Deckers Brands (NYSE: DECK), a global leader in designing,
marketing and distributing innovative footwear, apparel and
accessories, today announced financial results for the second
fiscal quarter ended September 30, 2016.
Throughout this release, references to Non-GAAP financial
measures exclude certain restructuring charges. Additional
information regarding these Non-GAAP financial measures is set
forth under the heading "Non-GAAP Financial Measures" below.
“We are pleased with the results of our second quarter and the
progress on our plans for the year,” said Dave Powers, President
and Chief Executive Officer. “Despite a challenging consumer
environment, we delivered earnings per share results that were
higher than last year and at the top end of our expectations.
Looking ahead, our teams are prepared for the upcoming selling
season, and we are excited about our fall and holiday product and
marketing plans.”
Second Quarter Fiscal 2017 Financial Review
- Net sales decreased (0.2)% to
$485.9 million compared to $486.9 million for the same period last
year. On a constant currency basis, net sales increased 0.3%.
- Gross margin was 44.5% compared
to 44.0% for the same period last year.
- SG&A expenses as a
percentage of sales were 33.4% compared to 33.5% for the same
period last year. Non-GAAP SG&A expenses as a percentage of
sales were 33.2%.
- Operating income was $54.0
million compared to $51.2 million for the same period last year.
Non-GAAP operating income was $54.9 million.
- Diluted earnings per share was
$1.21 compared to $1.11 for the same period last year. Non-GAAP
diluted earnings per share was $1.23.
Brand Summary
- UGG® brand net sales for the second
quarter decreased (2.1)% to $412.2 million compared to $421.1
million for the same period last year. On a constant currency
basis, sales decreased (1.6)%. The year over year decrease was
driven by lower European combined wholesale and distributor sales,
primarily due to a delay in our European shipments now deferred to
the third quarter, and a decrease in direct-to-consumer (DTC)
comparable sales.
- Teva® brand net sales for the second
quarter decreased (4.2)% to $17.1 million compared to $17.9 million
for the same period last year. On a constant currency basis, sales
decreased (4.8)%. The decrease in sales was driven by lower
domestic wholesale sales.
- Sanuk® brand net sales for the second
quarter increased 9.2% to $18.9 million compared to $17.3 million
for the same period last year. On a constant currency basis, sales
increased 9.0%. The increase in sales was driven by an increase in
global wholesale and distributor sales.
- Combined net sales of the Company’s
other brands increased 23.3% to $37.7 million compared to $30.6
million for the same period last year. On a constant currency
basis, sales increased 23.9%. The increase was primarily
attributable to increased HOKA ONE ONE® sales. HOKA ONE ONE® brand
net sales, which are included as part of the Company’s other brand
sales, increased 39.0% compared to the same period last year.
Channel Summary (included in the brand sales numbers
above)
- Wholesale and distributor net sales for
the second quarter decreased (0.1)% to $399.9 million compared to
$400.3 million for the same period last year. On a constant
currency basis, sales increased 0.6%.
- DTC net sales for the second quarter
decreased (0.7)% to $86.0 million compared to $86.6 million for the
same period last year. On a constant currency basis, sales
decreased (1.0)%. DTC comparable sales for the second quarter
decreased (3.2)% over the same period last year.
Geographic Summary (included in the brand and channel sales
numbers above)
- Domestic net sales for the second
quarter increased 3.6% to $312.2 million compared to $301.6 million
for the same period last year.
- International net sales for the second
quarter decreased (6.3)% to $173.7 million compared to $185.3
million for the same period last year. On a constant currency
basis, sales decreased (5.1)%.
Balance Sheet
At September 30, 2016, cash and cash equivalents were $110.0
million compared to $99.8 million at September 30, 2015. The
Company had $310.4 million in outstanding borrowings at September
30, 2016 compared to $349.7 million at September 30, 2015.
Company-wide inventories at September 30, 2016 decreased (2.9)%
to $578.0 million from $595.0 million at September 30, 2015. By
brand, UGG inventory decreased (4.1)% to $512.4 million at
September 30, 2016, Teva inventory decreased (9.1)% to $17.8
million at September 30, 2016, Sanuk inventory decreased (2.7)% to
$18.6 million at September 30, 2016, and the other brands inventory
increased 34.0% to $29.2 million at September 30, 2016.
