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Deckers Outdoor's Ups Guidance on Strong Q2

posted Jul 23, 2010, 11:46 AM by Bill Kendall

Source:  SportsOneSource Media     Posted: 7/22/2010

Deckers Outdoor Corporation reported second-quarter diluted EPS increased 155.6% to a record 23 cents compared to 9 cents for the same quarter a year earlier. The strong performance, adjusted for a 3-for-1 stock split paid out July 2, prompted the owner of UGG, Teva and other outdoor footwear brands to boost its earnings and sales guidance for the year.

"Our business continued to perform very well during the second quarter with sales, margins and earnings all coming in above plan," said Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors. "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."Net sales increased 33.7% to $137.1 million versus $102.5 million last year, while 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.

Division Summary 

  • 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. DECK now expects its full-year revenue to increase approximately 14% over 2009 levels, compared to previous guidance of approximately 13%.

Full-year diluted earnings per share are expected 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 13 cents 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 
DECK now 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%. 
Fourth quarter 2010 revenue and diluted EPS are expected 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%.
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