks ended March 30, 2014 compared to the thirteen weeks ended March 31, 2013.

E-Commerce sales increased 45.0% to $38.6 million compared to $26.6 million for the same period last year. Domestic sales increased 8.5% to $198.3 million compared to $182.7 million for the same period last year.

International sales increased 18.9% to $96.4 million compared to $81.1 million for the same period last year.

“The strength of our business early in the new calendar year underscores the power of our brand portfolio and the successful execution of our consumer centric growth strategy,” commented Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors.

“We believe that our diversified spring product offerings from the UGG, Teva, Sanuk and HOKA brands are resonating with a broader global audience. At the same time, we believe that our enhanced Omni-Channel capabilities are helping fuel increased demand across our wholesale and Direct-to-Consumer distribution channels."

"Our current momentum combined with our strong fall order book give us a heightened degree of optimism about our future prospects. We are confident we are making the right investments in our brands and operating platform to drive sustainable sales and earnings growth over the long-term.”

Division Summary

UGG brand net sales for the transition period increased 15.8% to $197.6 million compared to $170.6 million for the same period last year. The increase in sales was driven by sales gains across all primary channels, including an increase in global E-Commerce sales, the sales contribution from new retail store openings and an increase in same store sales, and higher domestic wholesale sales.

Teva brand net sales for the transition period decreased 9.2% to $46.8 million compared to $51.6 million for the same period last year. The decrease in sales was primarily attributable to lower domestic wholesale sales.

Sanuk brand net sales for the transition period decreased 0.8% to $30.7 million compared to $30.9 million for the same period last year. The decrease in sales was primarily attributable to lower international distributor sales, partially offset by an increase in domestic wholesale, retail and E-Commerce sales.

Combined net sales of the Company’s other brands increased 84.3% to $19.6 million for the transition period compared to $10.6 million for the same period last year. The increase was primarily attributable to a $8.2 million increase in sales for the HOKA ONE ONEâ brand compared to the same period last year.

Sales for the global retail store business, which are included in the brand sales numbers above, increased 26.1% to $80.1 million for the transition period compared to $63.6 million for the same period last year. This increase was driven by 42 new stores opened after the first quarter of 2013 and by a same store sales increase of 4.0% for the thirteen weeks ended March 30, 2014 compared to the thirteen weeks ended March 31, 2013.

Sales for the global E-Commerce business, which are included in the brand sales numbers above, increased 45.0% to $38.6 million for the transition period compared to $26.6 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 and Teva brands, plus the domestic launch of the HOKA ONE ONE brand website and the addition of new international E-Commerce websites.

Balance Sheet

At March 31, 2014, cash and cash equivalents were $245.1 million compared to $64.6 million at March 31, 2013. The Company had $6.7 million in outstanding borrowings under its credit facility at March 31, 2014 compared to $10.0 million at March 31, 2013.

The increase in cash and cash equivalents and the decrease in outstanding borrowings are primarily attributable to cash provided by operations and improved inventories, partially offset by $85.4 million of cash payments for capital assets primarily related to retail expansion, the Company’s new headquarters facility and the Moreno Valley distribution center.

Inventories at March 31, 2014 decreased 17.7% to $211.5 million from $257.1 million at March 31, 2013. By brand, UGG inventory decreased 25.6% to $150.0 million at March 31, 2014, Teva inventory increased 9.1% to $34.2 million at March 31, 2014, Sanuk inventory decreased 12.0% to $13.3 million at March 31, 2014, and the other brands’ inventory increased 53.3% to $14.0 million at March 31, 2014.

Zohar Ziv Retirement

The Company today announced that Zohar Ziv will retire as Chief Operating Officer after over 8 years with the company. In order to facilitate a smooth transition which is expected to be concluded by the end of the year, Mr. Ziv is expected to stay until his successor is named. The Company is commencing a search for his successor.

“I want to thank Zohar for his many years of service to Deckers,” commented Mr. Martinez. “His contributions to the development of our international operations, world class supply chain and infrastructure are numerous. More importantly, his influence on shaping our strong corporate culture is immeasurable."

"Personally, he has been a tremendous friend and trusted advisor since he joined the company eight years ago. I look forward to maintaining our close ties and continuing to benefit from his sage guidance.”

Mr. Ziv said, “My time at Deckers has been the most rewarding period of my career. I am extremely proud of the terrific people I’ve worked with and everything we’ve accomplished over the past several years. I’m very confident that the company is well positioned for continued success. I look forward to watching the company continue its expansion as I pursue personal interests and spend more time with my family.”

Transfer of Listing to the New York Stock Exchange

The Company is announcing that it will be transferring the listing of its common stock to the New York Stock Exchange from the NASDAQ Global Select Market. After careful consideration and deliberation, the Board of Directors of the Company determined that the proposed transfer of Deckers’ common stock listing to the NYSE would be in the best interests of its stockholders, customers and partners.

The Company expects that its common stock will begin trading on the NYSE on or about May 5, 2014, under its current ticker symbol, “DECK”. The Company will continue to trade on NASDAQ under the symbol “DECK” until the transfer is completed.

Full Fiscal Year 2015 Outlook for the Twelve Month Period Ending March 31, 2015

Based upon current visibility, the Company expects fiscal year 2015 revenues to increase approximately 13.0% over the twelve month period ended March 31, 2014.

The Company expects fiscal year 2015 diluted earnings per share to increase approximately 13.5% over the twelve month period ended March 31, 2014. This guidance assumes a gross profit margin of approximately 49.4% and an operating margin of approximately 13.0%.

The Company expects fiscal year 2015 SG&A expenses as a percentage of sales to be approximately 36.4%. Among other items, these expenses include increased marketing and supply chain costs, investments in IT infrastructure, expenses related to management reorganization, and operating costs associated with opening new stores in 2013 and 2014.

The Company expects fiscal year 2015 UGG brand revenues to increase approximately 11% over the twelve month period ended March 31, 2014.

The Company expects fiscal year 2015 Teva brand revenues to increase approximately 11% over the twelve month period ended March 31, 2014.

The Company expects fiscal year 2015 Sanuk brand revenues to increase approximately 15% over the twelve month period ended March 31, 2014.

Combined fiscal year 2015 net sales of the Company’s other brands are expected to be approximately $82.0 million compared to $48.6 million for the twelve month period ended March 31, 2014.

Fiscal year 2015 guidance also assumes that the Company’s effective tax rate will be approximately 29.0%.

First Quarter Fiscal Year 2015 Outlook for the Three Month Period Ending June 30, 2014

The Company currently expects first quarter 2015 revenues to increase approximately 12.0% over the three month period ended June 30, 2013 calendar year levels, and expects to report a first quarter fiscal year 2015 diluted loss per share of approximately $(1.33) compared to a diluted loss per share of $(0.85) reported for the three month period ended June 30, 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 calendar 2014 as compared to the first half of 2013, which are typically our lowest volume sales quarters. We expect the majority of our earnings increase in fiscal year 2015 to come in the second and third quarters – the three month periods ending September 30, 2014 and December 31, 2014 with the breakdown between those two periods to be similar to last year.

Author: 
The Editors
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