Deckers Outdoor Corporation Reports Record Fourth Quarter and Fiscal 2010 Financial Results
Company Reports Fiscal 2010 Sales of $1 Billion
Company Reports Fiscal 2010 Sales Increased 23.1% to a Record $1.001 Billion
Fiscal 2010 Diluted EPS Increased 36.1% to a Record $4.03 on a Post-Split Basis, Compared to $2.96 a Year Ago on a Post-Split Basis
Company Reports Fourth Quarter Sales Increased 23.6% to a Record $430.1 Million
Fourth Quarter Diluted EPS Increased 30.5% to a Record $2.27 on a Post-Split Basis, Compared to $1.74 a Year Ago on a Post-Split Basis
GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced record financial results for both the fourth quarter and fiscal year ended December 31, 2010.
Fourth Quarter Highlights
-- Net sales increased 23.6% to $430.1 million compared to $348.0 million
last year.
-- Gross margin increased 440 basis points to 54.2% compared to 49.8% last
year.
-- Diluted EPS increased 30.5% to $2.27 compared to $1.74 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 23.8% to $412.8 million compared to $333.3
million last year.
-- Teva(R) brand sales increased 26.2% to $13.3 million compared to $10.5
million last year.
-- International sales increased 34.6% to $53.0 million compared to $39.3
million last year.
-- Retail sales increased 55.4% to $72.4 million compared to $46.6 million
last year; same store sales rose 11.6%.
-- eCommerce sales increased 29.8% to $59.5 million compared to $45.9
million last year.
Fiscal 2010 Highlights
-- Net sales increased 23.1% to $1.001 billion compared to $813.2 million
last year.
-- Gross margin increased 460 basis points to 50.2% compared to 45.6% last
year.
-- Diluted EPS increased 36.1% to $4.03 compared to $2.96 last year.
-- UGG(R) brand sales increased 22.7% to $873.1 million compared to $711.8
million last year.
-- Teva(R) brand sales increased 30.5% to $101.3 million compared to $77.7
million last year.
-- International sales increased 41.7% to $236.9 million compared to $167.2
million last year.
-- Retail sales increased 59.1% to $125.6 million compared to $79.0 million
last year; same store sales rose 16.6%.
-- eCommerce sales increased 21.3% to $91.8 million compared to $75.7
million last year.
-- Cash and cash equivalents and short-term investments increased 30.2% to
$445.2 million as of December 31, 2010, compared to $342.0 million as of
December 31, 2009.
Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: "Our outstanding fourth quarter performance demonstrated the continuing strength of the UGG brand across all channels and markets and helped push our annual sales beyond the $1 billion mark. This past holiday season was highlighted by strong demand for our most complete product line ever with sell through of several new styles and collections exceeding initial projections. We are extremely pleased that the growth strategies we have implemented resulted in record sales for both the UGG and Teva brands in 2010. More importantly, our overall business has diversified in terms of distribution, seasonality and geographies - trends we anticipate will continue, fueled by product innovation, company-owned retail expansion, and the growth of our international wholesale operations. As we have discussed previously, 2011 will be an investment year for Deckers as we strengthen the foundation for future long-term growth. While these distribution enhancements and additional expenditures will have a near-term impact on our earnings, we are confident we can deliver strong sales growth, improved margins, and greater expense leverage in the years ahead."
Division Summary
UGG(R) Brand
UGG brand net sales for the fourth quarter increased 23.8% to a record $412.8 million compared to $333.3 million for the same period last year. The sales gain was primarily attributable to an increase in full price selling at company-owned retail stores and on the Company's eCommerce websites, coupled with higher shipments to global distributors versus the same period a year ago. For the full year, UGG brand net sales increased 22.7% to a record $873.1 million compared to $711.8 million in 2009.