Full Year Fiscal 2017 Outlook for the Twelve Month Period
Ending March 31, 2017
- The Company now expects fiscal year
2017 net sales to be in the range of down (3.0)% to down
(1.5)%.
- Gross margin for fiscal 2017 is
expected to be in the range of 47.0% to 47.5%.
- SG&A expenses as a percentage of
sales are projected to be approximately 37%.
- The Company expects fiscal 2017 diluted
earnings per share to be in the range of $4.05 to $4.25. This
excludes any pretax charges that may occur from any further
restructuring charges.
- The effective tax rate is expected to
be approximately 27%.
Third Quarter Fiscal 2017 Outlook for the Three Month Period
Ending December 31, 2016
- The Company expects third quarter
fiscal 2017 net sales to be in the range of down approximately (2)%
to flat versus same period last year. The Company expects diluted
earnings per share in the range of $4.16 to $4.28 compared to $4.78
for the same period last year.
- As a reminder, last year’s third
quarter included the reversal of performance based compensation
which created an SG&A benefit last year of $0.38 in the third
quarter.
Non-GAAP Financial Measures
We present certain Non-GAAP financial measures in this press
release, including Non-GAAP gross margin, Non-GAAP SG&A
expenses, Non-GAAP operating income and Non-GAAP diluted earnings
per share, to provide information that may assist investors in
understanding our financial results and assessing our prospects for
future performance. 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 restructuring charges relating
to retail store closures and office consolidations. In particular,
we believe that the exclusion of certain costs and charges allows
for a more meaningful comparison of our results from period to
period. These Non-GAAP 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. These Non-GAAP
financial results 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 financial
measures to the most directly comparable GAAP measures has been
provided under the heading “Reconciliation of GAAP Financial
Measures to Non-GAAP Financial Measures” in the financial statement
tables included below.
Conference Call Information
The Company’s conference call to review the results for the
second quarter 2017 will be broadcast live today, Thursday, October
27, 2016 at 4:30 pm Eastern Time and hosted at www.deckers.com. You
can access the broadcast by clicking on the “Investor Information”
tab and then clicking on the microphone icon at the top of the
page.
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 a 40-year history of 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 federal securities laws, which statements are
subject to considerable risks and uncertainties. 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 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 and earnings per share, as well as
statements regarding our product and brand strategies, marketing
plans and market opportunities. We have attempted to identify
forward-looking statements by using words such as "anticipate,"
"believe," “could,” "estimate," "expect," "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, 2016, as well as in our other filings with the
Securities and Exchange Commission.
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
(Loss) (Unaudited) (Amounts in thousands, except for
per share data)
Three-month period ended Six-month period
ended September 30, September 30, 2016
2015 2016 2015 Net sales $ 485,944 $
486,855 $ 660,337 $ 700,660 Cost of sales 269,519 272,742
367,660 399,951 Gross profit 216,425 214,113
292,677 300,709 Selling, general and administrative expenses
162,402 162,900 316,973 313,204 Income
(loss) from operations 54,023 51,213 (24,296 ) (12,495 )
Other expense, net 1,551 1,371 2,113 2,345
Income (loss) before income taxes 52,472 49,842 (26,409 )
(14,840 ) Income tax expense (benefit) 13,167 13,465
(6,796 ) (3,890 ) Net income (loss) 39,305 36,377 (19,613 )
(10,950 ) Other comprehensive (loss) income, net of tax
