Deckers Brands, the parent of Ugg and other footwear brands, recorded good sales and earnings in the third quarter ended on Dec.31, once again boosted by Hoka One One, which is now selling fewer shoes in the U.S. than in the rest of the world.
The group’s total revenues climbed by 7.4 percent from the same period last year to $938.7 million, rising by 8.4 percent in constant currencies and generating comprehensive net income of $203.3 million, up from $194.0 million in the year-ago period, thanks in part to a higher foreign currency gain.
Hoka’s sales rocketed by 63.6 percent to $93.1 million, driven by both replenishment orders and new consumers (more on this brand in SGI Europe and our Outdoor Industry Compass).
For the group’s biggest brand, Ugg, sales advanced by 2.6 percent to $781.1 million in the quarter, led by men’s and kids’ models, which grew respectively by 10 and 20 percent. The Neumel franchise and Fluff women’s slippers stood out.
Ugg saw an 8 percent gain in the U.S., but international sales were down by 7 percent due to weakness in Europe, where a marketplace reset is ongoing. The group has decided to be more selective in the region, following a cleaning-up process that has already given positive results in the U.S. in the past few years. The strategy is intended to reduce inventories in the marketplace, consolidate the account base by focusing on retail partners which the company thinks best represent the Ugg brand and provide a more differentiated and enhanced consumer experience. A similar strategy is planned for Asia-Pacific to boost the brand there as well.
Aside from Koolaburra, a lower-priced version of Ugg, Deckers’ other brands didn’t fare as well: Teva’s sales tumbled by 25.1 percent to $17.2 million, due in part to a shift in the timing of European orders, while Sanuk dropped by 34.5 percent to $8.5 million.
Overall, Deckers’ wholesale revenues grew by 8.9 percent to $525.1million, while direct-to-consumer sales, where Ugg is a major component, improved by 5.6 percent to $413.7 million, including a gain of 4.7 percent in comparable store sales.
U.S. sales benefited from the expansion of Ugg and Hoka, and soared by 12.7 percent to $645.7 million. However, the international business was hindered by Ugg’s weakness, particularly in Europe, and as a result, the group’s total international sales declined by 2.6 percent to $293.1 million.
Deckers’ gross margin expanded by 0.3 percentage points to 54.1 percent, thanks to less promotional activity than expected and strong sell-throughs at full prices. Its net income progressed by 2.6 percent to $201.6 million.
The management has decided to raise its full-year outlook to reflect the acceleration it is seeing in the Hoka and Ugg brands. For the full fiscal year ending March 31, Deckers predicts sales in the range of $2.150 million to $2,160 million, compared with a previous forecast calling for sales of between $2,115 million and $2,140 million, despite an expected drop in China due to the coronavirus epidemic. The outlook for the gross margin has been raised to 51.5 percent from 50.8 percent.