Press Release

Deckers Brands Reports Third Quarter Fiscal 2020 Financial Results And Raises Guidance For Full Fiscal Year 2020

- Third Quarter Fiscal 2020 Sales Increased 7.4% to a Record $938.7 Million

- Fiscal 2020 Full Year Outlook Raised: Earnings Per Share Now in the Range of $9.40 to $9.50

Company Release - 1/30/2020 4:05 PM ET

GOLETA, Calif., Jan. 30, 2020 /PRNewswire/ -- Deckers Brands (NYSE: DECK), a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories, today announced financial results for the third fiscal quarter ended December 31, 2019. The Company also provided its financial outlook for the fourth fiscal quarter ending March 31, 2020 and raised its outlook for the full fiscal year ending March 31, 2020.

"Our third quarter results were driven by three of our brands experiencing record levels of quarterly revenue, resulting in an updated outlook that reflects another year of strong top-line growth and earnings expansion," said Dave Powers, President and Chief Executive Officer. "Heading into the fourth quarter, our brands are intent on maintaining the momentum seen throughout this fiscal year as we are planning continued investment in consumer engagement opportunities and compelling product introductions."

Throughout this release, references to Non-GAAP financial measures exclude the impact of certain charges relating to retail store closures, tax reform, organizational changes and other one-time or non-recurring amounts.  Additional information regarding these Non-GAAP financial measures is set forth under the heading "Non-GAAP Financial Measures" below.

Third Quarter Fiscal 2020 Financial Review

  • Net sales increased 7.4% to $938.7 million compared to $873.8 million for the same period last year. On a constant currency basis, net sales increased 8.4%.
  • Gross margin was 54.1% compared to 53.8% for the same period last year.
  • SG&A expenses were $251.9 million compared to GAAP SG&A expenses last year of $225.4 million and Non-GAAP SG&A expenses last year of $227.8 million.
  • Operating income was $255.8 million compared to GAAP operating income of $244.7 million for the same period last year and Non-GAAP operating income of $242.3 million for the same period last year.
  • Income tax expense was $55.0 million compared to GAAP income tax expense of $48.3 million for the same period last year and Non-GAAP income tax expense of $48.4 million for the same period last year.
  • Diluted earnings per share was $7.14 compared to the GAAP diluted earnings per share of $6.68 for the same period last year and the Non-GAAP diluted earnings per share of $6.59 for the same period last year.

Brand Summary

  • UGG® brand net sales for the third quarter increased 2.6% to $781.1 million compared to $761.0 million for the same period last year.
  • HOKA ONE ONE® brand net sales for the third quarter increased 63.6% to $93.1 million compared to $56.9 million for the same period last year.
  • Teva® brand net sales for the third quarter decreased 25.1% to $17.2 million compared to $22.9 million for the same period last year.
  • Sanuk® brand net sales for the third quarter decreased 34.5% to $8.5 million compared to $12.9 million for the same period last year.

 Channel Summary (included in the brand sales numbers above)

  • Wholesale net sales for the third quarter increased 8.9% to $525.1 million compared to $482.2 million for the same period last year.
  • DTC net sales for the third quarter increased 5.6% to $413.7 million compared to $391.6 million for the same period last year. DTC comparable sales for the third quarter increased 4.7% over the same period last year.

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

  • Domestic net sales for the third quarter increased 12.7% to $645.7 million compared to $573.0 million for the same period last year.
  • International net sales for the third quarter decreased 2.6% to $293.1 million compared to $300.8 million for the same period last year.

Balance Sheet (December 31, 2019 as compared to December 31, 2018)

  • Cash and cash equivalents were $616.9 million compared to $515.9 million.
  • Inventories were $365.9 million compared to $342.0 million.
  • Outstanding borrowings were $37.1 million compared to $31.7 million.

Stock Repurchase Program

During the third quarter, the Company did not repurchase any shares of its common stock. As of December 31, 2019, the Company had $160 million remaining under its stock repurchase authorizations.

Full Year Fiscal 2020 Outlook for the Twelve Month Period Ending March 31, 2020

  • Net sales are now expected to be in the range of $2.150 billion to $2.160 billion.
  • Gross margin is now expected to be approximately 51.5%.
  • SG&A expenses as a percentage of sales are projected to be slightly lower than 36.0%.
  • Operating margin is now expected to be at or slightly better than 15.5%.
  • Effective tax rate expected to be approximately 20.5%.
  • Diluted earnings per share now expected to be in the range of $9.40 to $9.50.
  • The earnings per share guidance excludes any impact from additional share repurchases.

