Deckers Lifts Guidance As Quarterly Earnings Surpass Predictions

01 Nov Deckers Lifts Guidance As Quarterly Earnings Surpass Predictions

Posted at 16:15h in FDRA by

Deckers Brands raised the company’s guidance for the year after reporting earnings in the second quarter ended September 30 jumped 50.1 percent to $74.4 million, or $2.48, from $49.6 million, or $1.54, a year ago. Revenues expanded 4.0 percent led by a 28.4 percent gain for Hoka One One. Ugg’s sales dipped 1.0 percent.

“The continued profitability gains in the Ugg brand and top-line growth within the Hoka One One brand drove second quarter results as both sales and earnings per share exceeded expectations,” said Dave Powers, president and chief executive officer. “Profitability in the second quarter was aided by a 350 basis point increase in gross margin over last year. While a portion of the increase in gross margin came from one-time savings in the quarter, the company continues to execute well on our long-term plan of improving levels of profitability. Additionally, our confidence in our strategy, the momentum we see in the business and the strength of the brand portfolio has led us to raise our fiscal year 2019 guidance.”

Second Quarter Fiscal 2019 Financial Review

  • Net sales increased 4.0 percent to $501.9 million compared to $482.5 million for the same period last year. On a constant currency basis, net sales increased 3.3 percent.
  • Gross margin was 50.2 percent compared to 46.7 percent for the same period last year.
  • SG&A expenses were $161.5 million compared to $157.8 million for the same period last year. Non-GAAP SG&A expenses were $161.2 million this year compared to $157.3 million last year.
  • Operating income was $90.4 million compared to $67.4 million for the same period last year. Non-GAAP operating income was $90.7 million this year compared to $67.8 million last year.
  • Earnings jumped 50.1 percent to $74.4 million, or $2.48, from $49.6 million, or $1.54, a year ago. Non-GAAP diluted earnings rose 44.2 percent to $71.5 million, or $2.38, this year compared to $1.54 last year.

Sales came in above guidance calling for sales in the range of $485.0 million to $495.0 million. Non-GAAP diluted EPS were expected to be in the range of $1.60 to $1.70.

Brand Summary

  • Ugg brand net sales for the second quarter decreased 1.0 percent to $396.3 million compared to $400.4 million for the same period last year.
  • Hoka One One brand net sales for the second quarter increased 28.4 percent to $52.1 million compared to $40.6 million for the same period last year.
  • Teva brand net sales for the second quarter increased 0.6 percent to $21.5 million compared to $21.4 million for the same period last year.
  • Sanuk brand net sales for the second quarter decreased 9.4 percent to $13.8 million compared to $15.2 million for the same period last year.

Channel Summary 

  • Wholesale net sales for the second quarter increased 4.3 percent to $408.0 million compared to $391.2 million for the same period last year.
  • DTC net sales for the second quarter increased 2.8 percent to $93.9 million compared to $91.3 million for the same period last year. DTC comparable sales for the second quarter increased 4.8 percent over the same period last year.

Geographic Summary

  • Domestic net sales for the second quarter increased 2.9 percent to $311.6 million compared to $302.7 million for the same period last year.
  • International net sales for the second quarter increased 5.9 percent to $190.3 million compared to $179.8 million for the same period last year.

Balance Sheet (September 30, 2018 as Compared to September 30, 2017)

  • Cash and cash equivalents were $182.2 million compared to $230.6 million.
  • Inventories were $514.9 million compared to $555.6 million.
  • Outstanding borrowings were $102.7 million compared to $165.3 million.

Stock Repurchase Program

During the second quarter, the company repurchased approximately 1.1 million shares of its common stock for a total of $125 million. As of September 30, 2018, the company had $116 million remaining under its $400 million in stock repurchase authorizations.

Full Year Fiscal 2019 Outlook for the Twelve Month Period Ending March 31, 2019

  • Net sales are now expected to be in the range of $1.935 billion to $1.960 billion.
  • Gross margin is now expected to be approximately 50 percent.
  • SG&A expenses as a percentage of sales are projected to be slightly better than 37 percent.
  • Operating margin is now expected to be in the range of 13.0 percent to 13.2 percent.
  • Effective tax rate is now expected to be approximately 21 percent.
  • Non-GAAP diluted earnings per share are now expected to be in the range of $6.65 to $6.85.
  • The earnings per share guidance excludes any charges that may occur from additional store closures, tax reform, organizational changes and other one-time or non-recurring charges. It also does not assume any impact from additional share repurchases.

Previously, Deckers expected sales in the range of $1.930 billion to $1.955 billion. Non-GAAP diluted earnings per share were expected to to be in the range of $6.25 to $6.45.

Third Quarter Fiscal 2019 Outlook for the Three Month Period Ending December 31, 2018

  • Net sales are expected to be in the range of $805.0 million to $825.0 million.
  • Non-GAAP diluted earnings per share are expected to be in the range of $5.10 to $5.25.
  • The earnings per share guidance excludes any charges that may occur from additional store closures, tax reform, organizational changes and other one-time or non-recurring charges. It also does not assume any impact from additional share repurchases.