Full-Year 2012 Outlook
Based on third quarter results combined with reduced sales projections, the Company is revising its full year outlook.
- The Company now expects 2012 sales to increase approximately 5% over 2011 levels, compared to previous guidance of approximately 14%.
- The Company now expects 2012 diluted earnings per share to decrease approximately 33% from 2011 levels, compared to previous guidance for diluted earnings per share to decrease approximately 9% to 10%.
- This guidance assumes a gross profit margin decline of approximately 430 basis points from 2011 levels compared to previous guidance which assumed a decline of 250 basis points. The year over year decline is due primarily to an increase in cost of goods sold driven by higher sheepskin costs and lower European margins, partially offset by increased contribution from retail sales, and the addition of the Sanuk brand for the full year.
- This guidance also assumes SG&A as a percentage of sales of approximately 32% versus prior guidance of approximately 30% due to the lower sales projections partially offset by lower compensation expense. Fiscal 2012 guidance includes $16 million, or $0.30 per diluted share associated with amortization and accretion expenses related to the Sanuk brand acquisition.
- UGG brand sales are expected to be flat with 2011 levels compared to previous guidance of a 10% increase. Teva brand sales are expected to be slightly down and Sanuk brand sales are still expected to be approximately $95 million. The Company acquired Sanuk in July 2011. Combined sales of other brands are expected to be down approximately 10% to approximately $22 million, driven by the closure of the Simple brand at the end of 2011.
Fourth Quarter Outlook
- The Company now expects fourth quarter 2012 revenue to increase approximately 6% over 2011 levels, compared to its previous guidance of approximately 19%.
- The Company now expects fourth quarter 2012 diluted earnings per share to decrease approximately 14% from 2011 levels, compared to its previous guidance for an increase of approximately 22%
Mr. Martinez concluded, “As we make adjustments to our near-term strategies, including the adjusted pricing and continued focus on the optimal distribution of the UGG products, and to focus on the best interests for the UGG brand in the long term, we believe it is prudent to adopt a more cautious outlook for the fourth quarter. Long-term, the global growth strategies we have put in place remain intact and on course. This is also true of the previous measures we’ve taken to help mitigate the risks to the business. These include supply chain initiatives to reduce our exposure to sheepskin, product diversification to lessen our dependency on Classics and cold weather, and our acquisition of the Sanuk brand, which has helped to balance the seasonality of our business and improve margins. We also remain committed to enhancing shareholder value, evidenced by our aggressive stock repurchase activity over the past several quarters.”