Teva(R) Brand
Teva brand net sales for the fourth quarter increased 26.2% to $13.3 million compared to $10.5 million for the same period last year. The increase in sales was primarily the result of an increase in distributor sales into the Asia region and an increase in global shipments of the fall line compared to a year ago. For the full year, Teva brand net sales increased 30.5% to $101.3 million compared to $77.7 million in 2009.
Other Brands
Combined net sales of the Company's other brands decreased 2.3% to $4.1 million for the fourth quarter compared to $4.2 million for the same period last year. For the full year, combined net sales increased 11.9% to $26.5 million versus $23.7 million in 2009.
Retail Stores
Sales for the retail store business, which are included in the brand sales numbers above, increased 55.4% to $72.4 million for the fourth quarter compared to $46.6 million for the same period last year. This increase was driven by nine new stores and a same store sales increase of 11.6% for those stores that were open for the full three month periods ended December 31, 2009 and 2010. For the full year, sales for the retail store business increased 59.1% to $125.6 million compared to $79.0 million in 2009. For those stores that were open during the full year of 2009 and 2010, same store sales grew by 16.6%.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 29.8% to $59.5 million for the fourth quarter compared to $45.9 million for the same period last year. The increase in sales resulted from higher demand for the fall line of the UGG brand compared to the same period last year. For the full year, sales for the eCommerce business increased 21.3% to $91.8 million compared to $75.7 million in 2009.
Balance Sheet
At December 31, 2010, cash and cash equivalents and short-term investments increased 30.2% to $445.2 million compared to $342.0 million at December 31, 2009. Inventories at December 31, 2010 increased 46.4% to $125.0 million from $85.4 million at December 31, 2009. By brand, UGG inventory increased $24.7 million to $94.7 million at December 31, 2010, Teva inventory increased $13.4 million to $22.7 million at December 31, 2010, and other brands inventory increased $1.5 million to $7.6 million at December 31, 2010. The increase in inventories at December 31, 2010 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 upon current visibility, the Company expects a full year revenue
growth target of approximately 20% over 2010.
-- The Company expects full year diluted earnings per share to increase
approximately 10% over 2010. 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
$0.49 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 above, related to the transition to wholesale sales
in the United Kingdom, Benelux region and France.
-- Without these investments, diluted earnings per share growth would be
approximately 21% over 2010.
First Quarter Outlook
-- The Company currently expects first quarter 2011 revenue to increase
approximately 29% over 2010, and expects first quarter 2011 diluted
earnings per share to be down approximately 5% compared to 2010.
-- First quarter guidance includes estimates of approximately $11 million,
or $0.19 per diluted share, pertaining to the investments and expenses
noted under the full year outlook above. Included in this $11 million is
approximately $7 million related to the transition to wholesale sales in
the United Kingdom, Benelux region and France. This guidance also
assumes a gross profit margin of approximately 51% and SG&A as a
percentage of sales of approximately 38%.
-- Without these investments, diluted earnings per share growth would be
approximately 36% over 2010.
-- In addition, first quarter guidance includes higher levels of fixed
overhead for new retail stores, international infrastructure and other
general and administrative costs. 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 nine new stores that were not open until the second half of 2010.
Therefore, due to the aforementioned increases in SG&A, we expect our
earnings to decline in the first half of 2011 as compared to the first
half of 2010, which are typically our lowest volume sales quarters, and
increase in the back half of the year.
-- In addition, our shift from distributor to direct wholesale operations
in the U.K. and Benelux results in a significant impact to our second
quarter, as UGG brand U.K. and Benelux sales previously recognized in
the second quarter as sales to distributors will in 2011 be recorded as
wholesale sales during the third and fourth quarters.
