Led by a strong performance by Hoka One One, Ugg and Teva, Deckers Brands posted a strong first fiscal quarter, with revenues reaching a record high of $250.6 million, up by 19.5 percent from the same quarter last year. On a constant currency basis, sales increased by 17.6 percent.
Revenues from the Hoka One One brand jumped by a whopping 53.1 percent to $47 million for the quarter, which ended on June 30. The management said it sees a long runway for growth internationally for the brand, as the overseas business is up significantly since the start of the year. Domestic sales also increased substantially as the brand continues to take more shelf space and market share, while benefiting from a more frequent replenishment cycle.
During the quarter, the brand launched the Clifton 5, the Torrent, and the Bondi 6, which were significant drivers of the growth. Last week, the Outdoor Retailer Show in Denver presented Hoka with the Gear of the Year award from Outside Magazine for the Mach road shoe - a new release geared toward both the runner and the fitness enthusiast.
Meanwhile, revenues for the Teva brand increased by 6.2 percent to $40 million. Sales accelerated in May and June, which the management said drove reorders above expectations and produced strong gross margin gains over last year. The Hurricane XLT2 and Original Sandals performed well and drove the bulk of the volume. The brand continues to resonate with the younger consumer: according to a market research firm, YouGov, Teva's brand impressions in the U.S. are up by 21 percent among 18 to 34 year-olds as compared to a year ago.
Ugg was another strong performer. Sales advanced by 18.9 percent to $136.5 million, led by global growth in the wholesale channel, followed by a positive contribution from the direct-to-consumer (DTC) channel. In particular, the women's sneaker and sandal categories posted double-digit gains, with strong interest in spring/summer styles such as the Poppy, Holly, and Joan sandals.
However, Sanuk's sales were down by 6.6 percent to $40 million. This was in-line with Deckers' expectations, which anticipated that this year's top line would be impacted by the continued weakness in the U.S. surf specialty channel, as well as a strategic pullback from certain international markets to focus on the U.S.
Across the group, DTC sales advanced by 12.0 percent to $73 million for the quarter, or by 6.2 percent on a comparable basis, driven by strong e-commerce results, especially from Ugg and Hoka.
Reversing a previous trend in favor of DTC sales, the company's total wholesale revenues soared by 22.9 percent to $177.6 million. The domestic and international wholesale businesses were up in the high-teens and high 20s, respectively. Strong reorders across Ugg, Hoka and Teva - along with $10 million of earlier-than-planned shipments - buoyed performance.
By region, total sales were up by 17.4 percent to $141.7 million in the U.S. Elsewhere, they jumped by 22.3 percent to 108.9 million. The management said that the international business has been healthy, with continued strength and new opportunities in Europe, especially in Germany. China continues to be a major market for the Ugg brand.
Overall, Deckers' gross margin improved by 2.7 percentage points to reach 45.9 percent, with one full percentage point coming from foreign exchange gains and the balance from a greater proportion of full-price sales and cost cutting initiatives. The company again booked a net loss in the relatively small quarter, but reduced it from last quarter's $42.1 million to $30.4 million.
Deckers raised its guidance for the full year, anticipating sales in a range of $1,930 million to $1,955 million, or $5 million more than previously budgeted. The gross margin is still expected to be slightly above 49.0 percent, compared with 48.0 percent in the past year.
The bottom line should reach an indicative level of around $193 million, up sharply from $5.7 million and $114.4 million in the past two years, pleasing Marcato Capital Management and any other shareholders who were previously criticizing the group's management.
Nevertheless, the company's share price declined slightly because much of the inflated turnover came from advanced shipments and because the management's new guidance was marginally better than the previous one.