Deckers’ revenues top $3 billion for first time, Hoka set to surpass $1 billion

Executive Summary:

• Deckers’ annual revenues exceed $3 billion for the first time.
• Hoka’s exceptional performance, nearing $1 billion in sales.
• Net income doubled, signaling strong market performance.
• Hoka, Ugg, Teva, and Sanuk noted significant sales changes.
• Strategic growth and expansion planned in the European market.
• Positive revenue and sales growth projected for the coming fiscal year.

Comprehensive Financial Performance Review

Net income rose 106 percent to $68,819,000 from $33,458,000 for the three months ended March 31 as total revenues grew 31 percent to $736.0 million from $561.2 million. Operating income rose to 11.0 percent from 10.1 percent. Deckers Brands’ gross margin declined to 48.7 percent from 53.2 percent, largely on higher ocean and air freight costs and currency impacts. By channel, wholesale revenues grew 38 percent to $448.8 million, and DTC sales increased 19 percent on a comparable basis to $287.2 million. By brand, Hoka paced all with a 59.7 percent gain to $283.5 million, followed by a 24.7 percent increase for Ugg to $374.6 million, 8.8 percent improvement at Teva to $54.8 million, a 2.4 percent gain for Koolaburra to $11.2 million and a 1.7 percent decline at Sanuk to $11.9 million.

For the full year, Deckers delivered 18 percent net income growth to $451.9 million from $382.6 million as total revenues expanded 23.8 percent to $3.15 billion from $2.55 billion, with Hoka sales up 56.1 percent to $891.6 million, Ugg revenues increasing 15.4 percent to $1.98 billion, Teva up 17.3 percent to $162.7 million, and Sanuk brand sales coming in 3.0 percent higher at $43.1 million. Koolaburra sales dipped 9 percent to $69 million on disruption in wholesale deliveries. Annual wholesale net sales rose 31.0 percent to $1.94 billion, and DTC retail revenues increased 13.8 percent to $1.21 billion. Deckers’ U.S. sales rose 23.1 percent over the 12 months to $2.17 billion as revenues outside the U.S. improved 25.3 percent to $982.5 million. It marked the first time that the increase outpaced the domestic sales gain in four years.

While admitting it has faced supply chain challenges in Europe last year and current macroeconomic issues in the region, senior management said the company remains optimistic about growth opportunities across the EU, including in Germany, where work is underway to elevate marketing to local consumers and DTC presence for both Ugg and Hoka.

Full-year gross margin fell from 54.0 percent to 51.0 percent, largely due to a 3.7 percentage points hike in freight expenses. Full-year freight costs were more than $100 million higher than the prior year. 

The current FY23 outlook calls for 9.5 to 11.1 percent revenue expansion to a range of $3.45 billion to $3.50 billion with an annual operating margin in the 17.5 to 18.0 percent range. Ugg sales are forecast to increase low-single digits this FY. Hoka sales, meanwhile, are expected to grow in the “high 30 percent” range to more than $1.2 billion, helped by better product access in H2 due to new capacity availability and increased retail and wholesale exposure via pop-up locations in key cities and additional door availability in strategic accounts and run specialty locations. Pop-up stores have already opened in New York City, Chicago and Venice (California) in the U.S., with a permanent store slated to open in New York City by year-end. The Hoka brand is currently available in less than 20 percent of Dick’s Sporting Goods store locations and a handful of Foot Locker stores as it looks to increase its exposure to the 18- to 34-year-old demographic.