Deckers Outdoor Corporation Reports Fourth Quarter and Fiscal 2012 Financial Results

Deckers Outdoor Corporation Reports Fourth Quarter and Fiscal 2012 Financial Results

Fourth Quarter Sales Increased 2.2% to a Record $617.3 Million
Company Reports Fourth Quarter Diluted Earnings Per Share of $2.77
Fiscal 2012 Sales Increased 2.7% to a Record $1.414 Billion
Company Reports Fiscal 2012 Diluted Earnings Per Share of $3.45


GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Outdoor Corporation (NASDAQGS: DECK) today announced financial results for the fourth quarter and fiscal year ended December 31, 2012.

Fourth Quarter Review

  • Net sales increased 2.2% to a record $617.3 million compared to $603.9 million for the same period last year.

  • Gross margin was 46.3% compared to 51.0% for the same period last year.

  • Diluted earnings per share was $2.77 compared to $3.18 for the same period last year, which takes into account repurchases of the Company's common stock under its stock repurchase program.

  • UGG® brand sales increased 2.9% to $584.8 million compared to $568.5 million for the same period last year.

  • Sanuk® brand sales increased 39.2% to $15.3 million compared to $11.0 million for the same period last year.

  • Teva® brand sales decreased 29.5% to $13.7 million compared to $19.4 million for the same period last year.

  • Retail sales increased 37.1% to $135.5 million compared to $98.8 million for the same period last year; same store sales decreased 3.4% for the thirteen weeks ending December 30, 2012 compared to the thirteen weeks ending January 1, 2012.

  • eCommerce sales increased 30.6% to $87.6 million compared to $67.1 million for the same period last year.

  • Domestic sales decreased 2.1% to $446.7 million compared to $456.3 million for the same period last year.

  • International sales increased 15.6% to $170.5 million compared to $147.6 million for the same period last year.

Fiscal 2012 Review

  • Net sales increased 2.7% to a record $1.414 billion compared to $1.377 billion last year.

  • Gross margin was 44.7% compared to 49.3% last year.

  • Diluted earnings per share was $3.45 compared to $5.07 last year, which takes into account repurchases of the Company's common stock under its stock repurchase program.

  • UGG brand sales decreased 1.5% to $1.184 billion compared to $1.202 billion last year.

  • Sanuk brand net sales were $94.0 million for the fiscal year ending December 31, 2012 and were $26.6 million for the six months commencing on July 1, 2011, the acquisition date, and ending December 31, 2011.

  • Teva brand sales decreased 7.4% to $115.5 million compared to $124.8 million last year.

  • Retail sales increased 30.1% to $246.0 million compared to $189.0 million last year; same store sales decreased 3.4% for the 52 weeks ending December 30, 2012 compared to the 52 weeks ending January 1, 2012.

  • eCommerce sales increased 22.6% to $130.6 million compared to $106.5 million last year.

  • Domestic sales increased 2.9% to $973.0 million compared to $945.1 million last year.

  • International sales increased 2.1% to $441.4 million compared to $432.2 million last year.

"There are several aspects of our fourth quarter performance that we believe underscore the health and relevancy of the UGG brand," stated Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. "We experienced strong sales for the UGG brand on our eCommerce websites while at the same time it was widely reported that "UGG" was one of the most searched terms on the internet during the holiday season. Our fourth quarter retail store performance improved versus third quarter trends, while at the same time, weekly sell-through in our domestic wholesale channel accelerated as the fourth quarter progressed culminating in a period of robust full-price selling in late December 2012. While cancellations were higher as a result of the late start to the season, we believe the improved trends we witnessed as temperatures got colder helped our customer account base with improved inventory levels versus a year ago. In the U.K., wholesale sales grew double digits as better than expected sell-through resulted in a meaningful level of reorders during the quarter. Lastly, we are pleased with the performance of the Sanuk brand as demonstrated by double digit sales growth in the fourth quarter."

