Deckers Outdoor Corporation Reports Record First Quarter 2011 Financial Results
Company Reports First Quarter Sales Increased 31.4% to a Record $204.9 Million
First Quarter Diluted EPS Increased 6.5% to a Record $0.49 on a Post-Split Basis, Compared to $0.46 a Year Ago on a Post-Split Basis
Company Raises 2011 Sales and Earnings Outlook
GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced financial results for the first quarter ended March 31, 2011.
First Quarter Highlights
-- Net sales increased 31.4% to $204.9 million compared to $155.9 million
last year.
-- Diluted EPS increased 6.5% to $0.49 compared to $0.46 last year. 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.
-- UGG(R) brand sales increased 42.2% to $148.4 million compared to $104.4
million last year.
-- Teva(R) brand sales increased 16.8% to $50.4 million from $43.2 million
last year.
-- Domestic sales increased 26.6% to $148.1 million from $117.0 million
last year.
-- International sales increased 45.8% to $56.7 million compared to $38.9
million last year.
-- Retail sales increased 52.8% to $35.4 million compared to $23.1 million
last year.
-- eCommerce sales increased 27.3% to $23.5 million compared to $18.4
million last year.
"We delivered a good start to the year," said Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. "We believe that our strategies to diversify our merchandise assortments and extend the global reach of our brands are being executed successfully. The favorable response to the UGG brand's spring line of fashion sandals, sneakers, slippers and boots drove gains in our domestic wholesale, consumer direct, and international distribution channels. We achieved solid results with the Teva brand as well, with our new collection of closed toe footwear and expanded sandal offerings resonating with consumers. The first quarter was also highlighted by the commencement of our conversion to wholesale operations in our largest international market, the United Kingdom, and expansion of our existing business in our second largest market, Benelux. For the most part, these transitions have gone smoothly, and in addition to the immediate financial benefits, we are optimistic about the long-term growth opportunities these conversions will create for our Company. Furthermore, we are also optimistic that the brand investments we are currently making will also fuel domestic and international market share gains in the years ahead."
Division Summary
UGG(R) Brand
UGG brand net sales for the first quarter increased 42.2% to $148.4 million compared to $104.4 million for the same period last year. The sales increase was primarily attributable to the conversion to a wholesale business model in the United Kingdom, Benelux and France, strong sales of the spring line at company-owned retail stores, and increased shipments of spring product to domestic wholesale accounts.
Teva(R) Brand
Teva brand net sales for the first quarter increased 16.8% to $50.4 million compared to $43.2 million for the same period last year. The sales growth was primarily the result of increased domestic demand for the expanded spring line of open and closed toe footwear, as well as from the conversion to a wholesale business model in the United Kingdom.
Other Brands
Combined net sales of the Company's other brands decreased 28.3% to $6.0 million for the first quarter compared to $8.4 million for the same period last year. The decline in sales was primarily the result of lower sell-in of the Simple(R) and Ahnu(R) brands during the first quarter compared with the same period last year.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 52.8% to $35.4 million for the first quarter compared to $23.1 million for the same period last year. This increase was driven by nine new stores and a same store sales increase of 2.6% for those stores that were open for the full three-month periods ended March 31, 2010 and 2011.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 27.3% to $23.5 million for the first quarter compared to $18.4 million for the same period last year. This increase was primarily attributable to higher demand for the UGG brand driven by new product introductions and enhanced marketing efforts combined with the launch of the UGG brand's United Kingdom website.
Balance Sheet
At March 31, 2011, cash and cash equivalents increased 22.5% to $437.9 million compared to $357.3 million at March 31, 2010. Inventories at March 31, 2011 increased 55.6% to $107.1 million from $68.8 million at March 31, 2010. By brand, UGG inventory increased $24.5 million to $68.9 million at March 31, 2011, Teva inventory increased $12.0 million to $30.7 million at March 31, 2011, and other brands inventory increased $1.9 million to $7.5 million at March 31, 2011. The increase in inventories as of March 31, 2011 was primarily attributable to a larger spring 2011 assortment for the UGG brand, the growth in spring orders for the UGG and Teva brands, the warehousing of spring 2011 inventory supporting our continued conversion from an international distributor model to an international wholesale model, and increased retail stores.
Full-Year 2011 Outlook
-- Based on better than expected first quarter results the Company is
raising its full-year outlook. The Company now expects its full-year
revenue to increase approximately 21% over 2010, compared to previous
guidance of approximately 20%.
-- The Company now expects full year diluted earnings per share to increase
approximately 13% over 2010, compared to previous guidance of
approximately 10%. This guidance assumes a gross profit margin of
approximately 51% and SG&A as a percentage of sales of approximately
29%.
-- Fiscal 2011 guidance includes estimates of approximately $29 million, or
$0.50 per diluted share, pertaining to incremental investments and
expenses in 2011 associated with new marketing and advertising programs,
increased legal spend related to intellectual property rights
protection, and expenses of approximately $8 million, which is included
in the $29 million, related to the transition to a wholesale business
model in the United Kingdom, Benelux and France.
Second Quarter Outlook
-- The Company currently expects second quarter 2011 revenue to increase
approximately 4% over 2010 levels. It is important to note that due to
the conversion to a wholesale model for certain brands in the United
Kingdom and the UGG and Simple brands in Benelux approximately $50
million in projected sales on a distributor basis that normally would
have shipped during the second quarter under the previous distributor
business model will now ship on a higher wholesale basis in the third
quarter of 2011.
-- The Company currently expects to report a second quarter 2011 diluted
loss per share of approximately $(0.25) compared to second quarter 2010
diluted EPS of $0.23.
