Deckers Beats Street in Q1, Ugg Sales Down On FX Pressure

Goleta, Calif.-based Deckers Brands posted a mixed first quarter with revenues topping analysts’ forecasts but slumping sales at brands Ugg and Sanuk dragged down margins contributing to a net loss in the quarter. The Ugg declines, the company said, are attributable to foreign currency pressures and decreases in global direct-to-consumer sales stemming from lower tourist traffic.

Slower tourism—in key markets such as Hawaii, Las Vegas and New York—had already plagued the firm in Q4.

Teva brand however, saw a 6.8 percent increase in sales for the quarter while the firms other brands—Hoka One One and Ahnu—had a combined increase of 86 percent in net sales to $24 million. That combined increase was attributable mostly to Hoka’s $9.8 million sales jump, the company said.

Wholesale and distributor sales were down slightly in the quarter—increasing scarcely on a constant-currency basis—while direct-to-consumer, domestic and international showed modest gains.

Net Income: Net losses for the first quarter, ended June 30, 2015, totaled $47 million, compared to a net loss of $37 million in the comparable quarter.

EPS: Diluted loss per share was $1.43 compared to a diluted loss per share of $1.07 in the same period last year.

Net Revenue: Net sales increased 4.5 percent to $221 million on a constant currency basis compared to $211.5 million for the same period last year. On a reported basis, net sales increased 1.1 percent.

Hit, Miss or Beat: Deckers beat Wall Street’s estimates for both revenues and EPS in Q1. Analysts polled by Yahoo Finance had predicted diluted loss per share of $1.49 and revenues of $213.5 million.

Executive Insights: “Our efforts to diversify our product lines, distribution channels and global revenue streams are creating a stronger foundation to support sustainable growth,” said Angel Martinez, Deckers’ CEO, in a release. “At the same time, our enhanced omnichannel capabilities are giving us greater insight into our consumers and are allowing us to deliver a full brand experiences across all touch points. Looking ahead, we believe our merchandise and marketing strategies have us well positioned for a successful fall/winter selling season, which combined with moderating expense growth and share repurchases, should generate increased value for our shareholders this year and beyond.”

Looking Ahead: The Company expects fiscal 2016 constant-currency revenues of $2.01 billion, a 10.5 percent gain over the twelve-month period ended March 31, 2015. On a reported basis, revenues are expected to be $1.96 billion, or an increase of 8 percent.

Gross profit margin is expected to be approximately 48 percent, down 30 basis points from fiscal 2015 as a result of expectations regarding a stronger U.S. dollar, partially offset by lower input costs and favorable changes in the company’s channel mix.

SG&A expense as a percentage of sales is projected to be approximately 35.8 percent, compared to 36 percent in fiscal 2015.

The company expects fiscal 2016 diluted earnings per share to be approximately $5.68 on a constant currency basis, reflecting an increase of 22 percent over the twelve-month period ended March 31, 2015. On a reported basis, earnings per share are expected to be $5.15, or an increase of 10.5 percent. The increase in EPS, from its initial outlook, reflects a lower share count due to the shares repurchased in the first quarter fiscal 2016, the company said.

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