Hoka propels Deckers brands into Q1


DEarnings and sales at Eckers Brands came in well above analysts’ targets in the fiscal first quarter ended June 30, catapulted by the exceptional appointment of Hoka with sales growing 54.9% over the past year. the period to reach $330.0 million, eclipsing the $1 billion mark over the twelve-month period. .

Hoka’s outperformance helped Deckers raise its EPS forecast slightly for its 2023 fiscal year, as most other companies cut their outlook due to macroeconomic challenges and currency headwinds.

During a conference call with analysts, Dave Powers, President and CEO of Deckers, said the quarter marked the first time that Hoka accounted for more than 50% of Deckers’ total quarterly revenue, significantly reducing the historical seasonality of its portfolio. due to its long reliance on the Ugg brand.

Hoka’s growth was driven by international markets, which jumped 66% year-on-year, driven by strength in EMEA. The timing of the sale partly influenced the gains distributors perceived for entering a new market.

U.S. sales were up 49% year-over-year, with DTC’s growth leading wholesale. Continued momentum with existing consumers and new consumer acquisitions drove DTC’s global growth to 58%. Global wholesale grew 53%, driven by an increase in market share from existing accounts and some accounts that were added to strategic accounts.

Powers said, “We are excited about the positive brand metrics and continued market share gains that Hoka is building on across its global distribution network.

Highlights of the quarter included:

  • According to aggregate data from specialty stores in the United States, at least half of Top 10 styles are increasing their market share due to rising retail prices and an emphasis on styles.
  • Overseas, revenue in France doubled, driven by gains in Paris, which was Hoka’s third fastest growing European city during the quarter.
  • APAC recorded the highest regional DTC growth rate, led by strength in Japan and China. These countries have benefited from stores raising consumer awareness.

“Across the globe, Hoka stores continued to inspire new audiences and generate compelling levels of traffic and purchases,” Powers said. “This is particularly exciting in China, which has been a slow build as Hoka has been slow to find its voice with local consumers in the region. With the refined visual merchandising strategy enhancing the consumer experience, our stores in China are now generating higher conversion rates.We are better equipped as we open additional branches in the region.

In the United States, Hoka is on track to open its first permanent location in New York City by spring 2023, Powers said. “This is an exciting undertaking as the Hoka store will feature an elevated design that aligns with our premier performance brand.”

Hoka will open a second Pop-up in New York near Lincoln Center next month. The brand’s Chicago pop-up, which opened in the quarter, saw “great traffic, driving high conversion,” Powers said.

He said: “We will take a disciplined approach to opening a limited number of doors, but we welcome the opportunity to engage with consumers in key cities around the world.

DTC acquisition for Hoka increased 48% and retention increased 58% over last year. Gains among consumers aged 18 to 24 outpaced increases.

Hoka launched Fly Human Fly, its first global integrated marketing campaign. The campaign received a strong response from wholesale partners and consumers. The site saw 83% of new users connect to it. These powers “We believe this campaign will have a significant impact on Hoka’s awareness as we grow the brand into a major multi-billion dollar player in the long-term performance space.”

Mix changes negatively impact Ugg’s revenue
Ugg revenue for the quarter decreased 2% to $208 million from a year ago. The increase in international wholesaler and distributor sales was offset by category shifting momentum which impacted the brand’s global direct-to-consumer business.

Powers said the category’s momentum includes the introduction of more spring, summer and outdoor-ready styles. The latest Sport Yeah sandal has been replaced by styles from the Fluff franchise. Sandals were also available. ‘Standout category’ Ugg’s quarter ended with a loss of revenue due to the decline in the average selling price of sandals in the category. This contrasts with the strong volumes of Fluff that have been sold in the first quarter over the past two years.

Powers said: “Across our global Ugg DTC, although dollar revenues were lower than last year due to these product line changes, demand for Ugg remained robust as the brand recorded increases of 8% and 13% in acquired and retained consumers, respectively, over the prior year. Importantly, international DTC acquisition and retention gains are trending well above these global numbers as we continue to build brand heat overseas.





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Ugg gained additional market share through the sale of transitional styles like the Ultra Mini, Coquette and Sport Yeah. The Tasman franchise, Fluff Yeah and Sport Yeah, Clem, Goldenstar fashion sandals, as well as the Tasman franchise are key styles driving new consumer acquisition worldwide. The Fluff Yeah continues to be Hoka’s top style among acquired and retained consumers, including 18-34 year olds.

“Overall, the first quarter was a good start to the year for UGG,” Powers. “We believe Ugg is well positioned to complete fiscal year 2023.”

Powers noted that Anne Spangenberg, former chief merchandiser of Nike, was appointed president of Fashion Lifestyle to guide Ugg. He said, “In her new role, Anne will build on UGG’s strategic priorities, focusing on product diversification, consumer adoption and franchise evolution in our omnichannel marketplace.

Among its smaller brands, Teva’s sales rose 2.0% to $59.6 million, and Sanuk’s sales fell 5.9% to $14.2 million. Other brands, including Koolaburra which are sold in mid-sized department stores, saw sales fall 45.3% to $2.7 million from $5.0 million.

Quarterly sales and profits smash Wall Street targets
Company-wide, Deckers’ net sales rose 21.8% to $614.5 million, beating analysts’ consensus estimate of $567.34 million. At constant exchange rates, net sales increased by 23.5%.

Earnings fell 6.8% to $44.8 million, or $1.66 per share. However, they were well above the average analyst estimate of $1.25.

The main reason for lower earnings was due to a 360 basis point erosion in gross margins to 48.0%. The decline in margin was consistent and due to higher ocean and air freight costs and the effects of unfavorable foreign exchange rates, which are expected to continue to pressure margins throughout the year.

In addition, gross margin for the quarter was impacted by:

  • Ugg promoted its brand with a standardized product line and promotional activity. Ugg sold more sandals than ever before and also offered discounts on select styles to match pre-pandemic activity.
  • The shift in channel line-up to the wholesale and distribution segment, particularly its international distribution business, partly offsets the benefits of Hoka’s higher revenue mix. During the first quarter, Hoka achieved a high gross margin and received price increases.

General and administrative expenses increased 20.0% to $238.4 million, but fell to 38.8% as a percentage of sales. Operating profit fell 8.9% to $56.3 million.

Inventories, which are amounts in transit, increased from $457.7 million to $839.5 million. Steve Fasching, chief financial officer, noted that last year’s inventory levels were below normal operating levels due to supply chain disruption.

Deckers said it repurchased 384,000 common shares during the quarter for $100.0 million and had $354.0 million remaining under its stock repurchase authorization as of June 30.

The board of directors approved a $1.2 billion increase in the company’s share buyback authority.

Looking ahead, the outlook is for the fiscal year ending March 31, 2023.

  • Net sales are still expected between $3.45 billion and $3.50 billion
  • Gross margin is still expected to be 51.5%.
  • SG&A costs as a percentage of sales are still projected at around 34%.
  • The operating margin should remain in the range of 17.5% to 18.0%.
  • The effective tax rate should remain around 22-23%.
  • EPS is now expected between $17.50 and $18.35. This is an increase from the previous $17.40 and $18.25.

Photo courtesy Hoka


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