Deckers Brands, parent company to brands like Ugg and Teva, saw a successful second quarter despite a net sales drop. The brand also announced a $400 million repurchase plan after deciding not to sell.
They saw a net sales decline of 0.7% to $482.5 million, compared to $485.9 million during the same period last year. Meanwhile, on a constant currency basis net sales fell 0.3%.
However, gross margin grew to 46.7%, compared to 44.5% during the second quarter last year.
Diluted earnings per share (EPS) was $1.54, up from $1.21 during the same period last year. Non-GAAP diluted EPS was $1.54.
“Our goal remains to achieve an incremental $100 million of operating profit by the end of our fiscal year 2020, and operating margins of at least 13 percent by focusing on full-priced selling, driving supply chain efficiencies, implementing process improvements, reducing indirect spend and closing retail stores that do not meet our financial objectives,” said Dave Powers, president and CEO. “This quarter is yet another testament to the power of our transformation, as we generated a 220 basis point increase in gross margin and earnings per share that were ahead of expectations.”
Wholesale net sales fell 2.2% to $391.2 million, compared to $399.9 million during the second quarter last year. Direct-to-consumer net sales for the quarter grew 6.2% to $91.3 million, compared to $86 million during the same period last year. Direct-to-consumer comparable sales also grew 3.7%, compared to the same time last year.
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Stock Repurchasing Plan
Deckers Brands decided not to sell, and opted for a stock repurchasing plan. The board of directors authorized a new $335 million share repurchase program, added to the $65 million remaining under the brand’s current name, Deckers Brands now has the ability to buy back $400 million worth of shares, or around 20 percent of the brand’s market capitalization.
“We intend to aggressively repurchase our shares to reward our long-term shareholders with accelerated EPS growth,” said Powers.
Brand Breakdown
Ugg saw net sales for the second quarter drop 2.9% to $400.4 million, down from $412.2 million during the second quarter last year.
Hoka One One net sales grew 34.4% to $40.6 million, compared to $30.2 million during the same time last year.
Teva net sales also increased, with a whopping 24.9% to $21.4 million, compared to $17.1 million last year.
Sanuk net sales fell 19.3% to $15.2 million, down compared to $18.9 million last year.
FY2018 Guidance
Deckers Brands now expects net sales to be up 1 to 2 percent compared to last year. Gross margins are expected to be around 47.5%, while Non-GAAP diluted EPS are expected to be in the range of $4.15 to $4.30—excluding any charges that may occur from more store closures, restructuring and other charges.