-- In addition to the impact from the aforementioned revenue shift, second
quarter guidance includes estimates of approximately $7.5 million, or
$0.13 per diluted share, pertaining to the investments and expenses
noted under the full year outlook above. Second quarter guidance also
includes higher levels of fixed overhead for new retail stores,
international operating expenses for the Company's direct subsidiaries
in the United Kingdom, Benelux and France and other general and
administrative and international infrastructure costs. As a reminder, a
significant amount of the Company's operating expenses are fixed and
spread evenly on an absolute dollar basis throughout each quarter,
resulting in the greatest impact on earnings in the lowest volume sales
quarter, which has historically been the second quarter.
The Company's conference call to review first quarter 2011 results will be broadcast live over the internet today, Thursday, April 28, 2011 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com. You can access the broadcast by clicking on the "Investors" tab and then clicking on the microphone icon on the right side of the screen. The broadcast will be available for at least 30 days following the conference call. You can also access the broadcast at www.earnings.com.
Deckers Outdoor Corporation strives to be a premier lifestyle marketer that builds niche brands into global market leaders by designing and marketing innovative, functional and fashion-oriented footwear developed for both high performance outdoor activities and everyday casual lifestyle use. Teva(R), Simple(R)Shoes, UGG(R) Australia, TSUBO(R), Ahnu(R) and MOZO(R) are registered trademarks of Deckers Outdoor Corporation.
This news release contains statements regarding our expectations, beliefs and views about our future financial performance which are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by the use of words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," or future or conditional verbs such as "will," "would," "should," "could," or "may" or by the fact that such statements relate to future, and not just historical, events or circumstances, including statements related to anticipated revenues, expenses, earnings, operating cash flows, the outlook for the Company's markets and the demand for its products. The forward-looking statements in this news release regarding our future financial performance are based on currently available information as of the date of this release, and because our business is subject to a number of risks and uncertainties, some of which may be beyond our control, actual operating results in the future may differ materially from the future financial performance expected at the current time. In addition, the results reported in this release may differ from actual results filed with the SEC for the quarter ended March 31, 2011 if material events or circumstances occur between now and our SEC filing. Those risks and uncertainties include, among others: the recent financial crisis and current global economic uncertainty; the ability to realize returns on our new and existing retail stores; our ability to accurately forecast consumer demand; our ability to anticipate fashion trends; impairment losses on our intangible or tangible assets; flaws, shortages, or price fluctuations of raw materials that could interrupt product manufacturing and increase product costs; the risks of international commerce of manufacturing in China and Vietnam; the risks of conducting business outside the US, including foreign currency and global liquidity risks; the international markets we sell to are subject to compliance with a variety of laws and political and economic risks; risks related to international trade and import regulations and security procedures; our ability to implement our growth strategies; the success of our customers and the risk of losing one or more of our key customers; our ability to protect our intellectual property rights or deter counterfeiting; our dependence on independent manufacturers to maintain a continuous supply of finished goods that meet our quality standards; liquidity and market risks for our cash equivalents and short-term investments; the risk of losing key personnel; the interruption of key business processes and supporting information systems; loss of our warehouses; the impact of increases in petroleum and other energy prices, or demand for ocean containers or other means of transportation; the sensitivity of our sales to seasonal and weather conditions; we could be subject to additional income tax liabilities; our ability to compete effectively with our competition; and the volatility of our common stock. Certain of these risks and uncertainties, as well as others, are more fully described under the heading "Risk Factors" and in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, which the Company filed with the Securities and Exchange Commission on March 1, 2011, and under "Risk Factors" in any subsequent filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on forward-looking statements contained in this news release, which speak only as of the date of this release. The Company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements, which may be made to reflect new information, events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. The risks and uncertainties highlighted herein should not be assumed to be the only items that could affect the future performance or valuation of the Company.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
March 31, December 31,
Assets 2011 2010
Current assets:
Cash and cash equivalents $ 437,900 445,226
Trade accounts receivable, net 78,227 116,663
Inventories 107,118 124,995
Prepaid expenses and other current assets 19,475 16,846
Deferred tax assets 12,002 12,002
Total current assets 654,722 715,732
Property and equipment, at cost, net 49,584 47,737
Intangible assets, net 26,453 24,918
Deferred tax assets 15,121 15,121
Other assets 8,050 5,486
Total assets $ 753,930 808,994
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 43,010 67,073
Accrued payroll 9,341 35,109
Other accrued expenses 16,100 17,515
Income taxes payable 366 25,166
Total current liabilities 68,817 144,863
Long-term liabilities 9,906 8,456
Stockholders' equity:
Deckers Outdoor Corporation stockholders' equity:
Common stock 387 386
Additional paid-in capital 140,655 137,989
Retained earnings 532,637 513,459
Accumulated other comprehensive (loss)income (1,815) 1,153
Total Deckers Outdoor Corporation stockholders' 671,864 652,987
equity
Noncontrolling interest 3,343 2,688
Total equity 675,207 655,675
Total liabilities and equity $ 753,930 808,994
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended
March 31,
2011 2010
Net sales $ 204,851 155,927
Cost of sales 102,373 78,020
Gross profit 102,478 77,907
Selling, general and administrative expenses 74,283 49,086
Income from operations 28,195 28,821
Other income, net 138 65
Income before income taxes 28,333 28,886
Income tax expense 8,500 10,746
Net income 19,833 18,140
Net income attributable to the
noncontrolling interest (655) (245)
Net income attributable to Deckers Outdoor
Corporation $ 19,178 17,895
Net income per share attributable to Deckers
Outdoor Corporation common stockholders:
Basic $ 0.50 0.46
Diluted $ 0.49 0.46
Weighted-average common shares:
Basic 38,609 38,631
Diluted 39,397 39,060
Source: Deckers Outdoor Corporation
Released April 28, 2011