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Deckers Brands Reports Second Quarter Fiscal 2021 Financial Results

·12 min read

GOLETA, Calif., Oct. 29, 2020 /PRNewswire/ -- 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, 2020. The Company also provided an update regarding its response to COVID-19.

  • Second Quarter Fiscal 2021 Revenue Increased 15.0% to a Record $623.5 Million.

  • Second Quarter Fiscal 2021 Earnings Per Share Increased 32.2% to a Record $3.58.

"Deckers' record second quarter performance was the result of our powerful brands, dedicated teams, innovative product launches, and ability to capture demand online," said Dave Powers, President and Chief Executive Officer. "We are thrilled by the resilience of our organization to deliver strong results in the first half of fiscal year 2021. Our brands are operating from a position of strength, and while we continue to navigate the challenges of a global pandemic, the demand for our brands combined with our strong operating model and healthy balance sheet leave Deckers well positioned for the long-term."

Second Quarter Fiscal 2021 Financial Review

  • Net sales increased 15.0% to $623.5 million compared to $542.2 million for the same period last year. On a constant currency basis, net sales increased 14.1%.

  • Gross margin was 51.2% compared to 50.4% for the same period last year.

  • SG&A expenses were $190.4 million compared to $175.9 million for the same period last year.

  • Income from operations was $128.6 million compared to $97.1 million for the same period last year.

  • Income tax expense was $26.4 million compared to $19.4 million for the same period last year.

  • Diluted earnings per share was $3.58 compared to $2.71 for the same period last year.

Brand Summary

  • UGG® brand net sales for the second quarter increased 2.5% to $415.1 million compared to $404.9 million for the same period last year.

  • HOKA ONE ONE® brand net sales for the second quarter increased 83.2% to $143.1 million compared to $78.1 million for the same period last year.

  • Teva® brand net sales for the second quarter increased 20.5% to $27.7 million compared to $23.0 million for the same period last year.

  • Sanuk® brand net sales for the second quarter decreased 11.4% to $9.5 million compared to $10.7 million for the same period last year.

Channel Summary (included in the brand net sales numbers above)

  • Wholesale net sales for the second quarter increased 1.8% to $451.6 million compared to $443.5 million for the same period last year.

  • DTC net sales for the second quarter increased 74.2% to $171.9 million compared to $98.7 million for the same period last year. DTC comparable sales increased 86.2% over the same period last year.

Geographic Summary (included in the brand and channel net sales numbers above)

  • Domestic net sales for the second quarter increased 19.4% to $427.4 million compared to $358.0 million for the same period last year.

  • International net sales for the second quarter increased 6.4% to $196.1 million compared to $184.2 million for the same period last year.

Balance Sheet (September 30, 2020 as compared to September 30, 2019)

  • Cash and cash equivalents were $626.4 million compared to $177.7 million.

  • Inventories were $484.1 million compared to $558.9 million.

  • Outstanding borrowings were $39.9 million compared to $44.2 million.

Stock Repurchase Program

During the second quarter, the Company did not repurchase any shares of its common stock. As of September 30, 2020, the Company had $160 million remaining under its stock repurchase authorizations.

Financial Outlook

Given the ongoing and fluid economic environment related to the COVID-19 pandemic, the Company will not be providing full year guidance for fiscal year 2021.

COVID-19 Update

The Company continues to modify and evolve its operations in response to the COVID-19 pandemic. The Company will continue to review expert agency guidelines, as well as information from health officials and local authorities, while assessing and evolving the appropriate scope of operations and allocation of resources necessary to navigate this dynamic and unprecedented environment.

Company Liquidity
As of September 30, 2020, the Company had a liquidity position of approximately $1.1 billion dollars, which included $626.4 million in cash and cash equivalents and $462.6 million available under its existing revolving credit facilities.

Retail Stores
Approximately 95% of the Company's global stores were open for the entire second quarter. Stores continue to operate with limited capacity due to enhanced health and safety protocols. Given the ongoing and uncertain pandemic conditions, which include meaningful local and regional differences in restrictions imposed on retail store operations, the Company expects some retail store closures within the EMEA region for at least a portion of the third quarter, and anticipates that additional retail stores could be subject to closures or further operating limitations based on expert agency guidance and local authority mandates.

Supply Chain
The Company's distribution center in Moreno Valley, California, as well as other third-party distribution facilities that the Company leverages to service its operations, are currently in operation and supporting ongoing logistics. However, these facilities may continue to operate at limited capacity due to the enhanced health and safety measures now in place. The Company anticipates operational challenges related to capacity constraints, including higher levels of ecommerce shipments during peak wholesale volume periods, as well as increased costs associated with warehouse employee safety and payroll expense. Our third-party logistics providers are also experiencing capacity constraints, which are having an adverse effect on our operations. These include inbound ocean and air transportation, port congestion, as well as outbound truck and parcel transportation.

