• Fourth Quarter Sales Increased 11.2% to a Record $378.6 Million
• Fourth Quarter GAAP Loss per Share was $(0.73); Fourth Quarter Non-GAAP Earnings Per Share was $0.11
• Fourth Quarter Direct-to-Consumer Comparable Sales Increased 2.6%
• Company Announces CEO Transition

GOLETA, Calif.--(BUSINESS WIRE)-- Deckers Brands (NYSE: DECK), a global leader in designing, marketing and distributing innovative footwear, apparel and accessories, today announced financial results for the fourth fiscal quarter and fiscal year ended March 31, 2016.

Throughout this release, references to Non-GAAP financial measures exclude certain restructuring and other charges. Additional information regarding these Non-GAAP financial measures is set forth under the heading "Non-GAAP Financial Measures" below.

“Our stronger than expected fourth quarter Non-GAAP operating results are very encouraging given the current market environment,” commented Angel Martinez, Chief Executive Officer and Chair of the Board of Directors. “Looking back on the year, our performance was challenged by record warm weather across the globe and store traffic declines across retail. While these issues have created lingering headwinds for the industry, I am confident that Deckers is well positioned to increase long-term shareholder value with the new leadership team in place, our robust Omni-Channel capabilities and strong brand portfolio.”

Fourth Quarter Fiscal 2016 Financial Review

• Net sales increased 11.2% to a record $378.6 million compared to $340.6 million for the same period last year. On a constant currency basis, net sales increased 12.4%.
• Gross margin was 40.9% compared to 44.7% for the same period last year. Non-GAAP gross margin was 42.3%. The year over year decline was due to a higher proportion of closeouts, promotions and foreign exchange headwinds from the strengthening U.S. dollar.
• SG&A expenses as a percentage of sales were 48.3% compared to 44.5% for the same period last year. Non-GAAP SG&A expenses as a percentage of sales were 40.8%.
• Operating income/(loss) was $(27.9) million compared to $0.7 million for the same period last year. Non-GAAP operating income was $5.7 million.
• Diluted earnings/(loss) per share was $(0.73) compared to $0.04 for the same period last year. Non-GAAP diluted earnings per share was $0.11.

Full Year Fiscal 2016 Financial Review

• Net sales increased 3.2% to a record $1.875 billion compared to $1.817 billion last year. On a constant currency basis, net sales increased 5.9%.
• Gross margin was 45.2% compared to 48.3% last year. Non-GAAP gross margin was 45.4%. The year over year change in gross margin was due to increased promotions and higher closeout sales as well as foreign exchange headwinds from the strengthening of the U.S. dollar, partially offset by lower input costs.
• SG&A expenses as a percentage of sales were 36.5% compared to 36.0% last year. Non-GAAP SG&A expenses as a percentage of sales were 35.0%.
• Operating income was $162.1 million compared to $224.4 million last year. Non-GAAP operating income was $195.7 million.
• Diluted earnings per share was $3.70 compared to diluted earnings per share of $4.66 last year. Non-GAAP diluted earnings per share was $4.50.

The difference between the GAAP and Non-GAAP results for the fourth quarter and full year were due to the Company incurring restructuring charges of $24.7 million related to retail store closures, office consolidations and software impairments, and other charges of $8.9 million from inventory write-downs, asset impairment charges and compensation related expenses.

