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Deckers' Q3 Revenues Climb 21.7%, Raises FY10 Outlook

posted Oct 28, 2010, 6:47 PM by Unknown user

SportsOneSource Media    
 Posted: 10/28/2010

Deckers Outdoor Corp. reported third-quarter revenues increased 21.7% to $277.9 million versus $228.4 million last year. Ugg brand sales increased 20.2% while Teva's jumped 51.7%. Earnings climbed 24.5% to $42.1 million, or $1.07,  from $33.8 million, or 86 cents, a year ago.

Other highlights of the quarter:
  • Gross margin improved 420 basis points to 47.1% versus 42.9% a year ago.
  • UGG brand sales increased 20.2 % to $255.8 million versus $212.8 million last year.
  • Teva brand sales increased 51.7% to $13.7 million compared to $9.0 million a year ago.
  • International sales increased 48.2% to $73.2 million versus $49.4 million last year.
  • Retail sales increased 63.3% to $20.2 million compared to $12.3 million last year; same store sales rose 17.9%.
Angel Martinez, president, chief executive officer and chairman, stated: "The strong performance of our new fall lines helped fuel sales gains across each of our distribution channels and geographic regions compared to the third quarter of last year. We continue to successfully expand the UGG brand's market share by developing more compelling products including boots, casuals and sneakers that target a wider consumer audience. The global response to our fall collection has been very encouraging, with sell-through rates accelerating as we've moved into the fourth quarter. At the same time, the strong momentum the Teva brand experienced during the first half of the year is carrying over into the second half. This was driven by increased shipments of our fall collection, led by an expanded offering of closed toe products coupled with strong in-season demand for our sandal assortment. We are encouraged by the current trends in our business and believe we are well positioned for a very good holiday selling season."

Division Summary

UGG Brand

UGG brand net sales for the third quarter increased 20.2% to $255.8 million compared to $212.8 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, coupled with strong sales of the fall line at company owned retail stores.

Teva Brand

Teva brand net sales increased 51.7% to $13.7 million for the third quarter compared to $9.0 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 third quarter compared with the year ago period, an increase in domestic shipments of the fall line, 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 increased 26.5% to $8.4 million for the third quarter compared to $6.6 million for the same period last year. The increase in sales was driven by an increase in domestic shipments of fall product.

eCommerce

Sales for the eCommerce business, which are included in the brand sales numbers above, increased 3.8% to $8.7 million for the third quarter compared to $8.4 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 63.3% to $20.2 million for the third quarter compared to $12.3 million for the same period last year, driven by eight new stores that opened since September 30, 2009 and a same store sales increase of 17.9% for those stores that were open for the full three month periods ended September 30, 2009 and 2010.

Share Repurchases

During the third quarter, the company repurchased approximately 170,000 shares of its common stock under its stock repurchase program for a total of approximately $7.4 million. As of September 30, 2010, the company had approximately $20 million authorized repurchase funds remaining under its $50 million stock repurchase program announced in June 2009. Depending on market conditions and other factors, such purchases may be commenced or suspended at any time without prior notice.

Full-Year 2010 Outlook
  • Based on better than expected third 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 16% over 2009 levels, compared to previous guidance of approximately 14%.
  • The company now expects its full-year diluted earnings per share to increase approximately 22% over the non-GAAP diluted EPS of $2.98 in 2009, compared to previous guidance of approximately 16%. This guidance assumes a gross profit margin of approximately 49% and SG&A as a percentage of sales of approximately 25%. 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 was distributed 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 a reduction of net income of approximately $8.0 million pre-tax, with a diluted EPS impact of approximately $0.13, resulting from estimates of incremental expenses associated with the continuing 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 expected transitions in January 2011 to wholesale sales for the UGG, Teva and Simple brands in the United Kingdom as well as the UGG and Simple brands in the Benelux region and France. Fiscal 2010 guidance also assumes an effective tax rate of 36.8% compared to 36.2% in 2009 due to the impact on international income from the aforementioned incremental expenses and shift in profit.
Fourth Quarter Outlook

The company reiterated its outlook for both the fourth quarter 2010 revenue and diluted EPS to increase approximately 8% over 2009 levels. This guidance includes incremental expenses and a shift in sales from 2010 to 2011 associated with the upcoming transitions described above and assumes a gross profit margin of approximately 52% and SG&A as a percentage of sales of approximately 21%.





Three-month period ended
Nine-month period ended




September 30,
September 30,




2010
2009
2010
2009










 
Net sales
$277,879
228,414
570,865

465,188
Cost of sales

146,926
130,463
301,262 
267,539
Gross profit

130,953
97,951
269,603

197,649










 
Selling, general and administrative expenses

64,639
44,871
161,252

121,018
Impairment loss

-
-
- 
1,000
Income from operations

66,314
53,080
108,351

75,631










 
Other income, net

213
105
775 
1,942
Income before income taxes

66,527
53,185
109,126

77,573










 
Income tax expense

24,555
19,434
40,104 
28,702










 
Net income

41,972
33,751
69,022

48,871
Net loss (income) attributable to the








noncontrolling interest

171
74
(18)
173










 
Net income attributable to Deckers Outdoor








Corporation
$42,143
33,825
69,004 
49,044










 
Net income per share attributable to Deckers







Outdoor Corporation common stockholders:







Basic

$1.09
0.87
1.79

1.25
Diluted
$1.07
0.86
1.76 
1.24










 
Weighted-average common shares:








Basic

38,615
38,928
38,638

39,183
Diluted

39,228
39,210
39,258 
39,480


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