Deckers Renews Focus for 2013

Deckers Renews Focus for 2013
Angel Martinez

Deckers Outdoor Corp. chairman, president and CEO Angel Martinez has had a full year of reflection and told analysts late Thursday that he was not pleased with the firm’s 2012 results.

“2012 was a very tough storm that we weathered, but as the old saying goes, ‘What doesn’t kill you makes you stronger’ and we’re definitely stronger as a company now and a lot more focused,” Martinez said on a conference call with analysts. “If I knew how it’d all come together, I would’ve been harder about driving … the innovation of Ugg Pure, the transitional product we’re now doing. We need to get the entire organization focused on innovative ideas on every single component in our business.”

Having new lines of transitional product opens the Ugg business to more seasons for retailers, Martinez said.

“Consumers [have told us that] they love the brand, from everything from sandals to driving mocs, [which means] we’re taking market share from people we haven’t competed with in the past. Our classic is our classic; that’s a business in and of itself and is a big gift item in the fourth quarter. It’s bought for a very different purpose,” he added.

Part of the international strategy is to move Ugg’s retail stores in Asia to slightly different markets.

“We’ve been in luxury malls in Asia so far (but now) the consumer is evolving and the middle class is coming up. We have the opportunity to expand beyond the luxury locations we’ve been in, which have been great for brand positioning and image,” said Martinez.

Thomas George, Deckers’ CFO, said, “We’ve gained important insights and identified opportunities in store operations and merchandising that we will be applying to the business. These include smaller-format stores that carry lower operating expenses.”

He added, “Within the stores, we’re focused on telling better stories around the product lines, using enhanced visual merchandising, increasing the number of store exclusives, and maintaining better inventory assortments of key styles. We are also redeveloping our outlook strategy to take advantage of these highly profitable locations.”

Looking to 2013, full-year revenues are expected to grow 7 percent over 2012 levels. By brand, Ugg sales should rise 4 percent, Teva by 6 percent and Sanuk by 15 percent.

Earnings per share are expected to increase about 5 percent over 2012 figures, with lower sheepskin costs driving an improvement in gross margin.

But for the first quarter, Deckers expects to report a loss of 12 cents a share, on flat revenue.

“While we continue to strategically address the impact of weather conditions on our business, our top-line guidance assumes another mild winter, similar to the one we just had,” said George.

For the fourth quarter ended Dec. 31, Deckers’ sales rose but its profit slipped. Net income was $98.1 million, or $2.77 a share, compared with $127.2 million, or $3.18, in the same period a year ago. Revenue advanced 2.2 percent to $617.3 million, from $603.9 million.

By brand, Ugg Australia sales increased 2.9 percent to $584.8 million, while Sanuk surged 39.2 percent to $15.3 million. Teva sales decreased 29.5 percent to $13.7 million.

International sales had clear momentum, increasing 15.6 percent to $170.5 million, while domestic sales lost 2.1 percent to $446.7 million.

For 2012, full-year income came in at $129 million, or $3.45 a share, compared with $201.9 million, or $5.07, in 2011. Revenue hit $1.41 billion, a 2.7 percent increase from $1.38 billion in 2011.