Deckers Outdoor Corporation (NASDAQGS: DECK) today announced
record financial results for both the fiscal year and fourth
quarter ended December 31, 2011.
Fiscal 2011 Highlights
- Net sales increased 37.6% to $1.377
billion compared to $1.001 billion last year.
- Gross margin was 49.3% compared to
50.2% last year.
- Diluted EPS increased 25.8% to $5.07
compared to $4.03 last year.
- UGG brand sales increased 37.6% to
$1.202 billion compared to $873.1 million last year.
- Teva® brand sales increased 23.1% to
$124.8 million compared to $101.3 million last year.
- International sales increased 82.4% to
$432.2 million compared to $236.9 million last year.
- Domestic sales increased 23.7% to
$945.1 million compared to $764.1 million last year.
- Retail sales increased 50.4% to $189.0
million compared to $125.6 million last year; same store sales rose
6.3% on top of a 16.6% increase last year.
- eCommerce sales increased 16.0% to
$106.5 million compared to $91.8 million last year.
Fourth Quarter Highlights
- Net sales increased 40.4% to $603.9
million compared to $430.1 million for the same period last
year.
- Gross margin was 51.0% compared to
54.2% for the same period last year.
- Diluted EPS increased 40.1% to $3.18
compared to $2.27 for the same period last year.
- UGG brand sales increased 37.7% to
$568.5 million compared to $412.8 million for the same period last
year.
- Teva brand sales increased 45.9% to
$19.4 million compared to $13.3 million for the same period last
year.
- International sales increased 178.6% to
$147.6 million compared to $53.0 million for the same period last
year.
- Domestic sales increased 21.0% to
$456.3 million compared to $377.1 million for the same period last
year.
- Retail sales increased 36.5% to $98.8
million compared to $72.4 million for the same period last
year.
- eCommerce sales increased 12.6% to
$67.1 million compared to $59.5 million for the same period last
year.
“Our fourth quarter results exceeded expectations and were the
highest in the history of the Company for sales and profitability,”
stated Angel Martinez, President, Chief Executive Officer and Chair
of the Board of Directors. “UGG brand sales once again grew at a
robust pace during the holidays, fueling our record performance and
easily pushing annual sales for the UGG brand above $1 billion for
the first time. We are very pleased with the UGG brand results,
particularly the growing diversity of the sales mix in terms of
product collections, distribution channels, and geographies.”
“We are coming off a very strong period of growth in 2011 driven
by investments in product development, marketing and advertising,
and international and retail expansion” continued Martinez. “We
believe that each of these areas is critical to successfully
developing global lifestyle brands, and we remain committed to
these strategies going forward. With the addition of the Sanuk®
brand this July, we begin a new year with what we believe to be our
strongest brand portfolio ever, with compelling growth prospects
across our entire business as evidenced by our outlook for sales
growth of 15% in 2012. Our projected top-line expansion, which
includes a higher contribution from retail sales and the Sanuk
brand, along with selective price increases compared with 2011, is
helping offset our second consecutive year of significant cost
headwinds mainly related to increases in sheepskin prices. We
continue to pursue all available opportunities to further mitigate
the impact of cost pressures and based on our initial visibility,
we expect to experience relief beginning in 2013.”
Division Summary
UGG Brand
UGG brand net sales for the fourth quarter increased 37.7% to a
record $568.5 million compared to $412.8 million for the same
period last year. The sales gain was primarily attributable to
higher sales in the United Kingdom and Benelux resulting from the
conversion to wholesale operations in these markets, higher
domestic wholesale sales, and an increase in sales at company-owned
retail stores. For the full year, UGG brand net sales increased
37.6% to a record $1.202 billion compared to $873.1 million in
2010.
Teva Brand
Teva brand net sales for the fourth quarter increased 45.9% to a
record $19.4 million compared to $13.3 million for the same period
last year. The sales improvement was driven by an increase in
global shipments of closed-toe footwear. The fourth quarter of 2011
also benefited from the conversion to a wholesale business model in
the United Kingdom. For the full year, Teva brand net sales
increased 23.1% to a record $124.8 million compared to $101.3
million in 2010.