Fourth Quarter Fiscal 2020 Outlook for the Three Month Period Ending March 31, 2020

  • Net sales are expected to be in the range of $392 million to $402 million.
  • Diluted earnings per share are expected to be in the range of $0.35 to $0.45.
  • The earnings per share guidance excludes any impact from additional share repurchases.

Non-GAAP Financial Measures

We present certain Non-GAAP financial measures in this press release, including constant currency, Non-GAAP SG&A expenses, Non-GAAP operating income (loss), Non-GAAP income tax expense (benefit) and Non-GAAP diluted earnings (basic loss) per share, to provide information that may assist investors in understanding our financial results and assessing our prospects for future performance.

Consistent with SEC regulations, we have not provided a reconciliation of forward-looking Non-GAAP financial measures to the most directly comparable GAAP financial measures in reliance on the "unreasonable efforts" exception set forth in the applicable regulations, because there is substantial uncertainty associated with predicting any future adjustments that we may make to our GAAP financial measures in calculating our Non-GAAP financial measures.

We believe these Non-GAAP financial measures are important indicators of our operating performance because they exclude items that are unrelated to, and may not be indicative of, our core operating results, such as charges relating to retail store closures, tax reform, organizational changes and other one-time or non-recurring amounts. In particular, we believe the exclusion of certain costs and one-time amounts allows for a more meaningful comparison of our results from period to period. Further, we report comparable DTC sales on a constant currency basis for DTC operations that were open throughout the current and prior reporting periods, and we may adjust prior reporting periods to conform to current year accounting policies.

These Non-GAAP financial measures, as we calculate them, 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 our constant currency information, we calculate 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 re-measurements in the condensed consolidated balance sheets. 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 we utilize such Non-GAAP financial measures in the future, we expect to calculate them using a consistent method from period to period. A reconciliation of each of the GAAP financial measures to the most directly comparable Non-GAAP financial measures has been provided under the heading "Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures" in the financial statement tables attached to this press release.

Conference Call Information

The Company's conference call to review the results for the third quarter fiscal year 2020 will be broadcast live today, Thursday, January 30, 2020, at 4:30 pm Eastern Time and hosted at www.deckers.com. You can access the broadcast by clicking on the "Investors" tab and then clicking on the webcast box at the top of the page. A replay of the broadcast will be available for at least 30 days following the conference call and can be accessed under the "Quarterly Earnings" section of the "Investors" tab at the aforementioned website.

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.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, which statements are subject to considerable risks and uncertainties.  Forward-looking statements include all statements other than statements of historical fact contained in this press release, including statements regarding our anticipated financial performance, including our projected net sales, margins, expenses, effective tax rate and earnings (loss) per share, as well as statements regarding our progress towards the achievement of our long term strategic objectives, our ability to compete in our industry, our product and brand positioning and strategies, and our potential repurchase of shares. We have attempted to identify forward-looking statements by using words such as "anticipate," "believe," "could," "estimate," "expected," "intend," "may," "plan," "predict," "project," "should," "will," or "would," and similar expressions or the negative of these expressions.

Forward-looking statements represent our management's current expectations and predictions about trends affecting our business and industry and are based on information available as of the time such statements are made. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements predicted, assumed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2019, as well as in our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. Except as required by applicable law or the listing rules of the New York Stock Exchange, we expressly disclaim any intent or obligation to update any forward-looking statements, or to update the reasons actual results could differ materially from those expressed or implied by these forward-looking statements, whether to conform such statements to actual results or changes in our expectations, or as a result of the availability of new information.

 

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(dollar and share data amounts in thousands, except per share data)



Three Months Ended December 31,


Nine Months Ended December 31,


2019


2018


2019


2018

Net sales

$

938,735



$

873,800



$

1,757,779



$

1,626,307


Cost of sales

431,103



403,707



847,104



789,362


Gross profit

507,632



470,093



910,675



836,945


Selling, general and administrative expenses

251,866



225,375



589,195



541,229


Income from operations

255,766



244,718



321,480



295,716


Other (income) expense, net

(837)



51



(2,741)



