Deckers Brands posted revenues for the fourth quarter of its fiscal year ended March 31, 2017 that exceeded its own guidance, boosted by the strong performance of Hoka One One and by higher direct-to-consumer (DTC) sales. They dipped by 2.4 percent to $369.5 million, instead of an expected 5.0 to 6.0 percent drop. On a constant-currency basis, they decreased by 1.5 percent.
Hoka was a highlight this quarter, with sales jumping by 32.7 percent. The company said that new product introductions, like the Arahi and Hupana, helped fuel healthy growth in units and margins.
The Ugg brand's sales fell by 1.1 percent to $243.0 million, but gained 0.2 percent on a constant-currency basis, as the brand faced lower domestic wholesale revenues, partially offset by an increase in international wholesale and DTC revenues. Deckers said it was pleased with the reception of Ugg's spring and summer lines, noting that sales of women's shoes and sandals grew by more than 20.0 percent thanks to continued progress in diversifying and de-seasonalizing the Ugg brand.
Teva's sales declined by 13.3 percent to $51.3 million, or by 13.2 percent in constant currencies, weighed down by a decrease in global wholesale revenues, partially offset by an increase in the DTC business. Meanwhile, revenues from the Sanuk brand dropped by 16.1 percent to $32.3 million, on both a reported and constant-currency basis, due to a decrease in global wholesale and DTC sales. Combined net sales for the company's other brands, which includes Hoka as well as sales in the year-ago period of the discontinued Ahnu brand, increased by 21.2 percent to $42.9 million, or by 22.0 percent in constant currencies.
Total sales to third parties, including the wholesale business and foreign distributors, dipped by 5.8 percent to $219.1 million, or by 5.2 percent on a constant-currency basis. Direct-to-consumer sales fared better, increasing by 3.0 percent to $150.4 million, or by 4.3 percent in constant currencies. In this segment, comparable store sales were flat. The company said it experienced strong demand in its e-commerce channel, which was offset by declines at its retail stores.
Revenues from the U.S. were down by 4.3 percent to $230 million, while sales abroad inched up by 0.9 percent to $139.5 million, or by 4.1 percent in local currencies.
The gross margin gained 2.1 percentage points to 43.0 percent, due to less domestic promotional activity and supply chain improvements, partially offset by foreign exchange headwinds from the strengthening U.S. dollar.
The company ended the quarter with a net loss of $15.7 million, down from a loss of $23.7 million a year ago.
For the full financial year through March, Deckers' revenues were down by 4.5 percent to $1,790 million, or by 4.1 percent in constant currencies. Ugg's sales declined by 4.8 percent to $1,450 million, Teva's sales dipped by 11.5 percent to $117.7 million and Sanuk's sales slumped by 13.6 percent to $91.8 million. Combined revenues from the company's Other Brands increased by 16.2 percent to $129.6 million.
The gross margin was up by 1.5 percentage points to 46.7 percent for the year. Net income tumbled by 100.0 percent to $5.7 million, impacted by charges of $167.5 million related to the write-down of the Sanuk brand's goodwill and intangible assets, retail impairments and other restructuring charges.
The management now anticipates that the $150 million in cumulative savings before reinvestment identified in February 2017 - which will come from cost of sales improvements and SG&A reductions - will drive an improvement in operating profit of $100 million, that will be fully realized by the end of the fiscal year terminating in March 2020.
It said that Deckers is entering the new financial year in a much stronger position compared with a year ago, thanks to the completion of an organizational review, which has given it a clear path forward for improving profitability. Deckers will continue its focus on the four strategic priorities laid out early last year: developing compelling product, focusing on digital, optimizing distribution and implementing cost savings. It now expects sales for the year ending March 31, 2018 to be flat or down by two percent at the most as compared to last year.