Once again Hoka One One posted very strong results, helping Deckers Brands grow in its second fiscal quarter ended on June 30. Despite headwinds from Covid-19, the group’s sales progressed by 15.0 percent from the same period last year to reach a new quarterly record of $623.5 million, with a 14.1 percent rise in constant currencies. Its net income surged by 41 percent to $101.5 million.
Sales surged by 83.2 percent to $143.1 million at Hoka One One, which is benefiting from efforts to appeal to younger consumers and non-core runners. During the quarter, Hoka launched updates to several key franchises,a including the Clifton 7, Clifton Edge, Rincon 2, and the Bondi 7. The second edition of the Rincon recently won Runner’s World’s Best Value Award. Meanwhile, since its release online, the Bondi 7 has been the brand’s top-selling style. Deckers said that Hoka is now driving direct-to-consumer growth across the globe. While still small as compared to the U.S., international Hoka DTC increased by more than 150 percent in the first half of this year.
For the group’s biggest brand, Ugg, sales went up by 2.5 percent to $415.1 million in the quarter. Within the U.S. the brand performed well, increasing customer acquisition by 187 percent and customer retention by 155 percent versus last year, with the majority of the growth coming from younger customers. However, internationally, it did not perform as well. The management noted that Ugg remains in the midst of a multi-year reset in EMEA. In Europe, it has seen positive signs with Fluff, in addition to some small growth within men’s and kids footwear. Ugg has started to perform localized marketing in Asia.
The group is looking to rebuild brand heat for UGG, diversifying the European region away from core products and building a healthier product mix, akin to the successful transition it has made in the U.S. It has also implemented its global E project, which is meant to improve customer access to its site by offering additional languages, currencies and local types of payment.
Sanuk also dropped, by 11.4 percent to $9.5 million. However, Teva progressed by 20.5 percent to $35.2 million.
Overall, Deckers’ wholesale revenues rose by 1.8 percent to $451.6 million, while direct-to-consumer sales soared by 74.2 percent to $171.9 million, representing nearly 28 percent of the total turnover.
U.S. sales advanced by 19.4 percent to $427.4 million, while the international business gained 6.4 percent to $184.2 million.
The gross margin improved by 0.8 percentage points to 51.2 percent.
Deckers Brands noted that it still has a robust liquidity position of over $1.1 billion between its cash balance and available borrowings under its credit facilities.
The company’s distribution center in California, as well as other third-party distribution facilities, are currently in operation and supporting ongoing logistics. However, they and the company’s stores continue to operate at limited capacity due to the enhanced health and safety measures now in place. Deckers said it anticipates operational challenges related to capacity constraints, including higher levels of e-commerce shipments during peak wholesale volume periods, as well as increased costs associated with warehouse employee safety and payroll expense. Around 95 percent of the company’s global stores were open during the latest quarter.
Deckers did not provide a guidance for the full year, due to the uncertainties caused by the coronavirus pandemic, but it did say it expects some retail store closures within the EMEA region for at least a portion of the third quarter, and anticipates that additional retail stores could be subject to closures or further operating limitations based on expert agency guidance and local authority mandates.