Deckers Outdoor Corporation Reports Record First Quarter Financial Results
Company Reports First Quarter Sales Increased 16.2% to a Record of $155.9 Million
First Quarter Diluted EPS Increased 47.3% to a Record of $1.37
Company Raises 2010 Sales and Earnings Outlook
GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced financial results for the first quarter ended March 31, 2010.
First Quarter Highlights
-- Net sales increased 16.2% to $155.9 million versus $134.2 million last
year.
-- Gross margin improved 610 basis points to 50.0% versus 43.9% a year ago.
-- Diluted EPS increased 47.3% to $1.37 compared to $0.93 a year ago.
-- UGG(R) brand sales increased 14.2% to $104.4 million versus $91.4
million last year.
-- Teva(R) brand sales increased 21.4% to $43.2 million compared to $35.6
million last year.
-- Retail sales increased 66.1% to $23.1 million compared to $13.9 million
last year; same store sales rose 28.2%.
Angel Martinez, President, Chief Executive Officer and Chairman of the Board of Directors, stated: "Our first quarter earnings performance was much stronger than expected, driven by higher sales of the UGG brand combined with double digit growth of the Teva brand. Both our direct-to-consumer business, highlighted by same store sales growth of 28.2%, and our overall domestic wholesale business were above plan, as consumer response to the UGG brand's diverse assortment of spring boots, sandals, and new sneaker collection was very positive. At the same time, the Teva brand delivered its strongest quarter in several years, fueled by sales of our expanded spring line of open and closed toe styles. These results are a validation of Teva's resurgence as an outdoor market leader and underscore our efforts to lessen the brand's dependence on weather. The sell-through performance of our entire brand portfolio this spring has been very encouraging and has led to improved orders for the fall season, evidenced by our heightened outlook for the full year. We move forward with strong momentum across our business, and with $357 million in cash and no debt, we are well capitalized to execute our future growth strategies."
Division Summary
UGG(R) Brand
UGG brand net sales for the first quarter increased 14.2% to $104.4 million compared to $91.4 million for the same period last year. The sales increase was primarily attributable to strong sell-through of the spring line at company-owned retail stores, coupled with increased shipments of spring product to domestic wholesale accounts.
Teva(R) Brand
Teva brand net sales increased 21.4% to $43.2 million for the first quarter compared to $35.6 million for the same period last year. The increase in sales was the result of strong domestic and international demand for the expanded spring line of open and closed toe footwear, 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 $8.4 million for the first quarter of 2010 compared to $7.3 million for the same period last year.
eCommerce
Sales for the eCommerce business, which are included in the brand sales numbers above, increased 13.8% to $18.4 million for the first quarter compared to $16.2 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 66.1% to $23.1 million for the first quarter compared to $13.9 million for the same period last year, driven by five new stores and a same store sales increase of 28.2% for those stores that were open for the full three month periods ended March 31, 2009 and 2010.
Full-Year 2010 Outlook
-- Based on better than expected first 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
13% over 2009 levels, compared to previous guidance of approximately
11%.
-- The Company now expects its full-year diluted earnings per share to
increase approximately 11% over the non-GAAP diluted EPS of $8.94 in
2009, compared to previous guidance of approximately 5%. This guidance
assumes a gross profit margin of approximately 48% and SG&A as a
percentage of sales of approximately 26%. The non-GAAP diluted EPS of
$8.94 in 2009 excluded pre-tax non-cash impairment charges of $1.0
million, or $0.05 per diluted share, as discussed in the related
earnings release.
-- Fiscal 2010 guidance includes estimates of incremental expenses of
approximately $8.0 million, or approximately $0.38 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 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 approximately 37% compared to 36.2% in 2009 due to the impact on
international income from the aforementioned incremental expenses and
shift in profit.
Second Quarter Outlook
-- The Company currently expects second quarter 2010 revenue to increase
approximately 25% over 2009 levels.
-- The Company currently expects second quarter 2010 diluted earnings per
share to be flat compared to second quarter 2009 non-GAAP diluted EPS of
$0.26, which excluded pre-tax non-cash impairment charges of $1.0
million, or $0.04 per diluted share, as discussed in the related
earnings release.
