Deckers Swings into Wider Q2 Loss as Sales Flounder

Style from UGG brand's fall collection. Photo:  Joy Jacobs

Style from UGG brand’s fall collection. Photo: Joy Jacobs

Goleta, CA—Deckers Outdoor Corporation reported Thursday that its second quarter loss widened as sales of its UGG-brand and Teva footwear floundered.

For the quarter ended June 30, the footwear company posted a loss of $29.3 million, or 85 cents a share, compared to a los of $20.1 million, or 53 cents a share, in the same quarter last year. Analysts’ average estimate expected a loss of $1.06 a share, but shares of the company fell in trading since it was the sixth consecutive quarter Deckers has reported a loss or drop in profit.

Total revenue decreased 2.5% to $170.1 million, missing analysts’ estimate for $178.2 million in sales.

Deckers’ premier brand, UGG posted a 6.9% fall in net sales to $100.4 million. “Higher global retail sales from new store openings and an increase in global e-commerce sales were offset by lower domestic and international wholesale sales, lower international distributor sales and a decrease in same store sales,” the company said.

During the quarter, the company’s domestic sales declined 3% year over year to $110.1 million, whereas international sales fell 1.6% to $60 million.

Deckers has been hit with higher input costs due to rising sheepskin prices that impact its UGG brand which accounts for 85% of its sales.

In order to safeguard against rising sheepskin costs and other raw materials, Deckers has undertaken certain long-term programs, which include increasing the mix of non-sheepskin merchandises, new casual footwear materials less prone to weather, and innovative production technologies. Deckers has also developed a new material “UGG Pure” to safeguard against cost fluctuations.

Teva revenue fell 8% to $31.2 million. Revenue from Sanuk rose nearly 8% to $30.1 million.

“We are pleased with the second quarter, and while it is our smallest quarter it was an important transition period for the UGG brand that has positioned the Company for a good back half of the year, ” said, Angel Martinez, president/chairman and ceo. “We experienced solid sell-through of the UGG brand’s spring line in our wholesale and e-commerce channels and we believe the consumer response to the initial deliveries of our new transitional fall product has been very positive. While less than favorable weather negatively impacted sandal sales for the Teva and Sanuk brands, we reacted quickly to deliver bottom line results that were better than plan. We remain optimistic about our ability to expand sales and margins as we head into our highest volume sales quarters, and we continue to be excited about the many long-term growth opportunities that we believe exist for our business.”

Deckers also raised its full year earnings forecast to an 8% increase, up from 5%, which implies net income of about $3.73 a share. Analysts’ expect $3.67 a share.

 

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com