DECK
$74.31
Deckers Outdoor
$1.22
1.67%
Earnings Details
2nd Quarter September 2017
Thursday, October 26, 2017 4:05:05 PM
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Summary

Deckers Outdoor Beats

Deckers Outdoor (DECK) reported 2nd Quarter September 2017 earnings of $1.54 per share on revenue of $482.5 million. The consensus earnings estimate was $1.03 per share on revenue of $437.6 million. The Earnings Whisper number was $1.08 per share. Revenue fell 0.7% compared to the same quarter a year ago.

The company said it expects third quarter earnings of $3.65 to $3.75 per share and fiscal 2018 earnings of $4.15 to $4.30 per share. The company's previous guidance was for fiscal year earnings of $3.95 to $4.15 per share . The current consensus earnings estimate is $4.11 per share for the quarter ending December 31, 2017 and $4.12 per share for the year ending March 31, 2018.

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
$1.54
Earnings Whisper
$1.08
Consensus Estimate
$1.03
Reported Revenue
$482.5 Mil
Revenue Estimate
$437.6 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Deckers Brands Reports Second Quarter Fiscal 2018 Financial Results and Raises Guidance for Full Year Fiscal 2018

Gross margin expanded 220 basis points in the quarter

Fiscal 2018 sales now anticipated to increase between 1% to 2% over fiscal 2017 and adjusted earnings per share expected to be in the range of $4.15 to $4.30

--Share repurchase authorization increased to $400 million

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, 2017.

Throughout this release, references to Non-GAAP financial measures exclude the impact of certain restructuring and other charges. Additional information regarding these Non-GAAP financial measures is set forth under the heading "Non-GAAP Financial Measures" below.

"I am very pleased with the progress we have made, and continue to make, executing on our operating profit improvement plan. Our goal remains to achieve an incremental $100 million of operating profit by the end of our fiscal year 2020, and operating margins of at least 13% by focusing on full-priced selling, driving supply chain efficiencies, implementing process improvements, reducing indirect spend, and closing retail stores that do not meet our financial objectives," said Dave Powers, President and Chief Executive Officer. "This quarter is yet another testament to the power of our transformation, as we generated a 220 basis point increase in gross margin and earnings per share that were ahead of expectations. As we head into the holiday selling season with a stronger product lineup and cleaner channel inventories compared to a year ago, we are confident that Deckers is well positioned to achieve our near- and medium-term financial targets and deliver increased shareholder value."

"In light of our strong results and our confidence in the back half of the fiscal year, we are increasing our outlook for the year. In addition, I am pleased to announce that the board of directors has authorized a new $335 million share repurchase program. Combined with the $65 million remaining under our current authorization, we now have the ability to repurchase a total of $400 million worth of shares, or approximately 20% of our market capitalization. We intend to aggressively repurchase our shares to reward our long-term shareholders with accelerated EPS growth."

Second Quarter Fiscal 2018 Financial Review

Net sales declined 0.7% to $482.5 million compared to $485.9 million for the same period last year. On a constant currency basis, net sales decreased 0.3%.

Gross margin was 46.7% compared to 44.5% for the same period last year.

SG&A expenses were $157.8 million compared to $162.4 million for the same period last year. Non-GAAP SG&A expenses were $157.3 million.

Operating income was $67.4 million compared to $54.0 million for the same period last year. Non-GAAP operating income was $67.8 million.

Diluted earnings per share was $1.54 compared to $1.21 for the same period last year. Non-GAAP diluted earnings per share was $1.54.

Brand Summary

UGG(R) brand net sales for the second quarter declined 2.9% to $400.4 million compared to $412.2 million for the same period last year.

HOKA ONE ONE(R) brand net sales for the second quarter increased 34.4% to $40.6 million compared to $30.2 million for the same period last year.

Teva(R) brand net sales for the second quarter increased 24.9% to $21.4 million compared to $17.1 million for the same period last year.