Sanuk Brand
Sanuk brand net sales were $11.0 million for the fourth quarter
of 2011 and $26.6 million for the six months commencing on July 1,
2011, the acquisition date, and ending December 31, 2011.
Other Brands
Combined net sales of the Company’s other brands increased 23.1%
to $5.0 million for the fourth quarter compared to $4.1 million for
the same period last year. For the full year, combined net sales
decreased 9.0% to $24.1 million versus $26.5 million in 2010,
primarily due to the impact of phasing out the Simple® brand, which
we ceased distributing at the end of 2011.
Retail Stores
Sales for the retail store business, which are included in the
brand sales numbers above, increased 36.5% to $98.8 million for the
fourth quarter compared to $72.4 million for the same period last
year. This increase was driven by 18 new stores opened after the
fourth quarter of 2010. For the full year, sales for the retail
store business increased 50.4% to $189.0 million compared to $125.6
million in 2010. For those stores that were open during the full
year of 2010 and 2011, same store sales grew by 6.3%.
eCommerce
Sales for the eCommerce business, which are included in the
brand sales numbers above, increased 12.6% to $67.1 million for the
fourth quarter compared to $59.5 million for the same period last
year. The increase in sales resulted from 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. For the full year, sales for the eCommerce business
increased 16.0% to $106.5 million compared to $91.8 million in
2010.
Balance Sheet
At December 31, 2011, cash and cash equivalents were $263.6
million compared to $445.2 million at December 31, 2010. The
decrease in cash and cash equivalents is primarily attributable to
$125.2 million of cash payments associated with the acquisition of
the Sanuk brand as well as a cash payment of approximately $20
million for land for a new headquarters facility.
Inventories at December 31, 2011 increased 102.6% to $253.3
million from $125.0 million at December 31, 2010. By brand, UGG
inventory increased $107.1 million to $201.8 million at December
31, 2011, Teva inventory increased $6.6 million to $29.3 million at
December 31, 2011, and our other brands’ inventory decreased $1.5
million to $6.1 million at December 31, 2011. Sanuk brand
inventories were $16.1 million at December 31, 2011. The increase
in inventory from a year ago is fairly equally balanced between the
growth in spring orders, inventory for our direct subsidiaries in
the U.K. and Benelux, the addition of the Sanuk brand and growth of
our consumer direct division, carryover product from the holiday
period which will be utilized to fulfill orders during 2012, and an
increase in product costs.
Goodwill and net intangible assets increased to $214.5 million
at December 31, 2011 compared to $24.9 million at December 31,
2010, primarily due to the acquisition of the Sanuk brand.
Stock Repurchase Program
The Company also announced the Board’s approval to repurchase up
to $100 million of the Company’s common stock in the open market or
in privately negotiated transactions, in compliance with the
Securities and Exchange Commission Rule 10b-18 from time to time,
subject to market conditions, applicable legal requirements and
other factors. The program does not obligate the Company to acquire
any particular amount of common stock and the program may be
suspended at any time at the Company’s discretion. The purchases
will be funded from available cash and cash equivalents.
Full-Year 2012 Outlook
- Based upon current visibility, the
Company expects full year revenues to increase approximately 15%
over 2011 levels.
- The Company expects full year diluted
earnings per share to be approximately flat with 2011 levels due
primarily to the increase in sheepskin costs in 2012 compared to
2011, which the Company projects to adversely impact profitability
by approximately $1.40 per diluted share. This guidance assumes a
gross profit margin decline of 200 basis points from 2011 levels
due to an increase in costs of goods sold, partially offset by
selective price increases, an increased contribution from retail
sales, and the addition of the Sanuk brand for the full year. This
guidance also assumes SG&A as a percentage of sales of
approximately 29%.
- Fiscal 2012 guidance assumes
approximately $13 million, or $0.23 per diluted share, associated
with the amortization and accretion expenses related to the Sanuk
acquisition.
- Fiscal 2012 guidance also assumes that
the Company’s effective tax rate will be approximately 31%.
First Quarter Outlook
- The Company currently expects first
quarter 2012 revenue to increase approximately 19% over 2011, and
expects first quarter 2012 diluted earnings per share to be down
approximately 50% compared to 2011.
