Deckers gross margin drops 3.8% in Q3 FY2016 due to increased marketing and share repurchasing

By

Dani Greene

Published
Feb 5, 2016

Deckers Brands, which include Ugg, Teva, Sunuk, Ahnu, Hoka One One and Koolaburra, announced modest increases in sales and slight decreases in international sales. Net sales increased 1.4% on a constant reported basis over the same period last year to $795.9 million. Diluted earnings per share for Q3 FY 2016 increased 13.6% to $4.78 compared to $4.50 for Q3 FY 2015.
 
When accounting for sales, inventories and investments, Deckers’ gross margin dropped from 52.9% in Q3 FY2015 to 49.1% for Q3 FY2016.  Specifically, the company’s cash and cash equivalents dropped from $369.4 million in Q3 FY 2015 to $263 million for Q3 FY 2016, in large part due to share repurchases, inventory and capital investments and greater than expected investments in marketing.

 
Angel Martinez, Chief Executive Officer and Chair of the Board of Directors, said of the financial results, "While we have made significant progress diversifying our brands and product lines and transforming our organization over the past several years, we recognize the need to accelerate elements of our long-term strategy.”
 
To address reductions in cash equivalents, the Deckers is moving the Sanuk brand’s operations to global headquarters and is closing the Anhu office in California. The company is also realigning its brands across two groups, Fashion Lifesyle and Performance Lifestyle. Finally, the company may close up to 20 retail stores to cut costs.

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Deckers Brands, established in 1973 in Santa Barbara, California, is a global leader in designing and distributing footwear, apparel and accessories for everyday and active lifestyles. The company’s products are sold in over 50 countries and oversees via 145 retail stores, as well as e-commerce stores for its in-house brands, Ugg, Teva, Sunuk, Ahnu, Hoka One One and Koolaburra.