Division Summary

UGGBrand

UGG brand net sales for the fourth quarter increased 2.9% to $584.8 million compared to $568.5 million for the same period last year. The increase in sales was driven by higher sales from new retail store openings and an increase in global eCommerce sales, partially offset by lower domestic and international wholesale sales and a decline in same store sales. For the full year, UGG brand net sales decreased 1.5% to $1.184 billion compared to $1.202 billion last year.

SanukBrand

Sanuk brand net sales for the fourth quarter increased 39.2% to $15.3 million compared to $11.0 million for the same period last year. The increase in sales was primarily attributable to higher domestic wholesale and eCommerce sales. Sanuk brand net sales were $94.0 million for the fiscal year ending December 31, 2012 and were $26.6 million for the six months commencing on July 1, 2011, the acquisition date, and ending December 31, 2011.

TevaBrand

Teva brand net sales for the fourth quarter decreased 29.5% to $13.7 million compared to $19.4 million for the same period last year. The sales decline was driven primarily by a decrease in international distributor sales. For the full year, Teva brand sales decreased 7.4% to $115.5 million compared to $124.8 million last year.

OtherBrands

Combined net sales of the Company's other brands decreased 29.6% to $3.5 million for the fourth quarter compared to $5.0 million for the same period last year. The decrease in sales was primarily attributable to the impact of phasing out the Simple® brand, which we ceased distributing at the end of 2011. For the full year, combined net sales of the Company's other brands decreased 11.4% to $21.3 million compared to $24.1 million last year. Excluding the impact of the Simple brand, combined net sales of the Company's other brands increased 43.2% to $3.5 million for the fourth quarter compared to $2.5 million for the same period last year and full year combined net sales increased 69.4% to $21.2 million.

Retail Stores

Sales for the global retail store business, which are included in the brand sales numbers above, increased 37.1% to $135.5 million for the fourth quarter compared to $98.8 million for the same period last year. This increase was driven by 30 new stores opened after the fourth quarter of 2011, partially offset by a same store sales decrease of 3.4% for the thirteen weeks ending December 30, 2012 compared to the thirteen weeks ending January 1, 2012. For the full year, sales for the retail store business increased 30.1% to $246.0 million compared to $189.0 million last year.

eCommerce

Sales for the global eCommerce business, which are included in the brand sales numbers above, increased 30.6% to $87.6 million for the fourth quarter compared to $67.1 million for the same period last year. The sales increase was driven primarily by strong domestic and international sales for the UGG brand, increased domestic sales of the Sanuk brand, plus the addition of new international eCommerce websites. For the full year, sales for the eCommerce business increased 22.6% to $130.6 million compared to $106.5 million last year.

Stock Repurchase Program

During the fourth quarter of 2012, the Company repurchased approximately 932,000 shares of its common stock, at an average price per share of $38.64, for a total of $36.0 million under its stock repurchase program. This brings the Company's total stock repurchases over the past year to $220.7 million. As of December 31, 2012, the Company had $79.3 million authorized repurchase funds remaining under its $200.0 million stock repurchase program announced in July 2012. Depending on market conditions and other factors, such repurchases may be commenced or suspended at any time without prior notice.

Balance Sheet

At December 31, 2012, cash and cash equivalents were $110.2 million compared to $263.6 million at December 31, 2011. The Company had $33.0 million in outstanding borrowings under its credit facility at December 31, 2012 and no outstanding borrowings at December 31, 2011. The decrease in cash and cash equivalents and the increase in outstanding borrowings are primarily attributable to $220.7 million of cash payments for stock repurchases and $61.6 million of cash expenditures primarily related to retail expansion and the Company's new headquarters facility, offset in part by cash provided by operations.

Inventories at December 31, 2012 increased 18.5% to $300.2 million from $253.3 million at December 31, 2011. By brand, UGG inventory increased $46.5 million to $248.3 million at December 31, 2012, Teva inventory decreased $1.4 million to $27.8 million at December 31, 2012, Sanuk inventory decreased $1.6 million to $14.5 million at December 31, 2012, and the other brands' inventory increased $3.4 million to $9.6 million at December 31, 2012.