Brand Summary

• UGG® brand net sales for the fourth quarter increased 13.3% to $245.6 million compared to $216.8 million for the same period last year. On a constant currency basis, sales increased approximately 15.2%. The increase in sales was driven by an increase in global wholesale sales and DTC sales. For fiscal 2016, UGG brand sales increased 2.1% to $1.524 billion. On a constant currency basis, sales increased 5.0%.
• Teva® brand net sales for the fourth quarter increased 11.3% to $59.1 million compared to $53.1 million for the same period last year on both a reported and constant currency basis. The increase in sales was driven by an increase in global wholesale sales. For fiscal 2016, Teva brand sales increased 5.0% to $133.0 million. On a constant currency basis, sales increased 7.0%.
• Sanuk® brand net sales for the fourth quarter decreased (1.9)% to $38.5 million compared to $39.2 million for the same period last year on both a reported and constant currency basis. The decrease in sales was driven by a decrease in domestic wholesale sales. For fiscal 2016, Sanuk brand sales decreased (7.4)% to $106.2 million on both a reported and constant currency basis.
• Combined net sales of the Company’s other brands for the fourth quarter increased 12.4% to $35.4 million compared to $31.5 million for the same period last year. On a constant currency basis, sales increased approximately 13.0%. The increase was primarily attributable to an $8.6 million, or 43.3%, increase in sales for the HOKA ONE ONE® brand compared to the same period last year. For fiscal 2016, combined sales of the Company’s other brands increased 35.4% to $111.6 million. On a constant currency basis, sales increased 36.9%.

Channel Summary (included in the brand sales numbers above)

• Wholesale and distributor net sales for the fourth quarter increased 13.4% to $232.7 million compared to $205.1 million for the same period last year. On a constant currency basis, sales increased 14.2%. The increase in sales was driven by an increase in global wholesale sales. For fiscal 2016, wholesale and distributor sales increased 2.6% to $1.231 billion. On a constant currency basis, sales increased 5.2%.
• Direct-to-Consumer (DTC) net sales for the fourth quarter increased 7.7% to $145.9 million compared to $135.5 million for the same period last year. On a constant currency basis, sales increased 9.7%. DTC comparable sales for the fourth quarter increased 2.6% over the same period last year. For fiscal 2016, DTC sales increased 4.4% to $644.3 million and DTC comparable sales decreased (1.0)% primarily driven by a decrease in tourist traffic in the U.S. as a result of the strengthening U.S. dollar. On a constant currency basis, DTC sales increased 7.4%.

Geographic Summary (included in the brand and channel sales numbers above)

• Domestic net sales for the fourth quarter increased 10.4% to $240.4 million compared to $217.7 million for the same period last year. For fiscal 2016, domestic sales increased 4.7% to $1.220 billion.
• International net sales for the fourth quarter increased 12.4% to $138.2 million compared to $122.9 million for the same period last year. On a constant currency basis, sales increased 15.8%. For fiscal 2016, international sales increased 0.6% to $655.5 million. On a constant currency basis, sales increased 8.2%.

Stock Repurchase Program

During the fourth quarter the Company repurchased approximately 441,000 shares of its common stock for a total of $25.0 million. For the full fiscal year, the Company repurchased approximately 1.42 million shares for a total of $94.2 million. As of March 31, 2016, the Company had $77.9 million authorized repurchase funds remaining under its $200.0 million stock repurchase program announced in January 2015.

Balance Sheet

At March 31, 2016, cash and cash equivalents were $246.0 million compared to $225.1 million at March 31, 2015. The Company had $67.5 million in outstanding borrowings under its credit facility at March 31, 2016 compared to $5.4 million at March 31, 2015.

Company-wide inventories at March 31, 2016 increased 25.5% to $299.9 million from $238.9 million at March 31, 2015. By brand, UGG inventory increased 31.0% to $218.1 million at March 31, 2016, Teva inventory increased 21.4% to $33.2 million at March 31, 2016, Sanuk inventory decreased (5.5)% to $24.3 million at March 31, 2016, and the other brand inventory increased 25.4% to $24.3 million at March 31, 2016. The elevated levels of inventory were in-line with expectations given the unseasonably warm weather experienced in the third quarter of fiscal 2016.

Full Year Fiscal 2017 Outlook for the Twelve Month Period Ending March 31, 2017

• The Company expects fiscal 2017 net sales to be in the range of down (3)% to flat.
• Gross margin for fiscal 2017 is expected to be in the range 47.0% to 47.5%.
• SG&A expenses as a percentage of sales are projected to be approximately 37%.
• The Company expects fiscal 2017 diluted earnings per share to be in the range of $4.05 to $4.40. This excludes any pretax charges that may occur from any further restructuring charges, which are expected to be in the range of $10-$15 million in fiscal year 2017.

