Deckers Outdoor (DECK) 8-K Deckers Brands Reports Second Quarter Fiscal 2017 Financial Results

Exhibit 99.1

Deckers Brands Reports Second Quarter Fiscal 2017 Financial Results

GOLETA, Calif.--(BUSINESS WIRE)--October 27, 2016--Deckers Brands (NYSE: DECK), a global leader in designing, marketing and distributing innovative footwear, apparel and accessories, today announced financial results for the second fiscal quarter ended September 30, 2016.

Throughout this release, references to Non-GAAP financial measures exclude certain restructuring charges. Additional information regarding these Non-GAAP financial measures is set forth under the heading "Non-GAAP Financial Measures" below.

“We are pleased with the results of our second quarter and the progress on our plans for the year,” said Dave Powers, President and Chief Executive Officer. “Despite a challenging consumer environment, we delivered earnings per share results that were higher than last year and at the top end of our expectations. Looking ahead, our teams are prepared for the upcoming selling season, and we are excited about our fall and holiday product and marketing plans.”

Second Quarter Fiscal 2017 Financial Review

• Net sales decreased (0.2)% to $485.9 million compared to $486.9 million for the same period last year. On a constant currency basis, net sales increased 0.3%.
• Gross margin was 44.5% compared to 44.0% for the same period last year.
• SG&A expenses as a percentage of sales were 33.4% compared to 33.5% for the same period last year. Non-GAAP SG&A expenses as a percentage of sales were 33.2%.
• Operating income was $54.0 million compared to $51.2 million for the same period last year. Non-GAAP operating income was $54.9 million.
• Diluted earnings per share was $1.21 compared to $1.11 for the same period last year. Non-GAAP diluted earnings per share was $1.23.

Brand Summary

• UGG® brand net sales for the second quarter decreased (2.1)% to $412.2 million compared to $421.1 million for the same period last year. On a constant currency basis, sales decreased (1.6)%. The year over year decrease was driven by lower European combined wholesale and distributor sales, primarily due to a delay in our European shipments now deferred to the third quarter, and a decrease in direct-to-consumer (DTC) comparable sales.
• Teva® brand net sales for the second quarter decreased (4.2)% to $17.1 million compared to $17.9 million for the same period last year. On a constant currency basis, sales decreased (4.8)%. The decrease in sales was driven by lower domestic wholesale sales.
• Sanuk® brand net sales for the second quarter increased 9.2% to $18.9 million compared to $17.3 million for the same period last year. On a constant currency basis, sales increased 9.0%. The increase in sales was driven by an increase in global wholesale and distributor sales.
• Combined net sales of the Company’s other brands increased 23.3% to $37.7 million compared to $30.6 million for the same period last year. On a constant currency basis, sales increased 23.9%. The increase was primarily attributable to increased HOKA ONE ONE® sales. HOKA ONE ONE® brand net sales, which are included as part of the Company’s other brand sales, increased 39.0% compared to the same period last year.

Channel Summary (included in the brand sales numbers above)

• Wholesale and distributor net sales for the second quarter decreased (0.1)% to $399.9 million compared to $400.3 million for the same period last year. On a constant currency basis, sales increased 0.6%.
• DTC net sales for the second quarter decreased (0.7)% to $86.0 million compared to $86.6 million for the same period last year. On a constant currency basis, sales decreased (1.0)%. DTC comparable sales for the second quarter decreased (3.2)% over the same period last year.

Geographic Summary (included in the brand and channel sales numbers above)

• Domestic net sales for the second quarter increased 3.6% to $312.2 million compared to $301.6 million for the same period last year.
• International net sales for the second quarter decreased (6.3)% to $173.7 million compared to $185.3 million for the same period last year. On a constant currency basis, sales decreased (5.1)%.

Balance Sheet

At September 30, 2016, cash and cash equivalents were $110.0 million compared to $99.8 million at September 30, 2015. The Company had $310.4 million in outstanding borrowings at September 30, 2016 compared to $349.7 million at September 30, 2015.

Company-wide inventories at September 30, 2016 decreased (2.9)% to $578.0 million from $595.0 million at September 30, 2015. By brand, UGG inventory decreased (4.1)% to $512.4 million at September 30, 2016, Teva inventory decreased (9.1)% to $17.8 million at September 30, 2016, Sanuk inventory decreased (2.7)% to $18.6 million at September 30, 2016, and the other brands inventory increased 34.0% to $29.2 million at September 30, 2016.

