Deckers reports mixed Q3 results, undertakes realignment for growth

Deckers Brands net sales increased 3.6 percent on a constant currency basis and 1.4 percent on a reported basis to 795.9 million dollars in the third quarter compared to 784.7 million dollars for the same period last year. Diluted earnings per share were 4.78 dollars compared to 4.50 dollars for the same period last year, an increase of 6.2 percent. On a constant currency basis, diluted earnings per share increased 13.6 percent.

"Our third quarter was more challenging than we expected as warm weather and weak store traffic across retail pressured demand," commented Angel Martinez, Chief Executive Officer and Chair of the Board of Directors, adding, "While we have made significant progress diversifying our brands and product lines and transforming our organization over the past several years, we recognise the need to accelerate elements of our long-term strategy. To do this, we are streamlining our organisation.”

Brands except Sanuk performed well during Q3

UGG brand net sales increased 1 percent to 743.2 million dollars compared to 736 million dollars for the same period last year. On a constant currency basis, net sales increased approximately 3.3 percent. The increase in net sales was primarily driven by an increase in global Direct-to-Consumer (DTC) sales and domestic wholesale sales, partially offset by a decrease in international wholesale and distributor sales.

Teva brand net sales increased 3.2 percent to 14.1 million dollars compared to 13.6 million dollars for the same period last year. On a constant currency basis, net sales increased approximately 4.1 percent. The increase in net sales was primarily driven by an increase in international distributor sales, partially offset by a decrease in domestic wholesale sales.

Sanuk brand net sales decreased 17 percent to 17 million dollars compared to 20.5 million dollars for the same period last year. The decrease in net sales was driven by a decrease in global wholesale and international distributor sales, partially offset by an increase in global DTC sales.

Combined net sales of the company's other brands increased 48.4 percent to 21.6 million dollars compared to 14.6 million dollars for the same period last year. The increase was primarily attributable to a 6.7 million dollars increase in net sales for the Hoka One One brand compared to the same period last year.

Performance by different channels

Wholesale and distributor sales decreased 0.1 percent to 444.6 million dollars compared to 445.1 million dollars for the same period last year. On a constant currency basis, sales increased approximately 2 percent. The decrease in reported sales was driven by a decrease in international wholesale and distributor sales due to foreign currency fluctuations, partially offset by an increase in domestic wholesale sales.

DTC sales increased 3.4 percent to 351.3 million dollars compared to 339.6 million dollars for the same period last year. On a constant currency basis, sales increased 5.8 percent. DTC comparable sales decreased 0.9 percent over the same period last year, primarily driven by a decrease in tourist traffic in the US as a result of the strengthening US dollar.

Domestic sales increased 3.2 percent to 543.3 million dollars but international sales decreased 2.2 percent to 252.6 million dollars. On a constant currency basis, sales increased 4.5 percent.

Deckers reports mixed Q3 results, undertakes realignment for growth

Corporate restructuring and other highlights

Deckers is moving the Sanuk brand's operations to its global headquarters in Goleta to enhance the brand's growth prospects and is closing the Sanuk office in Irvine, California. Deckers is also closing the Ahnu office outside San Francisco as it seeks strategic alternatives aimed at optimising the value of the Ahnu brand.

The company is realigning its brands across two groups, Fashion Lifestyle and Performance Lifestyle. The Fashion Lifestyle group will encompass UGG and Koolaburra brands and the Performance Lifestyle group will house Teva, Sanuk and Hoka One One brands.

The company has identified 20 retail stores that are candidates for closure and is engaging a retail consulting firm to assist in assessing and implementing additional retail operational improvements as it continues to strengthen its global store fleet.

Full fiscal 2016 outlook

The company now expects fiscal 2016 constant currency revenues to be approximately 1.91 billion dollars, reflecting a 5 percent increase over the twelve month period ended March 31, 2015. On a reported basis, revenues are expected to be 1.86 billion dollars, or an increase of 2.4 percent. The company expects fiscal 2016 diluted earnings per share to be approximately 5.15 dollars on a constant currency basis, reflecting an increase of 10.5 percent over the twelve month period ended March 31, 2015. On a reported basis, earnings per share are expected to be approximately 4.49 dollars, or a decrease of 3.6 percent.

The company now expects fourth quarter fiscal 2016 constant currency revenues to be up approximately 7.9 percent over the same period last year and up approximately 7.2 percent on a reported basis. Diluted earnings per share are expected to be 0.07 dollar on a reported basis compared to diluted earnings per share of 0.04 dollar for the same period last year.

 

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