In a Nutshell: Last week, Deckers said its supply chain remains operational, although in a limited capacity, and strategic sourcing partners, including material vendors and production factories, battled disruption during the fiscal 2020 fourth quarter ended March 31, with the potential for even more hiccups ahead. Still, Deckers Brands president and CEO Dave Powers said the footwear specialist has mitigated many of its current challenges.
“With the help of our sourcing and material teams, we have worked closely with our strategic partners to ramp up quickly after the COVID-19 related closures,” Powers said. “At this point, we do not have any major concerns from a sourcing perspective.”
Deckers Brands said it will preserve its liquidity of more than $1 billion in cash and credit facilities, in part by restricting unnecessary employee travel and canceling or postponing industry events. The company has also suspended hiring and annual salary increases and is seeking payment accommodation or deferrals in certain cases.
After the entire brick-and-mortar base shut down on March 17, about 20 percent of the company’s North American stores are now open again but operating on a “very limited capacity,” Powers said. Though most of Deckers’ 145 total stores remain closed, all China stores are open and about 20 percent in Japan are welcoming shoppers.
“We are intentionally reopening at a measured pace and using the early learnings to shape our broader go-forward strategy,” Powers said. “Our direct to consumer leadership is empowering retail associates with educational tools and training related to the new working environment.”
Sales: Full-year sales grew 5.6 percent to reach a record $2.13 billion in fiscal 2020, while Deckers reported net sales of $374.9 million in the fourth quarter, higher than the $346.5 million Wall Street was expecting, but 4.9 percent off from the 2019 comparable period.
Ugg sales decreased 17.9 percent to $196.3 million in the fourth quarter, with total sales of $1.521 billion falling 0.8 percent for the full fiscal year. Sanuk sales tumbled 57.8 percent to $13.3 million from $31.5 million in the comparable period while full-year sales fell 38.1 percent to $51.2 million.
Hoka One One bucked these trends, with quarterly sales increasing 51.8 percent to $101.9 million compared to $67.1 million for prior-year period while full-year sales jumped of 58 percent of $352.6 million.
Teva net sales ticked up 12.5 percent to $52.9 million while full-year sales improved 0.4 percent to $138 million.
“This is the low period of volume for Ugg and Koolaburra, while our Hoka One One brand is spread more evenly throughout the year,” Powers said. “For Hoka, we’ve made adjustments to our product launches and inventory purchasing to better allow our wholesale partners to capture consumer demand with existing inventory as they’re able to reopen stores and work to best leverage our online presence.”
By channel, wholesale revenue was down 2.9 percent to $230.7 million in Q4. Direct to consumer comparable sales fell by 3.7 percent in the quarter, excluding the final two weeks of retail sales in the period, though full-year DTC comp sales climbed 5 percent to $736.9 million.
Powers said the business is currently trending down by single-digits in the quarter to date compared to the full fiscal year while wholesale sales are down around 30 percent and DTC sales are down around 40 percent.
Earnings: Deckers reported diluted earnings per share (EPS) of 57 cents compared to the Wall Street estimate of 3 cents, although diluted EPS was below the 85 cent record set in the comparable Q4.
Full-year diluted EPS reached $9.82, an improvement of 8.8 percent and a company record.
CEO’s Take: “Fiscal year 2020 performance was driven by the strength of our brand portfolio, fueled by targeted investments in our key initiatives, coupled with disciplined financial management,” Powers said. “We expect fiscal year 2021 results to be impacted depending on the duration and severity of the COVID-19 pandemic, but our in-demand brands, omnichannel capabilities, and healthy balance sheet position us well to weather this challenging environment.”