Full Year Fiscal 2017 Outlook for the Twelve Month Period Ending March 31, 2017

• The Company now expects fiscal year 2017 net sales to be in the range of down (3.0)% to down (1.5)%.
• Gross margin for fiscal 2017 is expected to be in the range of 47.0% to 47.5%.
• SG&A expenses as a percentage of sales are projected to be approximately 37%.
• The Company expects fiscal 2017 diluted earnings per share to be in the range of $4.05 to $4.25. This excludes any pretax charges that may occur from any further restructuring charges.
• The effective tax rate is expected to be approximately 27%.

Third Quarter Fiscal 2017 Outlook for the Three Month Period Ending December 31, 2016

• The Company expects third quarter fiscal 2017 net sales to be in the range of down approximately (2)% to flat versus same period last year. The Company expects diluted earnings per share in the range of $4.16 to $4.28 compared to $4.78 for the same period last year.
• As a reminder, last year’s third quarter included the reversal of performance based compensation which created an SG&A benefit last year of $0.38 in the third quarter.

Non-GAAP Financial Measures

We present certain Non-GAAP financial measures in this press release, including Non-GAAP gross margin, Non-GAAP SG&A expenses, Non-GAAP operating income and Non-GAAP diluted earnings per share, to provide information that may assist investors in understanding our financial results and assessing our prospects for future performance. We believe these Non-GAAP financial measures are important indicators of our operating performance because they exclude items that are unrelated to, and may not be indicative of, our core operating results, such as restructuring charges relating to retail store closures and office consolidations. In particular, we believe that the exclusion of certain costs and charges allows for a more meaningful comparison of our results from period to period. These Non-GAAP measures, as we calculate them, may not necessarily be comparable to similarly titled measures of other companies and may not be appropriate measures for comparing the performance of other companies relative to Deckers. These Non-GAAP financial results are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of operating performance as determined in accordance with GAAP. To the extent we utilize such Non-GAAP financial measures in the future, we expect to calculate them using a consistent method from period to period. A reconciliation of each of the financial measures to the most directly comparable GAAP measures has been provided under the heading “Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures” in the financial statement tables included below.

Conference Call Information

The Company’s conference call to review the results for the second quarter 2017 will be broadcast live today, Thursday, October 27, 2016 at 4:30 pm Eastern Time and hosted at www.deckers.com. You can access the broadcast by clicking on the “Investor Information” tab and then clicking on the microphone icon at the top of the page.

About Deckers Brands

Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The Company’s portfolio of brands includes UGG®, Koolaburra®, HOKA ONE ONE®, Teva® and Sanuk®. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally. For more information, please visit www.deckers.com.

Forward Looking Statements

This press release contains "forward-looking statements" within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements other than statements of historical fact contained in this press release, including statements regarding our anticipated financial performance, including our projected net sales, margins, expenses and earnings per share, as well as statements regarding our product and brand strategies, marketing plans and market opportunities. We have attempted to identify forward-looking statements by using words such as "anticipate," "believe," “could,” "estimate," "expect," "intend," "may," “plan,” “predict,” "project," "should," "will," or “would,” and similar expressions or the negative of these expressions.

Forward-looking statements represent our management’s current expectations and predictions about trends affecting our business and industry and are based on information available as of the time such statements are made. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements predicted, assumed or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2016, as well as in our other filings with the Securities and Exchange Commission.

Except as required by applicable law or the listing rules of the New York Stock Exchange, we expressly disclaim any intent or obligation to update any forward-looking statements, or to update the reasons actual results could differ materially from those expressed or implied by these forward-looking statements, whether to conform such statements to actual results or changes in our expectations, or as a result of the availability of new information.

DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(Amounts in thousands, except for per share data)
				Three-month period ended						Six-month period ended
				September 30,						September 30,
				2016			2015			2016			2015
Net sales			$	485,944		$	486,855		$	660,337		$	700,660
Cost of sales				269,519			272,742			367,660			399,951
	Gross profit			216,425			214,113			292,677			300,709
Selling, general and administrative expenses				162,402			162,900			316,973			313,204
	Income (loss) from operations			54,023			51,213			(24,296	)		(12,495	)
Other expense, net				1,551			1,371			2,113			2,345
	Income (loss) before income taxes			52,472			49,842			(26,409	)		(14,840	)
Income tax expense (benefit)				13,167			13,465			(6,796	)		(3,890	)
	Net income (loss)			39,305			36,377			(19,613	)		(10,950	)
Other comprehensive (loss) income, net of tax
	Unrealized (loss) gain on foreign currency hedging			(890	)		1,027			2,019			(436	)
	Foreign currency translation adjustment			(856	)		(1,091	)		2,843			1,675
		Total other comprehensive (loss) income		(1,746	)		(64	)		4,862			1,239
	Comprehensive income (loss)		$	37,559		$	36,313		$	(14,751	)	$	(9,711	)
Net income (loss) per share:
	Basic		$	1.23		$	1.12		$	(0.61	)	$	(0.33	)
	Diluted		$	1.21		$	1.11		$	(0.61	)	$	(0.33	)
Weighted-average common shares outstanding:
	Basic			32,057			32,511			32,041			32,812
	Diluted			32,422			32,775			32,041			32,812