Sanuk(R) brand net sales for the second quarter decreased 19.3% to $15.2 million compared to $18.9 million for the same period last year.

Channel Summary (included in the brand sales numbers above)

Wholesale net sales for the second quarter declined 2.2% to $391.2 million compared to $399.9 million for the same period last year.

DTC net sales for the second quarter increased 6.2% to $91.3 million compared to $86.0 million for the same period last year. DTC comparable sales for the second quarter increased 3.7% over the same period last year.

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

Domestic net sales for the second quarter decreased 3.1% to $302.7 million compared to $312.2 million for the same period last year.

International net sales for the second quarter increased 3.5% to $179.8 million compared to $173.7 million for the same period last year.

Balance Sheet (September 30, 2017 as compared to September 30, 2016)

Cash and cash equivalents were $230.6 million compared to $110.0 million.

Deckers had $165.3 million in outstanding borrowings compared to $310.4 million.

-- Inventories decreased 3.9% to $555.6 million from $578.0 million.

Full Year Fiscal 2018 Outlook for the Twelve Month Period Ending March 31, 2018

Deckers now expects fiscal year 2018 results to be:

Net sales are expected to be in the range of up approximately 1% to up 2% versus last year.

-- Gross margin is expected to be approximately 47.5%.

SG&A expenses as a percentage of sales are projected to be approximately 37%.

Non-GAAP diluted earnings per share are expected to be in the range of $4.15 to $4.30. This excludes any charges that may occur from additional store closures, restructuring and other charges.

The earnings per share guidance does not assume any future share repurchase.

Third Quarter Fiscal 2018 Outlook for the Three Month Period Ending December 31, 2017

The Company expects third quarter fiscal 2018 net sales to be in the range of $735.0 million to $745.0 million.

Non-GAAP diluted earnings per share are expected to be in the range of $3.65 to $3.75. This excludes any charges that may occur from additional store closures, restructuring and other charges.

The earnings per share guidance does not assume any future share repurchase.