325


Income before income taxes

256,603



244,667



324,221



295,391


Income tax expense

55,010



48,293



64,169



55,052


Net income

201,593



196,374



260,052



240,339


Other comprehensive income (loss), net of tax








Unrealized (loss) gain on cash flow hedges

(973)



(3,128)



207



998


Foreign currency translation gain (loss)

2,667



781



(656)



(10,543)


Total other comprehensive income (loss)

1,694



(2,347)



(449)



(9,545)


Comprehensive income

$

203,287



$

194,027



$

259,603



$

230,794


Net income per share








Basic

$

7.21



$

6.74



$

9.12



$

8.06


Diluted

$

7.14



$

6.68



$

9.02



$

7.99


Weighted-average common shares outstanding








Basic

27,978



29,157



28,515



29,807


Diluted

28,249



29,397



28,832



30,063


 

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollar amounts in thousands)



December 31, 2019


March 31, 2019

ASSETS

(UNAUDITED)



Current assets




Cash and cash equivalents

$

616,864



$

589,692


Trade accounts receivable, net

286,891



178,602


Inventories, net

365,946



278,842


Other current assets

70,149



48,269


Total current assets

1,339,850



1,095,405


Property and equipment, net

209,690



213,796


Operating lease assets

216,420




Other noncurrent assets

122,391



118,005


Total assets

$

1,888,351



$

1,427,206






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




Short-term borrowings

$

6,645



$

603


Trade accounts payable

244,767



124,974


Operating lease liabilities

47,521




Other current liabilities

164,225



124,947


Total current liabilities

463,158



250,524


Mortgage payable

30,430



30,901


Long-term operating lease liabilities

192,562




Other long-term liabilities

78,454



100,651


Total long-term liabilities

301,446



131,552


Total stockholders' equity

1,123,747



1,045,130


Total liabilities and stockholders' equity

$

1,888,351



$

1,427,206


 

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)

(dollar and share data amounts in thousands, except per share data)



Three Months Ended December 31, 2018


GAAP Measures
(As Reported)


Restructuring and
Other Charges (1)


Non-GAAP Measures
(Excluding Items)
(2)(3)

Net sales

$

873,800





$

873,800


Cost of sales

403,707





403,707


Gross profit

470,093





470,093


Selling, general and administrative expenses

225,375



2,425



227,800


Income from operations

244,718



(2,425)



242,293


Other expense, net

51





51


Income before income taxes

244,667



(2,425)



242,242


Income tax expense

48,293





48,448


Net Income

$

196,374





$

193,794


Net income per share






Basic

$

6.74





$

6.65


Diluted

$

6.68





$

6.59


Weighted-average common shares outstanding






Basic

29,157





29,157


Diluted

29,397





29,397



(1) Adjustments as of December 31, 2018 reflect amounts related to organizational changes and legal matters.

(2) The effective tax rate for the GAAP measures is 19.7% and the tax rate applied to the Non-GAAP measures is 20.0% for the three months ended December 31, 2018, which represented our expected effective tax rate for the fiscal year 2019.

(3) Figures may not sum due to rounding.

 

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

(dollar and share data amounts in thousands, except per share data)



Nine Months Ended December 31, 2018


GAAP Measures

(As Reported)


Restructuring and

Other Charges (1)


Non-GAAP Measures

(Excluding Items)

(2)(3)

Net sales

$

1,626,307





$

1,626,307


Cost of sales

789,362





789,362


Gross profit

836,945





836,945


Selling, general and administrative expenses

541,229



1,608



542,836


Income from operations

295,716



(1,608)



294,109


Other expense (income), net

325



(445)



(120)


Income before income taxes

295,391



(1,163)



294,229


Income tax expense

55,052





58,794


Net income

$

240,339





$

235,435


Net income per share






Basic

$

8.06





$

7.90


Diluted

$

7.99





$

7.83


Weighted-average common shares outstanding






Basic

29,807





29,807


Diluted

30,063





30,063



(1) Adjustments as of December 31, 2018 reflect amounts related to restructuring costs, organizational changes, legal matters, and charges in connection with the Company's refinancing of its prior credit facility.

(2) The effective tax rate for the GAAP measures is 18.6% and the tax rate applied to the Non-GAAP measures is 20.0% for the nine months ended December 31, 2018. The Non-GAAP tax rate is calculated using the blended Non-GAAP tax rates for the three months ended June 30, 2018, September 30, 2018, and December 31, 2018, respectively.

(3) Figures may not sum due to rounding.

 

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