DECKERS OUTDOOR CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
					September 30,		March 31,
			Assets		2016		2016
Current assets:
	Cash and cash equivalents			$	110,047	$	245,956
	Trade accounts receivable, net				300,159		160,154
	Inventories				578,027		299,911
	Other current assets				86,796		79,744
		Total current assets			1,075,029		785,765
Property and equipment, net					246,723		237,246
Other noncurrent assets					250,849		255,057
		Total assets		$	1,572,601	$	1,278,068
			Liabilities and Stockholders' Equity
Current liabilities:
	Short-term borrowings			$	278,026	$	67,475
	Trade accounts payable				202,917		100,593
	Other current liabilities				64,918		70,430
		Total current liabilities			545,861		238,498
Long-term liabilities:
	Mortgage payable				32,366		32,631
	Other liabilities				37,100		39,468
		Total long-term liabilities			69,466		72,099
		Total stockholders' equity			957,274		967,471
		Total liabilities and stockholders' equity		$	1,572,601	$	1,278,068

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
	DECKERS BRANDS - GAAP to Non-GAAP Reconciliation
	For the Three Months Ended September 30, 2016
	(in thousands, except per share data)
	(unaudited)
				Three-month period ended September 30, 2016
								Non-GAAP
				GAAP Measures	Restructuring			Measures
				(As Reported)	Charges (1)			(Excluding Items) (2)
	Net sales		$	485,944			$	485,944
	Cost of sales			269,519				269,519
		Gross profit		216,425				216,425
	Selling, general and administrative expenses			162,402	(903	)		161,499
		Income (loss) from operations		54,023	903			54,926
	Other expense, net			1,551				1,551
		Income (loss) before income taxes		52,472				53,375
	Income tax expense (benefit)			13,167				13,394
		Net income (loss)	$	39,305			$	39,981
	Net income (loss) per share:
		Basic	$	1.23			$	1.25
		Diluted	$	1.21			$	1.23
	Weighted-average common shares outstanding:
		Basic		32,057				32,057
		Diluted		32,422				32,422
	(1) Amounts as of September 30, 2016 reflect charges related to restructuring costs as a result of retail store closures and office consolidations.
	(2) The tax rate applied to the Non-GAAP measures is 25.1%, which is the same as the GAAP tax rate for the fiscal quarter ended September 30, 2016.

Reconciliation of GAAP Financial Measures to Non-GAAP Financial Measures
	DECKERS BRANDS - GAAP to Non-GAAP Reconciliation
	For the Six Months Ended September 30, 2016
	(in thousands, except per share data)
	(unaudited)
				Six-month period ended September 30, 2016
									Non-GAAP
				GAAP Measures		Restructuring			Measures
				(As Reported)		Charges (1)			(Excluding Items) (2)
	Net sales		$	660,337				$	660,337
	Cost of sales			367,660					367,660
		Gross profit		292,677					292,677
	Selling, general and administrative expenses			316,973		(2,635	)		314,338
		Income (loss) from operations		(24,296	)	2,635			(21,661	)
	Other expense, net			2,113					2,113
		Income (loss) before income taxes		(26,409	)				(23,774	)
	Income tax expense (benefit)			(6,796	)				(6,118	)
		Net income (loss)	$	(19,613	)			$	(17,656	)
	Net income (loss) per share:
		Basic	$	(0.61	)			$	(0.55	)
		Diluted	$	(0.61	)			$	(0.55	)
	Weighted-average common shares outstanding:
		Basic		32,041					32,041
		Diluted		32,041					32,041
	(1) Amounts as of September 30, 2016 reflect charges related to restructuring costs as a result of retail store closures and office consolidations.
	(2) The tax rate applied to the Non-GAAP measures is 25.7%, which is the same as the GAAP tax rate for the six-month period ended September 30, 2016.

CONTACT:
Deckers Brands
Steve Fasching, VP, Strategy & Investor Relations
805-967-7611