Deckers Outdoor Corporation DECK reported Q4 FY2023 results that were better than expected, as both their top and bottom lines increased from the previous year. The company’s performance was driven by the strength of HOKA and Teva brands.
A Closer Look
Deckers’ quarterly earnings were $3.46 per share for Q4 FY2023, surpassing the Zacks Consensus Estimate of $2.61. The reported earnings were more than the previous year’s earnings of $2.51 per share.
Meanwhile, net sales increased 7.5% YoY to $791.6 million, exceeding the Zacks Consensus Estimate of $709 million. On a constant-currency basis, net sales grew 10.2%, primarily due to the strength of the HOKA and Teva brands.
The gross margin increased 130 basis points to 50% during the quarter. This was aided by significant cost savings from lower freight costs, partially offset by foreign currency exchange headwinds. Additionally, the strength in the HOKA DTC business further boosted the metric by bringing gains from favorable channel mix.
Meanwhile, SG&A expenses climbed 4.6% YoY to $290.2 million. As a percentage of net sales, SG&A expenses decreased 100 basis points to 36.7%, thanks to the benefits of marketing leverage.
The company recorded operating income of $105.9 million, up 30.3% from the year-ago quarter. The operating margin increased 240 basis points to 13.4%.
For FY2023, Deckers’ adjusted earnings increased to $19.37, marking a 19.1% YoY increase. Revenue increased 15.1% to $3,627.3 million YoY.
Brand-wise Analysis
HOKA’s net sales skyrocketed 40.3% to $397.7 million. However, UGG’s net sales dipped 16.1% to $314.3 million. On the other hand, Teva’s net sales increased 14.6% to $62.8 million. Meanwhile, net sales for Sanuk declined 10.5% to $10.7 million, and net sales for other brands, primarily Koolaburra, decreased 46.2% to $6 million.
Channel and Geography-wise Discussion
Wholesale net sales stayed relatively flat YoY at $448.4 million. However, DTC net sales rose 19.5% to $343.1 million, with comparable DTC net sales increasing by 18.4%.
Domestic net sales increased 4.1% to $542.4 million YoY, with international net sales increasing 15.8% to $249.1 million.
Other Financial Details
For Mar 31, 2023, cash and cash equivalents stood at $981.8 million compared to $843.5 million during the previous year. Notably, there were no outstanding borrowings, and the company had total stockholders’ equity of $1,765.7 million. Additionally, around 243 thousand shares were repurchased for $102.5 million during the quarter, and the company had $1.357 billion remaining under their share repurchase authorization.
Future Outlook
Deckers predicts that their net sales for FY2024 will likely be approximately $3.950 billion. This suggests growth from $3.627 billion reported in FY2023. The increase is expected to be driven by the HOKA brand since it continues to outclass expectations in DTC while expanding across wholesale access points globally.
The HOKA brand is anticipated to climb in the range of 20% in FY2024. In addition, the company expects strong DTC demand and growth. As such, it focuses on driving consumer acquisitions and retention, margin improvement, and marketplace management.
The expected UGG revenues are likely to increase in the low single digits, favored by international expansion and a flat US marketplace, as the company focuses on maintaining the brand’s pull model.
Deckers expects its earnings in FY2024 to be in the range of $21.10-$21.60 per share, which is better than the FY2023 earnings of $19.37 per share.
The company has a Zacks Rank #3 (Hold), and the stock has increased by 10.7% in the past three months compared to the industry’s decline of 7.2%.
Key Takeaways
Deckers posted strong Q4 FY2023 results, boosted primarily by the HOKA and Teva brands. The company’s gross margin was remarkable, given the considerable benefits from lower freight costs and the strength in HOKA’s DTC business, which further aided the metric. Deckers’ outlook for FY2024 is positive, given the expected growth in the HOKA brand alongside strengthened DTC demand and growth, favoring consumer acquisition and retention, margin improvement, and marketplace management.
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