Non-GAAP Financial Measures

We present certain Non-GAAP financial measures in this press release, including constant currency, 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, and other charges relating to inventory write-downs, severance and asset impairments. 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. For example, in order to calculate our constant currency information, we calculate 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 balance sheets. 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 2018 will be broadcast live today, Thursday, October 26, 2017 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 cost savings initiatives, product and brand strategies, and marketing and distribution plans. 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, 2017, 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,
2017
2016
2017
2016
Net sales
$ 482,460
$ 485,944
$ 692,177
$ 660,337
Cost of sales
257,343
269,519
376,435
367,660
Gross profit
225,117
216,425
315,742
292,677
Selling, general and administrative expenses
157,762
162,402
304,643
316,973
Income (loss) from operations
67,355
54,023
11,099
(24,296 )
Other expense, net
1,034
1,551
1,365
2,113
Income (loss) before income taxes
66,321
52,472
9,734
(26,409 )
Income tax expense (benefit)
16,762
13,167
2,296
(6,796 )
Net income (loss)
49,559
39,305
7,438
(19,613 )
Other comprehensive income (loss), net of tax
Unrealized (loss) gain on foreign currency hedging
(911 )
(890 )
(4,683 )
2,019
Foreign currency translation adjustment
2,968
(856 )
4,518
2,843
Total other comprehensive income (loss)
2,057
(1,746 )
(165 )
4,862
Comprehensive income (loss)
$
51,616
$
37,559
$
7,273
$ (14,751 )
Net income (loss) per share:
Basic
$
1.55
$
1.23
$
0.23
$
(0.61 )
Diluted
$
1.54
$
1.21
$
0.23
$
(0.61 )
Weighted-average common shares outstanding:
Basic
32,015
32,057
32,003
32,041
Diluted
32,272
32,422
32,256
32,041
Reconciliation of GAAP Financial Measures to Non-GAAP
Financial Measures
DECKERS BRANDS - GAAP to Non-GAAP Reconciliation
For the Three Months Ended September 30, 2017 and September 30,
2016
(Amounts in thousands, except for per share data)
(Unaudited)
Three-month period ended September 30, 2017
Non-GAAP
GAAP Measures
Measures
(As Reported)
Other Charges (1)
(Excluding Items) (2)
Net sales
$
482,460
$
482,460
Cost of sales
257,343
257,343
Gross profit
225,117
225,117
Selling, general and administrative expenses
157,762
(464 )
157,298
Income from operations
67,355
464
67,819
Other expense, net
1,034
1,034
Income before income taxes
66,321
66,785
Income tax expense
16,762
17,084
Net income
$
49,559
$
49,701
Net income per share:
Basic
$
1.55
$
1.55
Diluted
$
1.54
$
1.54
Weighted-average common shares outstanding:
Basic
32,015
32,015
Diluted
32,272
32,272
(1) Amounts as of September 30, 2017 reflect other charges related
to organizational changes, the strategic review process and the
contested annual meeting.
(2) The tax rate applied to the Non-GAAP measures is 25.6% for the
fiscal quarter ended September 30, 2017.
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
(900 )
161,502
Income from operations
54,023
900
54,923
Other expense, net
1,551
1,551
Income before income taxes
52,472
53,372
Income tax expense
13,167
13,394
Net income
$
39,305
$
39,978
Net income 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 three-month period 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, 2017 and September 30, 2016
(Amounts in thousands, except for per share data)
(Unaudited)
Six-month period ended September 30, 2017
Non-GAAP
GAAP Measures
Restructuring and
Measures
(As Reported)
Other Charges (1)
(Excluding Items) (2)
Net sales
$
692,177
$
692,177
Cost of sales
376,435
376,435
Gross profit
315,742
315,742
Selling, general and administrative expenses
304,643
(2,408 )
302,235
Income from operations
11,099
2,408
13,507
Other expense, net
1,365
1,365
Income before income taxes
9,734
12,142
Income tax expense
2,296
3,357
Net income
$
7,438
$
8,785
Net income per share:
Basic
$
0.23
$
0.27
Diluted
$
0.23
$
0.27
Weighted-average common shares outstanding:
Basic
32,003
32,003
Diluted
32,256
32,256
(1) Amounts as of September 30, 2017 reflect other charges related
to organizational changes, the strategic review process and the
contested annual meeting.
(2) The tax rate applied to the Non-GAAP measures is 27.6% for the
six months ended September 30, 2017.
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
(2,632 )
314,341
Loss from operations
(24,296 )
2,632
(21,664 )
Other expense, net
2,113
2,113
Loss before income taxes
(26,409 )
(23,777 )
Income tax benefit
(6,796 )
(6,118 )
Net loss
$
(19,613 )
$
(17,659 )
Net 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.
DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
September 30,
March 31,
Assets
2017
2017
Current assets:
Cash and cash equivalents
$
230,586
$
291,764
Trade accounts receivable, net
306,573
158,643
Inventories, net
555,560
298,851
Other current assets
60,192
71,563
Total current assets
1,152,911
820,821
Property and equipment, net
216,980
225,531
Other noncurrent assets
150,397
145,428
Total assets
$
1,520,288
$
1,191,780
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings
$
133,474
$
549
Trade accounts payable
244,846
95,893
Other current liabilities
95,727
62,609
Total current liabilities
474,047
159,051
Long-term liabilities:
Mortgage payable
31,803
32,082
Other liabilities
45,612
46,392
Total long-term liabilities
77,415
78,474
Total stockholders’ equity
968,826
954,255
Total liabilities and stockholders’ equity
$
1,520,288
$
1,191,780

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SOURCE: Deckers Brands

Deckers Brands
Investor Contact:
Steve Fasching | VP, Strategy & Investor Relations
805.967.7611