DECK
$61.96
Deckers Outdoor
($.38)
(.61%)
Earnings Details
2nd Quarter September 2016
Thursday, October 27, 2016 4:04:00 PM
Tweet Share Watch
Summary

Deckers Outdoor Reports In-line

Deckers Outdoor (DECK) reported 2nd Quarter September 2016 earnings of $1.23 per share on revenue of $485.9 million. The consensus earnings estimate was $1.19 per share on revenue of $498.6 million. The Earnings Whisper number was $1.23 per share. Revenue fell 0.2% compared to the same quarter a year ago.

The company said it expects third quarter earnings of $4.16 to $4.28 per share. The current consensus earnings estimate is $4.58 per share for the quarter ending December 31, 2016. The company also said it now expects fiscal 2017 earnings of $4.05 to $4.25 per share. The company's previous guidance was earnings of $4.05 to $4.40 per share and the current consensus earnings estimate is $4.32 per share for the year ending March 31, 2017.

Deckers Outdoor Corp is engaged in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities.

Results
Reported Earnings
$1.23
Earnings Whisper
$1.23
Consensus Estimate
$1.19
Reported Revenue
$485.9 Mil
Revenue Estimate
$498.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Deckers Brands Reports Second Quarter Fiscal 2017 Financial Results

Deckers Brands (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(R) 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(R) 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(R) 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(R) sales. HOKA ONE ONE(R) 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(R), Koolaburra(R), HOKA ONE ONE(R), Teva(R) and Sanuk(R). 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.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20161027006696r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20161027006696/en/

SOURCE: Deckers Brands

Deckers Brands
Steve Fasching, VP, Strategy & Investor Relations
805-967-7611