MOSS ADAMS CAPITAL: Apparel and foowear market monitor highlights notable deals, stock prices and results.
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GOLETA, Calif.--(BUSINESS WIRE)--Deckers Outdoor Corporation (NASDAQGS: DECK - News) 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® brand sales increased 14.2% to $104.4 million versus $91.4 million last year.
Teva® 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.”
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 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.
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.
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.
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.