Full-Year 2013 Outlook

  • Based upon current visibility, the Company expects full year revenues to increase approximately 7% over 2012 levels.

  • The Company expects full year diluted earnings per share to increase approximately 5% over 2012 levels. This guidance assumes a gross profit margin of approximately 46.5% and an operating margin of approximately 12.5%.

  • The Company expects full year UGG brand revenues to increase approximately 4% over 2012 levels.

  • The Company expects full year Teva brand revenues to increase approximately 6% over 2012 levels.

  • The Company expects full year Sanuk brand revenues to increase approximately 15% over 2012 levels.

  • Combined full year net sales of the Company's other brands are expected to be approximately $40 million.

  • Fiscal 2013 guidance also assumes that the Company's effective tax rate will be approximately 32%.

First Quarter Outlook

  • The Company currently expects first quarter 2013 revenues to remain flat as compared to first quarter 2012 levels, and expects to report a first quarter 2013 diluted loss per share of approximately $(0.12) compared to a diluted earnings per share of $0.20 reported in the first quarter of 2012.

  • 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 the 24 new stores that were not open until the second half of 2012. Therefore, we expect our earnings to decline in the first half of 2013 as compared to the first half of 2012, which are typically our lowest volume sales quarters, and increase over 2012 in the back half of the year.

Mr. Martinez concluded, "We exited a very challenging year with valuable insights that we believe will serve the Company well in 2013 and beyond. We've made modifications to the UGG brand footwear collections to broaden accessibility, reduce exposure to sheepskin price fluctuations, and better bridge the summer and holiday selling seasons. We've adjusted receipts and reduced future purchase commitments as we continue to work diligently to better align inventory and sales growth. At the same time, we're making strategic investments that we believe are integral to our long-term success. These include expanding our global retail footprint, adding key personnel to our Asian subsidiaries, and enhancing our sales and marketing programs. We believe continued focus on the success of the Sanuk brand in 2013 will help improve overall margins. As always, creating shareholder value remains our top priority and we believe the combination of our growth strategies and recent share repurchases will yield positive returns."

Conference Call Information

The Company's conference call to review fourth quarter 2012 results will be broadcast live over the internet today, Thursday, February 28, 2013 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 "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, that concern matters that involve risks and uncertainties that could cause actual results to differ materially from those anticipated or projected in the forward-looking statements. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this press release, including statements regarding our future financial performance and business strategies, are forward-looking statements. We have attempted to identify forward-looking statements by using words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "project," "plan", "predict", "should," "will," and similar expressions, or the negative of these expressions, as they relate to us, our management and our industry, to identify forward-looking statements. We have based our forward-looking statements on our current expectations and projections about trends affecting our business and industry and other future events. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. As a result, actual results may differ materially from the results stated in or implied by our forward-looking statements. Some of the risks, uncertainties and assumptions that may cause actual results to differ from these forward-looking statements include, but are not limited to: changes in economic or market conditions; the financial success of our customers and the risk of losing one or more of our key customers; our ability to adequately protect our intellectual property rights and deter counterfeiting; the sensitivity of our sales to seasonality and the effect of weather conditions; the quality and price of raw materials, most notably sheepskin; our ability to realize returns on our new and existing retail stores; our ability to accurately forecast consumer demand; our ability to anticipate fashion trends; our ability to successfully implement our growth strategies, including enhancing the position of our brands and expanding our distribution channels; the impairment of our goodwill and other intangible assets; our dependence on independent manufacturers located outside of the U.S., and the challenge of maintaining a continuous supply of quality finished goods; risks of conducting business outside the U.S., including foreign currency and global liquidity risks; our ability to protect sensitive customer and company information and prevent the failure or interruption of key business processes; our ability to attract and retain key personnel; the loss of our warehouses; the international markets in which we sell our products are subject to a variety of laws and political and economic risks; risks related to international trade, import regulations and security procedures, liquidity and market risks for our cash and cash equivalents; risks associated with our revolving credit facility, including negative covenants that may restrict our ability to take certain actions; tax laws applicable to our business are very complicated and we could be subject to additional income tax liabilities; our ability to compete effectively with our competition; the effect of existing and future litigation on our business; and the volatility of the price of our common stock. Certain of these risks and uncertainties are more fully described in the section entitled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which we filed with the Securities and Exchange Commission, or the SEC, on February 29, 2012, as well as in our other filings with the SEC. In addition, actual results may differ as a result of additional risks and uncertainties of which we are currently unaware or which we do not currently view as material to our business.