- First quarter guidance includes
estimates of approximately $3.5 million, or $0.06 per diluted
share, associated with the amortization and accretion expenses
related to the Sanuk acquisition.
- This guidance also assumes a gross
profit margin of approximately 48% and SG&A as a percentage of
sales of approximately 43%.
- 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 18
new stores that were opened in 2011.
The Company’s conference call to review fourth quarter and
fiscal 2011 results will be broadcast live over the internet today,
Thursday, February 23, 2012 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.
About the Company
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. UGG® Australia, Teva®, Sanuk®,
TSUBO®, Ahnu®, and MOZO® are registered trademarks of Deckers
Outdoor Corporation.
Forward Looking Statements
This press release contains statements regarding our
expectations, beliefs and views about our future financial
performance, brand strategies and cost structure 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,"
“assume,” 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, cash flows, the outlook for the Company's markets and the
demand for its products. The forward-looking statements in this
press release regarding our future financial performance, brand
strategies and cost structure 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 results in the future may
differ materially from the future financial performance expected at
the current time. In addition, the results reported in this press
release may differ from actual results filed with the Securities
and Exchange Commission (SEC) for the fiscal year ended December
31, 2011 if material events or circumstances occur between now and
the date of our SEC filing. Those risks and uncertainties include,
but are not limited to: 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, including our ability to
successfully integrate newly acquired brands or convert
international distributors to wholesale models; 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; 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 SEC on March 1, 2011, and
under “Risk Factors” in any subsequent SEC filings. 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
Consolidated Balance Sheets (Unaudited) (Amounts
in thousands)
December 31, December 31, Assets 2011
2010 Current assets: Cash and cash equivalents $
263,606 445,226 Trade accounts receivable, net 193,375 116,663
Inventories 253,270 124,995 Prepaid expenses and other current
assets 93,237 16,846 Deferred tax assets 14,414 12,002 Total
current assets 817,902 715,732 Property and equipment, net
90,257 47,737 Goodwill 120,045 6,507 Other intangible assets, net
94,449 18,411 Deferred tax assets 13,223 15,121 Other assets 10,320
5,486 Total assets $ 1,146,196 808,994
Liabilities and Stockholders' Equity Current
liabilities: Trade accounts payable $ 110,853 67,073 Accrued
payroll 32,594 35,109 Other accrued expenses 57,744 17,515 Income
taxes payable 30,888 25,166 Total current liabilities
232,079 144,863 Long-term liabilities 72,687 8,456
Stockholders' equity: Deckers Outdoor Corporation
stockholders' equity: Common stock 387 386 Additional paid-in
capital 144,684 137,989 Retained earnings 692,595 513,459
Accumulated other comprehensive (loss) income (1,730 ) 1,153 Total
Deckers Outdoor Corporation stockholders' equity 835,936 652,987
Noncontrolling interest 5,494 2,688 Total equity 841,430
655,675 Total liabilities and equity $ 1,146,196
808,994
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
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,
2011 2010 2011
2010 Net sales $ 603,852 430,124 $ 1,377,283
1,000,989 Cost of sales 296,100 196,789 698,288
498,051 Gross profit 307,752 233,335 678,995 502,938
Selling, general and administrative expenses 130,972
92,598 394,157 253,850 Income from operations
176,780 140,737 284,838 249,088 Other income, net 293
246 424 1,021 Income before income taxes
177,073 140,983 285,262 250,109 Income tax expense 49,865
49,628 83,404 89,732 Net income
127,208 91,355 201,858 160,377 Net income attributable to the
noncontrolling interest (2,479 ) (2,124 ) (2,806 ) (2,142 )
Net income attributable to Deckers Outdoor
Corporation
$ 124,729 89,231 $ 199,052 158,235
Net income per share attributable to
Deckers
Outdoor Corporation common
stockholders:
Basic $ 3.23 2.31 $ 5.16 4.10 Diluted $ 3.18 2.27 $
5.07 4.03 Weighted-average common shares
outstanding: Basic 38,633 38,546 38,605 38,615 Diluted 39,188
39,296 39,265 39,292
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