Deckers Brands reports 5.4 percent net sales rise in Q3

Deckers Brands net sales increase of 5.4 percent to 506.2 million dollars on a constant currency basis for the second quarter of fiscal 2016 which ended September 30, 2015. On a reported basis, net sales increased 1.4 percent to a record 486.9 million dollars.

“We delivered record second quarter revenue and continue to track towards achieving our financial objectives for the fiscal year,” commented Angel Martinez, Chief Executive Officer and Chair of the Board of Directors, adding, “I'm very pleased with our current performance which wouldn't have been possible without the strategic investments we've made in key areas of the business over the past several years.”

Positive performance by brands

Gross margin was 44 percent compared to 46.6 percent for the same period last year. Diluted earnings per share were 1.11 dollars compared to 1.17 dollars for the same period last year. On a constant currency basis, diluted earnings per share increased 21.4 percent to 1.42 dollars.

UGG brand net sales increased 0.9 percent to 421.1 million dollars compared to 417.1 million dollars for the same period last year. On a constant currency basis, sales increased approximately 5.3 percent. The increase in sales was primarily driven by an increase in domestic wholesale sales, partially offset by a decrease in global Direct-to-Consumer sales primarily driven by a decrease in tourist traffic in the U.S. as a result of the strengthening dollar.

Teva brand net sales decreased 13.6 percent to 17.9 million dollars compared to 20.7 million dollars for the same period last year. On a constant currency basis, sales decreased approximately 11.8 percent. The decrease in sales was driven by a decrease in global wholesale and distributor sales.

Sanuk brand net sales decreased 9 percent to 17.3 million dollars compared to 19 million dollars for the same period last year. The decrease in sales was driven by a decrease in global wholesale sales, partially offset by an increase in global Direct-to-Consumer sales.

Combined net sales of the company's other brands increased 30.5 percent to 30.6 million dollars compared to 23.5 million dollars for the same period last year. The increase was primarily attributable to a 6.9 million dollars increase in sales for the Hoka One One brand compared to the same period last year.

Segment sales review

Wholesale and distributor sales increased 1.2 percent to 400.3 million dollars compared to 395.5 million dollars for the same period last year. On a constant currency basis, sales increased approximately 4.9 percent. The increase in sales was driven by an increase in domestic wholesale sales, partially offset by a decrease in international wholesale and distributor sales.

Direct-to-Consumer sales increased 2.1 percent to 86.6 million dollars compared to 84.8 million dollars for the same period last year. On a constant currency basis, sales increased 7.5 percent. This increase was primarily driven by Direct-to-Consumer growth in the Hoka, Sanuk, and Teva brands. Direct-to-Consumer comparable sales were down 5.2 percent over the same period last year, primarily driven by a decrease in tourist traffic in the US as a result of the strengthening dollar.

Domestic sales increased 4.3 percent to 301.6 million dollars compared to 289.1 million dollars for the same period last year. International sales decreased 3.1 percent to 185.3 million dollars compared to 191.2 million dollars for the same period last year. On a constant currency basis, sales increased 7.1 percent to 204.6 million dollars.

Full fiscal 2016 outlook

For the twelve month period ending March 31, 2016, the company expects constant currency revenues to be approximately 2.01 billion dollars, reflecting a 10.5 percent increase over the twelve month period ended March 31, 2015. On a reported basis, revenues are expected to be 1.96 billion dollars, or an increase of 8 percent.

Gross profit margin is expected to be approximately 48 percent on a reported basis, down 30 basis points from fiscal 2015 as a result of expectations regarding a stronger US dollar, partially offset by lower input costs and favorable changes in the company's channel mix. The foreign exchange headwind on gross margin is expected to be approximately 120 to 130 basis points.

The company expects fiscal 2016 diluted earnings per share to be approximately 5.73 dollars on a constant currency basis, reflecting an increase of 23 percent over the twelve month period ended March 31, 2015. On a reported basis, earnings per share are expected to be approximately 5.18 dollars, or an increase of 11.2 percent.

The company expects third quarter fiscal 2016 constant currency revenues to be up approximately 11 percent over the same period last year and up approximately 9 percent on a reported basis and fourth quarter revenues to be up approximately 18 percent on a reported basis.