Shares of Goleta-based Deckers Outdoor Corp. plunged 8.6 percent on Friday as the Ugg boot parent reported first-quarter earnings were a fraction of what they had been a year earlier.
Deckers said first-quarter profits were $1 million, or 3 cents per share, compared to $8 million, or 20 cents per share, a year earlier. The drop represents an 87 percent decline in profitability.
The footwear firm also predicted a second-quarter loss.
The lackluster first-quarter earnings came even as revenue climbed 7 percent to $263.8 million.
“We’re pleased to start the year with first quarter sales and earnings that were ahead of projections,” Deckers CEO, President and Chairman Angel Martinez said in an earnings release.
Many analysts had been expecting a first-quarter loss. The average estimate of 16 analysts compiled by MarketWatch predicted a 10-cent loss in the quarter.
Sales of Ugg, Deckers’ signature brand, increased 7.9 percent to $170.6 million during the quarter, driven by largely by colder weather in the first few months of the year and better sales through the company’s own retail stores.
Sales of Teva and many of Deckers’ smaller brands also increased, although Sanuk revenue slipped 4.4 percent to $30.9 million.
Deckers’ expenses increased about 19 percent during the quarter, in part driven by a rapid retail store buildout. The firm said it opened 24 new company-owned Ugg stores in the first quarter. The retail expansion is part of an ambitious plan to maintain Ugg’s relevance and to allow Deckers itself to have greater control over pricing, branding and distribution of its biggest moneymaker.
“The investments we are making in our product lines, direct to consumer channel and international markets are creating strong growth pillars for our brands,” Martinez said in the statement. “At the same time, the new innovation we’ve developed has the potential to provide meaningful cost savings and open new expansion opportunities in the future.”
The firm expects revenue this year to top 2012 levels by 7 percent, and predicted full-year earnings will come in about 5 percent higher.
In the second quarter, the Goleta-based firm expects revenue to come in about the same as a year earlier, indicating about $174 million in sales, but predicts a second-quarter loss of about $1.10 per diluted share, compared to a 53-cent loss in 2012.
Deckers said a significant amount of its operating expenses are fixed and spread evenly on an absolute dollar basis throughout the year. Those costs include the 24 new stores, which won’t open until the second half of 2012. Deckers said it expects earnings in the first half of this year to be lower than they had been last year, but to gain momentum and increase over 2012 in the last half of the year.
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