-- Second quarter guidance includes improved gross margins compared to 2009
due to a higher retail mix and improved brand margins. In addition,
second quarter guidance includes higher levels of fixed overhead for new
retail stores, international infrastructure and other general and
administrative costs. Second quarter guidance also includes estimates of
approximately $1.0 million, or approximately $0.05 per diluted share,
for incremental investments associated with the distribution
transitions. 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 fiscal 2010 results will be broadcast live over the internet today, Thursday, April 22, 2010 at 4:30 pm Eastern Time. The broadcast will be hosted at www.deckers.com and 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. 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, 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, distributor, 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 actions by the Chinese government; 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 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 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 Securities and Exchange Commission on March 1, 2010, 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 2010 2009
Current assets:
Cash and cash equivalents $ 357,328 315,862
Restricted cash 200 300
Short-term investments - 26,120
Trade accounts receivable, net 54,582 76,427
Inventories 68,824 85,356
Prepaid expenses and other current assets 7,369 7,210
Deferred tax assets 9,712 9,712
Total current assets 498,015 520,987
Restricted cash 213 400
Property and equipment, at cost, net 36,144 35,442
Intangible assets, net 25,993 23,940
Deferred tax assets 16,704 16,704
Other assets 1,852 1,570
Total assets $ 578,921 599,043
Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable $ 29,458 47,331
Accrued payroll 10,353 20,869
Other accrued expenses 10,087 12,985
Income taxes payable 10,038 19,685
Total current liabilities 59,936 100,870
Long-term liabilities 5,769 6,269
Stockholders' equity:
Deckers Outdoor Corporation stockholders' equity:
Common stock 129 129
Additional paid-in capital 129,020 125,431
Retained earnings 383,199 365,304
Accumulated other comprehensive income 77 494
Total Deckers Outdoor Corporation stockholders' 512,425 491,358
equity
Noncontrolling interest 791 546
Total equity 513,216 491,904
Total liabilities and equity $ 578,921 599,043
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month period ended
March 31,
2010 2009
Net sales $ 155,927 134,226
Cost of sales 78,020 75,313
Gross profit 77,907 58,913
Selling, general and administrative expenses 49,086 39,587
Income from operations 28,821 19,326
Other (income) expense, net:
Interest income (19 ) (596 )
Interest expense 18 17
Other, net (64 ) (19 )
Income before income taxes 28,886 19,924
Income tax expense 10,746 7,571
Net income 18,140 12,353
Less: Net income attributable to the
noncontrolling interest (245 ) (13 )
Net income attributable to Deckers Outdoor
Corporation $ 17,895 12,340
Net income attributable to Deckers Outdoor
Corporation common stockholders per share:
Basic $ 1.39 0.94
Diluted $ 1.37 0.93
Weighted-average common shares:
Basic 12,877 13,090
Diluted 13,020 13,201
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Reconciliation of Non-GAAP Measures
(Unaudited)
(Amounts in thousands, except for per share data)
Three-month Twelve-month
period ended period ended
June 30, 2009 December 31, 2009
Income before income taxes $ 4,464 183,223
Add back impairment charges 1,000 1,000
Income before income taxes, excluding 5,464 184,223
impairment charges
Income tax expense (1) 2,076 66,666
Net income excluding impairment charges 3,388 117,557
Less: Net loss (income) attributable to the 112 (133)
noncontrolling interest
Net income excluding impairment charges
attributable to
Deckers Outdoor Corporation $ 3,500 117,424
Net income excluding impairment charges
attributable to
Deckers Outdoor Corporation common
stockholders per share:
Basic $ 0.27 9.03
Diluted $ 0.26 8.94
Weighted-average shares:
Basic 13,116 13,008
Diluted 13,210 13,131
(1) The non-GAAP income tax expense assumes the same effective tax rate as the GAAP income tax expense for the periods presented. Use of Non-GAAP Financial Measures To supplement the actual and forecast results in accordance with U.S. generally accepted accounting principles (GAAP), for the applicable periods, the Company also used non-GAAP measures of net income and earnings per share, which are adjusted from the GAAP-based results to exclude non-cash impairment charges. This adjustment is not in accordance with or an alternative for GAAP. This adjustment is provided to enhance an overall understanding of the Company's financial performance for the applicable periods and are indicators management uses for planning and forecasting future periods. The excluded items represent non-cash impairment charges associated with the write-down of the Company's TSUBO trademarks because management does not believe these expenses are indicative of the Company's core business. Even though such items have occurred in the past and may recur in future periods, it is driven by events that are not directly related to the Company's ongoing core business operations. These financial measures are not to be considered in isolation from, or as a substitute for, financial results prepared in accordance with GAAP.
Source: Deckers Outdoor Corporation
Released April 22, 2010