Thanks to a strong performance by Ugg and Hoka One One, Deckers Brands posted a stellar fourth fiscal quarter and full year, with revenues and profits beating analysts' expectations.
The revenues from the Hoka One One brand jumped by 34.1 percent to $50.4 million for the quarter ended March 31, and by 46.7 percent to $153 million for the full year. The management said these “exceptional” results are due to the brand's dedication to developing innovative and technical footwear.
Within the U.S., Hoka's wholesale business was up by nearly 40 percent for the year. On the international front, the brand's annual sales were up by over 50 percent, with the largest share coming from Europe. Looking forward, the management said that Europe represents the largest near-term opportunity for growth, while the Asia-Pacific region is beginning to build up.
Ugg was another strong performer. Sales advanced by 6 percent to $257.5 million for the quarter and by 3.9 percent to $1,500 million for the year, with international wholesale and global e-commerce accounting for the majority of the gains. The popular brand posted the best revenue growth since 2015 thanks to several factors, including favorable weather late in the season that drove more full-price selling of cold-weather product combined with a strong selling of the spring summer of 2018 line.
The management noted that, over the past several years, the Ugg team has made progress on de-seasonalizing the business with a focus on the product offerings for spring and summer. The initial reaction to the spring-summer 2018 line has been positive. During the year, the brand also saw success with a renewed trend in the classic Mini, and continued strong growth of the men's Neumel.
Meanwhile, sales for the Teva brand increased by 7.3 percent to $55 million for the fourth quarter and by 13.5 percent to $133.6 million for the year, while those of the Sanuk brand went up by 10.3 percent to $35.6 million for the fourth quarter, but declined by 0.9 percent to $90.9 million for the year. The management said it is encouraged by the fact that both brands overachieved their profitability targets for the 2018, with gross and operating margins up significantly over the prior year.
Overall, the company's fourth-quarter revenues rose by 8.4 percent to $400.7 million, beating analysts' estimates by $25.3 million. On a constant currency basis, sales improved by 6.6 percent. For the year, revenues increased by 6.3 percent to $1,903 million, or by 6.1 percent on a constant currency basis.
Direct-to-consumer (DTC) sales for the quarter soared by 18.1 percent to $177.6 million, or by 15 percent on a comparable basis, driven by stronger-than-expected e-commerce results and better trends in retail store comparables. DTC also benefited from more exclusives and successful digital marketing initiatives. For fiscal 2018, DTC sales increased by 7.4 percent to $715.7 million and DTC comparable sales advanced by 7 percent.
By region, total sales were up by 8.3 percent to $249.0 million in the U.S. for the fourth quarter, and by 2.9 percent to $1,200 million for the year. Elsewhere, they gained 8.7 percent to 151.7 million for the quarter, and 12.4 percent to $729.3 million for the year.
The management said that the international online business achieved over $100 million in sales during the year, as the continued shift of marketing spend to digital pays dividends in the form of incremental sales with a strong return on investment.
Overall, Deckers' gross margin improved by five full percentage points in the quarter to reach 48.0 percent, and by 2.2 percentage points to 48.9 percent for the year, thanks to a combination of more full-price sales, supply chain improvements and favorable foreign exchange rates.
Net income reached $29.7 million, compared with a loss of $12 million for the year-ago quarter, partly due to extraordinary charges that declined to about $1.6 million from $35.9 million. For the year, net earnings rocketed to $114.4 million, up sharply from $5.7 million in the previous year.
The company issued its guidance for the year through March 2019, anticipating sales in a range of $1,925 million to $1,950 million, with a gross margin slightly above 49.0 percent.