Deckers Outdoor Corp. reports that its 1st quarter sales increased 45.2 percent to $64.3 million from the same period last year, while net earnings jumped by 65.1 percent to a record $8,887,000. Provisions for bad debt rose by around $500,000, primarily as a result of non-payment by the company’s British distributor for UGG, Michael Pearce's Expedite, which it terminated in March 2005.
Evidently, the very strong growth UGG in the UK led Pearce into a serious cash squeeze. Deckers' representative in Europe, 24-HR Sportslife, is looking for a high-caliber replacement for Expedite. It is also investigating the best possible way to replace its own former sales manager, Mike Todd, who left in January.
Deckers says the growth continued on a global basis for all its three brands, including Simple and Teva, and Fall bookings are higher than previously estimated. Teva’s net sales for the quarter increased by 5 percent to $39.4 million, despite unseasonable weather and lower than anticipated sales overseas. UGG’s sales climbed by 337 percent to $22.5 million, and Simple’s sales rose by 41 percent to $2.4 million. Revenues from the internet and catalog retailing reached an overall total of around $5.0 million, up 38 percent from the year-ago period.
UGG’s growth was partly attributed to carry-over shipments from the Fall 2004 and holiday seasons in addition to the initial deliveries of the first Spring line. Simple’s sales were driven by strength in sneakers, sandals and clogs, in addition to expanded distribution and increased shelf space.
The group’s gross margin for the quarter was 46.0 percent, a slip from 46.1 percent for the same period in 2004. However, operating margins improved by 70 basis points to 22.4 percent of sales, although marketing costs increased by $0.8 million.
Deckers has decided to receive Fall and Winter UGG products earlier in order to better meet demand and ensure more timely retail deliveries in the 2nd half of fiscal 2005, and to support the brand’s anticipated growth in the Fall and Winter seasons. Due to unseasonable weather and lower expectations for its foreign business, Deckers is expecting sales to range from $40 million to $41 million for the 2nd quarter. Due to better than expected Fall bookings for UGG, the company expects to make up for the lower sales and earnings in the second half of fiscal 2005, particularly in the 3rd quarter.