Sales up, earnings flat at Deckers
Goleta-based Deckers Brands delivered an increase in revenue during the second quarter of fiscal year 2021-22, but “historic” supply chain demands kept earnings flat year-over-year.
Deckers, the parent company of footwear brands including Ugg, Hoka One One and Teva, saw revenue grow to $721.9 million for the quarter ended Sept. 30, up 15.8% from the same quarter a year ago, according to earnings released Oct. 28.
But earnings were essentially flat. Net income for the quarter was $102 million, or $3.69 per share. In the same quarter last year, net income was at $101 million, or $3.62 per share.
Deckers shares opened at $389.27 on Oct. 29, up 2.4% from the previous day’s close, before the earnings release.
Deckers CFO Steve Fasching said in the company’s earnings call that supply chain issues remain and will persist through the end of this fiscal year and possibly into the next.
“While the supply chain remains a headwind to overcome, the performance of our brands thus far is the result of our team’s dedication to executing Decker’s long term strategies as we manage through near term disruption,” Fasching said.
The majority of Deckers products are made in Vietnam, Fasching said, which had some parts of the country go into pandemic-related shutdown. He does not expect this to be a problem, however, as “less than 10% of our Vietnam production today is done in the southern region, which experienced shutdowns during the second quarter,” Fasching said.
Port delays have also strained Deckers’ supply chain. Fasching said in a normal year, 20% of the company’s inventory is in transit at the end of September, but this year, 45% of the company’s inventory is in transit.
“While the challenges at the Port of Los Angeles and Long Beach have been widely reported, the issue is not isolated to those ports, and port constraints have postponed shipments to our warehouses in Q2,” he said.
To address these issues, Fasching said Deckers has secured additional production lines, onboarded new factory partners and plans to carry more inventory this year into next year.
The Hoka One One brand of running shoes led Deckers’ revenue growth. Hoka generated $210 million in the second quarter, a 47% increase from the same quarter a year ago.
“The Hoka retail strategy is in the infancy stage,” Deckers CEO Dave Powers said. “The brand is testing multiple strategies, and learning from our results and feedback,” Powers said.
Hoka opened a few small pop-up stores in New York and Los Angeles and a store in China, which all saw success, Powers said.
“While it’s too soon to make any definitive statements on Hoka stores, we have been very pleased with the initial response from a foot traffic, sales and service perspective. Hoka is already benefiting from Deckers organizational retail expertise,” he said.
Ugg, Deckers’ premier brand, also delivered growth in the second quarter, generating revenue of $448 million, an 8% increase from a year ago.
Ugg is coming into this holiday season with its “most diverse product assortment to date,” Powers said, including more shoes and boots for men.
Net sales for the Teva brand increased 4% to $28.5 million, while Sanuk sales increased 6.2% to $10.1 million.
Other brands, primarily Koolaburra, saw net sales decrease 14.1%, to $24.2 million.
Wholesale net sales increased 20.7% $545.2 million, while direct to consumer net sales increased 2.8% to $176.7 million. Domestic net sales were up 20.4% to $514.6 million while international net sales grew 5.7% to $207.3 million.
Deckers ended the quarter with $746.2 million in cash and cash equivalents.