Deckers Outdoor Corporation (

DECK

)

Q4 2011 Earnings Conference Call

February 23, 2012 16:30 AM ET

Executives

Angel Martinez – President and Chief Executive Officer

Zohar Ziv – Chief Operating Officer

Tom George – Chief Financial Officer

Analysts

Jeff Klinefelter – Piper Jaffray

Bob Drbul – Barclays Capital

Omar Saad – ISI Group

Mitch Kummetz – Robert Baird

Camilo Lyon – Canaccord Genuity

Diana Katz – Lazard Capital Markets

Taposh Bari – Jefferies & Company

Christian Buss – Credit Suisse

Eric Alexander – Stifel Nicolaus

Chris Svezia – Susquehanna Financial Group

Scott Krasik – BB&T

Howard Tubin – RBC Capital Markets

Presentation

Operator

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Good afternoon, ladies and gentlemen and thank you for standing by. Welcome to the Deckers Outdoor Corporation Fourth Quarter and Fiscal 2011 Year End Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (Operator Instructions) I would like to remind everyone that this conference call is being recorded.

Before we begin, I would also like to remind everyone of the company's Safe Harbor policy. Please note that certain statements made on this call regarding the company's expectations, beliefs, and views about future financial performance, brand strategies, and cost structure are forward-looking statements within the meaning of the Federal securities laws. These forward-looking statements are intended to qualify for the Safe Harbor from liability established by the Private Securities Litigation Reform Act of 1995. These statements relate to the company's anticipated revenues, expenses, earnings, gross margin capital expenditures, brand strategies, and cost structure as well as the outlook for the company's markets and the demand for its products.

The forward-looking statements made on this call are based on currently available information and because its business is subject to a number of risks and uncertainties, some of which may be beyond its control, actual operating results in the future may differ materially from the future financial performance expected at the current time.

Deckers has explained some of these risks and uncertainties in its earnings press release and in its SEC filings, including Risk Factors section of its Annual Report on Form 10-K and its other documents filed with the SEC. Listeners are cautioned not to place undue reliance on forward-looking statements, which may speak only as of the date hereof. The company undertakes no obligation to publicly release or update the results of any revisions to forward-looking statements.

I would now like to turn the conference over to the President, Chief Executive Officer, and Chair of the Board of Directors, Angel Martinez. Please go ahead sir.

Angel Martinez – President and Chief Executive Officer

Well, thank you and thank you to everyone for joining us today. With me on the call are Chief Operating Officer, Zohar Ziv and Chief Financial Officer, Tom George.

We're very pleased to report fourth quarter sales and earnings that exceed the levels that we outlined back in October. Our performance was driven by higher than expected demand for the UGG brand, primarily in our domestic wholesale channel. Fourth quarter UGG brand sales increased 38% easily pushing the first full year brand sales past $1 billion for the first time ever. This tremendous performance is a testament to the hard work put in by our UGG brand team year-in and year-out. Congratulations to Connie Rishwain and the global UGG brand team.

Tom will go through the financials in a moment, but I do want to highlight some of our key achievements. Fourth quarter net sales rose 40% to a record $604 million and diluted earnings per share increased 40% to a record $3.18. It was very gratifying to end 2011 on such a high note.

For the year, annual sales were $1.377 billion up 38% over 2010 and full year diluted EPS increased 26% to $5.07. A record financial performance was a result of our global team successfully executing the growth strategies that we have implemented over the past few years. While we regularly fine tune our strategies to adapt to market changes, our central theme has not changed, which includes reinvesting in our business and our brands. And in 2011, this included new product development, marketing, expansion of our consumer direct platform, which consists of our retail stores and eCommerce business and international growth, including the startup of subsidiaries in Europe.

2011 also included the acquisition of the Sanuk brand, a terrific addition to our brand portfolio and a compelling new growth vehicle for the company. Each of these investments contributed to our results while at the same time strengthening our connection with consumers, improving our position with retailers, and enhancing our future prospects.

Let's talk about new products. New products and styles which continued to spearhead growth in 2011. For the UGG brand, we introduced new styles in our classic collection significantly expanded the style count in our women's fashion, cold weather, clog and casual collections launched our high-end Italian collection, and broadened our men's offering. In aggregate, the response of the 2011 fall and spring lines was very positive and we are confident that the evolution of the UGG brand is creating repeat customers and attracting new customers.

The popularity of our classic boots was further enhanced this year by the Sparkles and Triplet Bailey button, which along with selected price increases help drive steady growth of our largest collection. As planned, our non-classic collections were the main growth drivers. Based on the sales mix, it is evident we are gaining share in new categories as we introduced more fashionable, functional, and of course, comfortable boots, comfortable sneakers, sandals and casual footwear for women and men, and continue to create growth in our highly successful slipper category.

Importantly, distribution for these new collections is not limited to our own stores, website and select wholesale accounts. Across our department stores, specialty retail, and independent network, more and more shelf space is being dedicated to our growing lifestyle product offering. It was a similar story with the Teva brand, as new products particularly our growing assortment of closed toe footwear fueled the brand's second consecutive year of 20% plus growth.

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