First Quarter Fiscal 2017 Outlook for the Three Month Period Ending June 30, 2016

• The Company expects first quarter fiscal 2017 net sales to be down (20)% to (25)%. The Company expects a diluted loss per share of approximately $(2.10) to $(2.20) compared to a diluted loss per share of $(1.43) for the same period last year. The decline in net sales in the first quarter is primarily due to the timing of order shipments between quarters.
• As a reminder, a significant amount of our operating expenses are fixed and spread evenly on an absolute dollar basis throughout each quarter. We expect the majority of our earnings increase in fiscal 2017 to come in the third and fourth quarters.

Executive Leadership Transition

In a separate press release issued today, the Company announced that Dave Powers will succeed Angel Martinez as Chief Executive Officer of Deckers Brands following Mr. Martinez’s retirement, effective May 31, 2016. Mr. Martinez will continue to serve as Chairman of the Company’s board of directors.

Non-GAAP Financial Measures

We present certain Non-GAAP financial measures in this press release, including Non-GAAP gross margin, Non-GAAP SG&A expenses, Non-GAAP operating income and Non-GAAP diluted earnings per share, to provide information that may assist investors in understanding our financial results and assessing our prospects for future performance. We believe these Non-GAAP financial measures are important indicators of our operating performance because they exclude items that are unrelated to, and may not be indicative of, our core operating results, such as restructuring charges relating to retail store closures and office consolidations, and other charges relating to inventory write-downs and asset impairments. In particular, we believe that the exclusion of certain costs and charges allows for a more meaningful comparison of our results from period to period. These Non-GAAP measures, as we calculate them, may not necessarily be comparable to similarly titled measures of other companies and may not be appropriate measures for comparing the performance of other companies relative to Deckers. These Non-GAAP financial results are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. To the extent we utilize such Non-GAAP financial measures in the future, we expect to calculate them using a consistent method from period to period. A reconciliation of each of the financial measures to the most directly comparable GAAP measures has been provided under the heading “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” in the financial statement tables included below.

Conference Call Information

The Company’s conference call to review the results for the fourth quarter 2016 will be broadcast live today, Thursday, May 26, 2016 at 4:30 pm Eastern Time and hosted at www.deckers.com. You can access the broadcast by clicking on the “Investor Information” tab and then clicking on the microphone icon at the top of the page.

About Deckers Brands

Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company’s portfolio of brands includes UGG®, Koolaburra®, HOKA ONE ONE®, Teva® and Sanuk®. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally. For more information, please visit www.deckers.com.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements other than statements of historical fact contained in this press release, including statements regarding our anticipated financial performance, including our projected net sales, margins, expenses and earnings per share, as well as statements regarding our business transformation plans, product and brand strategies, market opportunities, and restructuring plans. We have attempted to identify forward-looking statements by using words such as "anticipate," "believe," “could,” "estimate," "expect," "intend," "may," “plan,” “predict,” "project," "should," "will," or “would,” and similar expressions or the negative of these expressions.

Forward-looking statements represent our management’s current expectations and predictions about trends affecting our business and industry and are based on information available as of the time such statements are made. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements predicted, assumed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2015, as well as in our other filings with the Securities and Exchange Commission.

Except as required by applicable law or the listing rules of the New York Stock Exchange, we expressly disclaim any intent or obligation to update any forward-looking statements, or to update the reasons actual results could differ materially from those expressed or implied by these forward-looking statements, whether to conform such statements to actual results or changes in our expectations, or as a result of the availability of new information.

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Investor Contact:
Deckers Brands
Steve Fasching, VP, Strategy & Investor Relations
805-967-7611

Source: Deckers Brands