Deckers Breaks a Billion

Breaking $1 billion in sales is just another step in Deckers Outdoor Corp.’s growth, said analysts, who now expect the firm to grow its top line by another fifth in 2011.
“We expect powerful organic growth from new spring business at Ugg and Teva, increased shop-in-shops and broader European distribution,” Susquehanna Financial analyst Christopher Svezia wrote in a research note. “In the back half of the year, we expect Ugg’s men’s business and a new premium ‘Made in Italy’ boot collection (priced between $500 and $1,200) to drive new growth on top of a solid classic boot business.”
Looking beyond 2011, Stifel Nicolaus analyst Jim Duffy said he expects “ongoing execution to the global growth agenda and efforts to leverage the lifestyle and luxury appeal of the Ugg brand into different categories to provide multiple years of strong growth.”
Duffy predicted that Deckers’ 2012 revenue could hit $1.33 billion, and earnings per share could be $5.23.
Deckers is looking forward to creating new consumer demand for both the Ugg and Teva brands in 2011, the firm said. Ugg’s spring line includes a more complete offering of boots, slippers, sneakers and sandals, both casual and fashion, while fall will see a much-expanded men’s collection with more running boots, sneakers and casuals. Meanwhile, Teva will look to technical product to leverage the brand’s authenticity to drive volume in the mid-tier market, according to execs.

Thomas George, CFO of Deckers, said in a call with analysts that product costs could rise a total of about 10 percent in 2011, with more pressure coming in the back half, due to higher costs for sheepskin, which have continued to increase over the past 12 months. Labor and freight costs will rise to a lesser extent.

For the period ended Dec. 31, 2010, the Goleta, Calif.-based firm earned a net income of $89.2 million, or $2.27 a share, up nearly a third from $67.7 million, or $1.74, the same quarter a year earlier.
Net sales increased 24 percent to $430.1 million, from $348 million, buoyed by double-digit increases in every brand and category, and especially driven by the continued strength of the Ugg brand the past holiday season.
The firm blasted past estimates, as analysts were looking for EPS of $1.98 on revenue of $329.9 million, as polled by Yahoo Finance.

By segment, retail sales saw the strongest increase, of 55 percent to $72.4 million. International sales surged 35 percent to $53 million, while e-commerce revenue advanced 30 percent to $59.5 million.

Ugg and Teva brand sales both saw improvements of more than 20 percent, while combined net sales of the company’s other brands decreased 2 percent to $4.1 million.

For the full year, total sales increased 23 percent to just cross the $1 billion mark. EPS stood at $4.03, up from $2.96 previously. Deckers also ended the year with $445.2 million in cash and cash equivalents, up from $315.9 million previously, and no long-term debt.

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