The Company maintains a network of strategic sourcing partners which includes material vendors and third-party manufacturers. The Company continued to experience certain capacity constraints within its sourcing network during the second quarter, in addition to disruptions related to travel restrictions between country borders and production facilities. While the effects of these disruptions have been mitigated thus far, it is possible that there will be disruptions in the future.

Non-GAAP Financial Measures

In certain instances the Company may present Non-GAAP financial measures, including constant currency, to provide information that may assist investors in understanding its financial results and assessing its prospects for future performance.

The Company believes these Non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to, and may not be indicative of, its core operating results.

The Non-GAAP financial measures presented by the Company 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. For example, in order to calculate constant currency information, the Company calculates the current period financial information using the foreign currency exchange rates that were in effect during the previous comparable period, excluding the effects of foreign currency exchange rate hedges and re-measurements in the condensed consolidated financial statements. Further, the Company reports comparable DTC sales on a constant currency basis for DTC operations that were open throughout the current and prior reporting periods, and may adjust prior reporting periods to conform to current year accounting policies. These Non-GAAP financial measures 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 the Company utilizes such Non-GAAP financial measures in the future, it expects to calculate them using a consistent method from period to period.

Conference Call Information

The Company's conference call to review the results for the second quarter fiscal 2021 will be broadcast live today, Thursday, October 29, 2020, at 4:30 pm Eastern Time and hosted at ir.deckers.com. You can access the broadcast by clicking on the "Investors" tab and then clicking on the webcast box at the top of the page. A replay of the broadcast will be available for at least 30 days following the conference call and can be accessed under the "Quarterly Earnings" section of the "Financials" tab at the aforementioned website.

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 over 40 years of history 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 safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, which statements are subject to considerable risks and uncertainties. Forward-looking statements include all statements other than statements of historical fact contained in this press release, including statements regarding our anticipated financial performance and liquidity position, the scope of operations at our distribution centers, the impacts of COVID-19 on our business and operations, our ability to compete in our industry, our product and brand positioning and strategies, and our potential repurchase of shares. We have attempted to identify forward-looking statements by using words such as "anticipate," "believe," "could," "estimate," "expected," "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, 2020, as well as in our Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. 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. In addition, readers are cautioned that we may make future changes to our business and operations in response to the challenges and impacts of COVID-19, or in response to other business developments, which changes may be inconsistent with our prior forward-looking statements, and which may not be disclosed in future public announcements.

DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(dollar and share data amounts in thousands, except per share data)



Three Months Ended September 30,


Six Months Ended September 30,


2020


2019


2020


2019

Net sales

$

623,525



$

542,205



$

906,694



$

819,044


Cost of sales

304,548



269,181



445,151



416,001


Gross profit

318,977



273,024



461,543



403,043


Selling, general and administrative expenses

190,373



175,893



340,638



337,329


Income from operations

128,604



97,131



120,905



65,714










Other expense (income), net

640



(92)



1,013



(1,904)


Income before income taxes

127,964



97,223



119,892



67,618


Income tax expense

26,410



19,413



26,311



9,159


Net income

101,554



77,810



93,581



58,459


Other comprehensive income (loss)








Unrealized (loss) gain on cash flow hedges, net of tax

(800)



1,497



(447)



1,180


Foreign currency translation gain (loss)

6,395



(3,391)



7,048



(3,323)


Total other comprehensive income (loss)

5,595



(1,894)



6,601



(2,143)


Comprehensive income

$

107,149



$

75,916



$

100,182



$

56,316










Net income per share








Basic

$

3.62



$

2.73



$

3.34



$

2.03


Diluted

$

3.58



$

2.71



$

3.30



$

2.01


Weighted-average common shares outstanding








Basic

28,046



28,483



28,024



28,785


Diluted

28,335



28,705



28,314



29,039


DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(dollar amounts in thousands)



September 30, 2020


March 31, 2020

ASSETS



(AUDITED)

Current assets




Cash and cash equivalents

$

626,414



$

649,436


Trade accounts receivable, net

326,266



185,596


Inventories, net

484,138



311,620


Other current assets

62,918



47,459


Total current assets

1,499,736



1,194,111


Property and equipment, net

207,912



209,037


Operating lease assets

224,151



243,522


Other noncurrent assets

118,549



118,448


Total assets

$

2,050,348



$

1,765,118






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities




Short-term borrowings

$

9,965



$

638


Trade accounts payable

312,932



147,892


Operating lease liabilities

48,728



49,091


Other current liabilities

132,217



103,325


Total current liabilities

503,842



300,946


Mortgage payable

29,938



30,263


Long-term operating lease liabilities

196,861



215,724


Other long-term liabilities

76,743



78,065


Total long-term liabilities

303,542



324,052


Total stockholders' equity

1,242,964



1,140,120


Total liabilities and stockholders' equity

$

2,050,348



$

1,765,118


Deckers Brands Logo (PRNewsfoto/Deckers Brands)
Deckers Brands Logo (PRNewsfoto/Deckers Brands)
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SOURCE Deckers Brands