Unrealized (loss) gain on foreign currency hedging (890 ) 1,027
2,019 (436 ) Foreign currency translation adjustment (856 ) (1,091
) 2,843 1,675 Total other comprehensive (loss) income
(1,746 ) (64 ) 4,862 1,239 Comprehensive income
(loss) $ 37,559 $ 36,313 $ (14,751 ) $ (9,711 )
Net income (loss) per share: Basic $ 1.23 $ 1.12 $ (0.61 ) $
(0.33 ) Diluted $ 1.21 $ 1.11 $ (0.61 ) $ (0.33 )
Weighted-average common shares outstanding: Basic 32,057 32,511
32,041 32,812 Diluted 32,422 32,775 32,041 32,812
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
(Amounts in thousands)
September 30, March 31, Assets
2016 2016 Current assets: Cash and cash
equivalents $ 110,047 $ 245,956 Trade accounts receivable, net
300,159 160,154 Inventories 578,027 299,911 Other current assets
86,796 79,744 Total current assets 1,075,029 785,765
Property and equipment, net 246,723 237,246 Other noncurrent assets
250,849 255,057 Total assets $ 1,572,601 $ 1,278,068
Liabilities and Stockholders' Equity Current
liabilities: Short-term borrowings $ 278,026 $ 67,475 Trade
accounts payable 202,917 100,593 Other current liabilities 64,918
70,430 Total current liabilities 545,861 238,498 Long-term
liabilities: Mortgage payable 32,366 32,631 Other liabilities
37,100 39,468 Total long-term liabilities 69,466 72,099
Total stockholders' equity 957,274 967,471 Total liabilities
and stockholders' equity $ 1,572,601 $ 1,278,068
Reconciliation of
GAAP Financial Measures to Non-GAAP Financial
Measures
DECKERS BRANDS - GAAP
to Non-GAAP Reconciliation For the Three Months Ended
September 30, 2016 (in thousands, except per share data)
(unaudited)
Three-month period ended September 30, 2016 Non-GAAP
GAAP Measures Restructuring Measures (As
Reported) Charges (1) (Excluding Items) (2) Net
sales $ 485,944 $ 485,944 Cost of sales 269,519
269,519 Gross profit 216,425 216,425 Selling, general and
administrative expenses 162,402 (903 ) 161,499 Income (loss) from
operations 54,023 903 54,926 Other expense, net 1,551
1,551 Income (loss) before income taxes 52,472 53,375 Income
tax expense (benefit) 13,167 13,394 Net income (loss) $
39,305 $ 39,981 Net income (loss) per share: Basic $
1.23 $ 1.25 Diluted $ 1.21 $ 1.23 Weighted-average common
shares outstanding: Basic 32,057 32,057 Diluted 32,422 32,422
(1) Amounts as of September 30, 2016
reflect charges related to restructuring costs as a result of
retail store closures and office consolidations.
(2) The tax rate applied to the Non-GAAP
measures is 25.1%, which is the same as the GAAP tax rate for the
fiscal quarter ended September 30, 2016.
Reconciliation of
GAAP Financial Measures to Non-GAAP Financial
Measures
DECKERS BRANDS - GAAP
to Non-GAAP Reconciliation For the Six Months Ended
September 30, 2016 (in thousands, except per share data)
(unaudited)
Six-month period ended September 30, 2016 Non-GAAP
GAAP Measures Restructuring Measures (As
Reported) Charges (1) (Excluding Items) (2) Net
sales $ 660,337 $ 660,337 Cost of sales 367,660
367,660 Gross profit 292,677 292,677 Selling, general
and administrative expenses 316,973 (2,635 ) 314,338
Income (loss) from operations (24,296 ) 2,635 (21,661 )
Other expense, net 2,113 2,113 Income (loss)
before income taxes (26,409 ) (23,774 ) Income tax expense
(benefit) (6,796 ) (6,118 ) Net income (loss) $ (19,613 )
$ (17,656 ) Net income (loss) per share: Basic $
(0.61 ) $ (0.55 ) Diluted $ (0.61 ) $ (0.55 )
Weighted-average common shares outstanding: Basic 32,041 32,041
Diluted 32,041 32,041
(1) Amounts as of September 30, 2016
reflect charges related to restructuring costs as a result of
retail store closures and office consolidations.
(2) The tax rate applied to the Non-GAAP
measures is 25.7%, which is the same as the GAAP tax rate for the
six-month period ended September 30, 2016.
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Deckers BrandsSteve Fasching, VP, Strategy & Investor
Relations805-967-7611
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