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Hoka One One and Ugg Power Deckers Brands’ Q3 Strength

Hoka One One was, once again, Deckers Brands’ golden goose in Q3.

The performance footwear brand, along with sister brand Ugg, steered the group toward another record quarter of revenue, prompting Deckers to raise its year-end expectations.

In a Nutshell: Deckers Outdoor Corp. stock was up nearly four percent in after-hours trading after it reported the revised outlook and record third-quarter sales.

Deckers’ 12-month liabilities of $465.8 million totaled more than the full amount of its cash and short-term receivables at last count. However, Deckers increased its cash and cash equivalents to $619.9 million from $515.9 million in the comparable year-ago period, indicating the remote likelihood the company is overleveraging its debt.

Sales: In total, sales for Deckers were up by 7.4 percent to $938.7 million in Q3 compared to $873.8 million in Q3 of last year and above the $900.43 million average expected by Wall Street.

Ugg sales increased by 2.6 percent to $781.1 million compared to $761 million in Q3 of the prior-year period. Hoka One One revenue increased 63.6 percent during Q3, amounting to $93.1 million in total sales, up from $56.9 million in the comparable period.

Teva sales declined significantly, showing revenue loss of 25.1 percent to $17.2 million compared to $22.9 million in Q3 a year ago. Sanuk saw similar troubles, falling 34.5 percent to $8.5 million on a $12.9 million comp from the comparable period.

DTC sales were up by 5.6 percent to $413.7 million compared to $391.6 million, and comparable sales were up by 4.7 percent. Wholesale revenue also rose to $525.1 million on 8.9 percent growth.

By region, results were mixed as international sales declined 2.6 percent to $293.1 million as opposed to the $300.8 million year-ago comp. Domestic sales surged 12.7 percent to $645.7 million after driving $573 million in the comparable period last year.

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Deckers Brands raised its full-year sales outlook to a range of $2.150 billion to $2.160 billion from the previous range of $2.115 billion to $2.140 billion.

Earnings: Diluted earnings per share (EPS) were $7.14 compared to Wall Street’s expectation of $6.55. This was also above the $6.68 GAAP EPS recorded in Q3 of FY19.

Deckers also raised its earnings expectations, boosting its outlook for the second time in as many quarters. By year-end, Deckers sees EPS falling into a range of $9.40 to $9.50 after setting it at $8.90 to $9.05 in the second quarter.

CEO’s Take: “Our third-quarter results were driven by three of our brands experiencing record levels of quarterly revenue, resulting in an updated outlook that reflects another year of strong top-line growth and earnings expansion,” David Powers, president and CEO of Deckers Brands, said. “Heading into the fourth quarter, our brands are intent on maintaining the momentum seen throughout this fiscal year as we are planning continued investment in consumer engagement opportunities and compelling product introductions.”