You are cautioned not to place undue reliance on forward-looking statements contained in this press release, which speak only as of the date of this press release. You should read this press release with the understanding that our future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements and we expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations, except as required by applicable law or the rules of the NASDAQ Stock Market.

DECKERS OUTDOOR CORPORATION

AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(Amounts in thousands)

December 31,

December 31,

Assets

2012

2011

Current assets:

Cash and cash equivalents

$

110,247

263,606

Trade accounts receivable, net

190,756

193,375

Inventories

300,173

253,270

Prepaid expenses

14,092

8,697

Other current assets

59,028

84,540

Deferred tax assets

17,290

14,414

Total current assets

691,586

817,902

Property and equipment, net

125,370

90,257

Goodwill

126,267

120,045

Other intangible assets, net

98,423

94,449

Deferred tax assets

13,372

13,223

Other assets

13,046

10,320

Total assets

$

1,068,064

1,146,196

Liabilities and Stockholders' Equity

Current liabilities:

Short-term borrowings

$

33,000

-

Trade accounts payable

133,457

110,853

Accrued payroll

15,896

32,594

Other accrued expenses

59,597

57,744

Income taxes payable

25,067

30,888

Total current liabilities

267,017

232,079

Long-term liabilities

62,246

72,687

Stockholders' equity:

Deckers Outdoor Corporation stockholders' equity:

Common stock

344

387

Additional paid-in capital

139,046

144,684

Retained earnings

600,811

692,595

Accumulated other comprehensive loss

(1,400

)

(1,730

)

Total Deckers Outdoor Corporation stockholders' equity

738,801

835,936

Noncontrolling interest

-

5,494

Total equity

738,801

841,430

Total liabilities and equity

$

1,068,064

1,146,196

DECKERS OUTDOOR CORPORATION

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(Unaudited)

(Amounts in thousands, except for per share data)

Three-month period ended

Twelve-month period ended

December 31,

December 31,

2012

2011

2012

2011

Net sales

$

617,264

603,852

$

1,414,398

1,377,283

Cost of sales

331,270

296,100

782,244

698,288

Gross profit

285,994

307,752

632,154

678,995

Selling, general and administrative expenses

141,880

130,972

445,206

394,157

Income from operations

144,114

176,780

186,948

284,838

Other expense (income), net

2,803

(293

)

2,830

(424

)

Income before income taxes

141,311

177,073

184,118

285,262

Income tax expense

43,254

49,865

55,104

83,404

Net income

98,057

127,208

129,014

201,858

Other comprehensive (loss) income, net of tax

Unrealized gain (loss) on foreign currency hedging

313

(178

)

(633

)

(931

)

Foreign currency translation adjustment

(1,410

)

(999

)

963

(1,952

)

Total other comprehensive (loss) income

(1,097

)

(1,177

)

330

(2,883

)

Comprehensive income

$

96,960

126,031

$

129,344

198,975

Net income attributable to:

Deckers Outdoor Corporation

98,057

124,729

128,866

199,052

Noncontrolling interest

-

2,479

148

2,806

$

98,057

127,208

$

129,014

201,858

Comprehensive income attributable to:

Deckers Outdoor Corporation

96,960

123,552

129,196

196,169

Noncontrolling interest

-

2,479

148

2,806

$

96,960

126,031

$

129,344

198,975

Net income per share attributable to Deckers

Outdoor Corporation common stockholders:

Basic

$

2.81

3.23

$