Deckers Bounces Back

Deckers Bounces Back
Angel Martinez

Deckers Outdoor Corp. is “back from the brink,” said Susquehanna Financial analyst Christopher Svezia on Friday, after the firm reported better-than-expected second-quarter sales and earnings, and maintained its full-year guidance.

The Goleta, Calif.-based firm’s shares were trading 6.5 percent higher on Friday morning, at $44.90.

“Not one salesperson during our checks indicated that consumer interest for the brand has deteriorated. [In fact, they] expected sales to pick up as normal during back to school. With spring sales of Ugg Australia product up in the double digits in the U.S., the brand remains relevant,” said Svezia, who also increased his estimates for the firm’s stock.

Scott Krasik, analyst at BB&T Capital Markets, agreed. Reiterating his buy rating on Deckers, Krasik said, “Reports of the Ugg brand’s demise may have been premature.”

He noted Deckers is undervalued because margins should get a boost next year from lower sheepskin costs. And management’s buyback of 1.8 million shares this year is well timed and demonstrates a vote of confidence in its business.

On a call with analysts, Deckers Chairman, President and CEO Angel Martinez said, “We’re very pleased with this decision [to authorize a new $200 million repurchase program] as we believe that buying back stock at current price levels will provide a significant return on investment.”

Martinez said Ugg’s European retail business has stabilized after a challenging 12 months, as evidenced by a high-single-digit same-store sales gain for the second quarter.

“Expanding our retail footprint in the U.K., as well as France and the Benelux is a key aspect to our strategy to evolve the Ugg brand’s lifestyle position,” he said. “[Meanwhile], Asia exhibited nice growth. Distributor sales for the brand [there] increased 70 percent versus a year ago, and our Japanese business, which is wholesale, retail and e-commerce, collectively was up more than 80 percent over the second quarter last year … driven by a strong double-digit comp increase, additional retail locations and a larger assortment of spring product at key wholesale accounts.”

As for the Teva brand, net sales for the second quarter decreased 15.4 percent to $34.1 million, despite strong sell-in and a good sell-through in the U.S., driven by demand for its iconic sports sandal line and a growing assortment of light hiking and multisport footwear.

The Sanuk brand’s performance continues to be broad-based domestically, with both open- and closed-toe footwear sales up by strong double digits, Martinez added. Overseas, the brand’s momentum is building in Asia as distributors continue to roll out Sanuk stores.

For the period ended June 30, Deckers lost $20.1 million, or 53 cents a share, versus a loss of $7.3 million, or 19 cents, in the same period a year ago.

Revenue climbed 13.1 percent to $174.4 million. Analysts were expecting a loss per share of 60 cents, on revenue of $166.8 million, as polled by Yahoo Finance.

Deckers reiterated that fiscal 2012 revenues are expected to increase about 14 percent over 2011 levels, while earnings per share should slip 9 percent or 10 percent.

After paying $153.5 million related to the Sanuk acquisition and $100 million for stock repurchases, the firm reported cash and cash equivalents of $114.4 million at the end of the period, compared with $325.2 million in the same time a year ago.