The Company's conference call to review fourth quarter and fiscal 2010 results will be broadcast live over the internet today, Thursday, February 24, 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), and Ahnu(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. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. 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 Securities and Exchange Commission (SEC) for the year ended December 31, 2010 if material events or circumstances occur between now and our SEC filing. Those risks and uncertainties include, among others: the continued decline of the global economy; the ability to realize returns on our new and existing retail stores; our ability to anticipate fashion trends; a decline in wholesaler, distributer, or direct consumer demand or inventory needs; impairment charges related to a decline in the value of our brands' intangible assets below their carrying values; shortages or price fluctuations of raw materials that could interrupt product manufacturing and increase product costs; increased costs of manufacturing in China and Vietnam and actions by foreign governments; currency fluctuations; our ability to implement our growth strategy; the success of our customers, their ability to perform and obtain credit in an adverse economic environment and the risk of losing one or more of our key customers; our ability to develop and adequately protect our brands and intellectual property; the risk that counterfeiting can harm our sales or our brand image; our dependence on independent manufacturers to supply and store our products; the risk that retailers could postpone or cancel existing orders; unpredictable events and circumstances and currency risks related to our international operations; volatile credit and equity markets; liquidity and market risks for our cash equivalents and short-term investments; the risk of losing key personnel or the interruption of key information technology systems; a delay, increase in cost, or interruption in the delivery of merchandise to our customers; the sensitivity of our sales to seasonal and weather conditions; and we could be subject to additional income tax liabilities. Certain of these risks and uncertainties, as well as others, are more fully described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, which the Company filed with the SEC on March 1, 2010, and under "Risk Factors" in any subsequent filings with the SEC. 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)
December 31, December 31,
Assets 2010 2009
Current assets:
Cash and cash equivalents $ 445,226 315,862
Short-term investments - 26,120
Trade accounts receivable, net 116,663 76,427
Inventories 124,995 85,356
Prepaid expenses and other current assets 16,846 7,510
Deferred tax assets 12,002 9,712
Total current assets 715,732 520,987
Property and equipment, at cost, net 47,737 35,442
Intangible assets, net 24,918 23,940
Deferred tax assets 15,121 16,704
Other assets 5,486 1,970
Total assets $ 808,994 599,043
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 67,073 47,331
Accrued payroll 35,109 20,869
Other accrued expenses 17,515 12,985
Income taxes payable 25,166 19,685
Total current liabilities 144,863 100,870
Long-term liabilities 8,456 6,269
Stockholders' equity:
Deckers Outdoor Corporation stockholders'
equity:
Common stock 386 387
Additional paid-in capital 137,989 125,173
Retained earnings 513,459 365,304
Accumulated other comprehensive income 1,153 494
Total Deckers Outdoor Corporation stockholders' 652,987 491,358
equity
Noncontrolling interest 2,688 546
Total equity 655,675 491,904
Total liabilities and equity $ 808,994 599,043
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended Twelve-month period ended
December 31, December 31,
2010 2009 2010 2009
Net sales $ 430,124 347,989 1,000,989 813,177
Cost of sales 196,789 174,548 498,051 442,087
Gross profit 233,335 173,441 502,938 371,090
Selling, general and 92,598 67,825 253,850 188,843
administrative expenses
Impairment loss - - - 1,000
Income from 140,737 105,616 249,088 181,247
operations
Other income, net 246 34 1,021 1,976
Income before 140,983 105,650 250,109 183,223
income taxes
Income tax expense 49,628 37,602 89,732 66,304
Net income 91,355 68,048 160,377 116,919
Net income
attributable to
the
noncontrolling (2,124 ) (306 ) (2,142 ) (133 )
interest
Net income attributable to
Deckers Outdoor
Corporation $ 89,231 67,742 158,235 116,786
Net income per share
attributable to Deckers
Outdoor Corporation common
stockholders:
Basic $ 2.31 1.76 4.10 2.99
Diluted $ 2.27 1.74 4.03 2.96
Weighted-average
common shares:
Basic 38,546 38,553 38,615 39,024
Diluted 39,296 38,961 39,292 39,393
Source: Deckers Outdoor Corporation
Released February 24, 2011