Deckers Outdoor Corporation — FY2022 Form 10-K
Reporting period: Fiscal year ended March 31, 2022, compared with fiscal 2021. The filing also reports the quarter ended March 31, 2022; this is not a calendar-year 2021 Q4 filing. Amounts below are in U.S. dollars unless stated otherwise.
Business context
Deckers designs, markets, and distributes footwear, apparel, and accessories under UGG, HOKA, Teva, Sanuk, and Koolaburra. It sells through wholesale partners and its direct-to-consumer (DTC) e-commerce and retail channels. Products are made by independent manufacturers, primarily in Asia. The six reportable segments are wholesale operations for each of the five brands and DTC.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Net sales | $3,150.3 million | $2,545.6 million | +23.8% |
| Gross profit / gross margin | $1,607.6 million / 51.0% | $1,374.1 million / 54.0% | Margin down 3.0 percentage points |
| Operating income / margin | $564.7 million / 17.9% | $504.2 million / 19.8% | Income +12.0% |
| Net income | $451.9 million | $382.6 million | +18.1% |
| Diluted EPS | $16.26 | $13.47 | +$2.79 |
| Cash from operations | $172.4 million | $596.2 million | Down $423.9 million |
| Cash and cash equivalents at year-end | $843.5 million | $1,089.4 million | Down $245.8 million |
| Inventory at year-end | $506.8 million | $278.2 million | Up $228.6 million |
Wholesale sales rose 31.0% to $1,936.7 million; DTC sales grew 13.8% to $1,213.6 million. Domestic sales increased 23.1% to $2,167.8 million and international sales increased 25.3% to $982.5 million, or 31.2% of total sales. By brand, total UGG sales grew 15.4% to $1,982.0 million and HOKA grew 56.1% to $891.6 million; Teva grew 17.3%, while Sanuk grew 3.0% and Other brands declined 7.5%.
Operating cash flow fell chiefly because of working-capital changes, particularly the inventory build and higher receivables. Investing cash use was $51.0 million, including spending on the second U.S. distribution center; financing cash use was $367.5 million, including $356.7 million of share repurchases. The company reported no borrowings under its revolving facilities at year-end. Available capacity was approximately $399.5 million under the primary facility, $47.3 million in China, and $24.6 million in Japan; the company was in covenant compliance. Current assets were $1,752.1 million and current liabilities $541.7 million.
Total liabilities included $222.1 million of operating lease liabilities; the filing reports no outstanding revolving-credit borrowings. Total contractual obligations were $1,471.8 million, including $809.8 million of product purchase obligations, mostly expected within one year.
Material changes and unusual items
- Growth reflected higher HOKA, UGG, and Teva demand, wholesale customer inventory replenishment, brand marketing, and HOKA market-share gains. Total pairs sold increased 22.2% to 51.2 million.
- Gross margin contracted largely because of sharply higher air freight, ocean shipping, and third-party delivery costs, with an unfavorable shift toward wholesale partly offset by favorable HOKA mix, fewer closeouts, and currency effects.
- SG&A increased 19.9% to $1,042.8 million, including higher advertising, warehousing and shipping costs, payroll, technology, and other operating expenses. SG&A declined as a share of sales, from 34.2% to 33.1%.
- The effective tax rate declined to 20.0% from 23.7%, mainly due to discrete tax benefits and changes in the geographic mix of earnings. Net income also benefited from lower weighted-average shares following repurchases.
- Inventory grew substantially as Deckers procured goods earlier to manage long transit times and protect product availability. Inventory in transit was significantly higher than in comparable prior-year periods.
- The company repurchased 1.04 million shares for $356.7 million during FY2022. It had $454.0 million of authorization remaining at year-end and repurchased a further 176,046 shares for $48.0 million through May 5, 2022.
Outlook, risks, and contingencies
The filing does not provide clear numerical revenue or earnings guidance. Management expected supply-chain disruption, elevated freight and logistics costs, inflation, and operational challenges to continue into the next fiscal year and pressure gross margin. Deckers anticipated using air freight, particularly for HOKA, and procuring inventory early, which could keep inventory and working-capital needs elevated. It also cited higher costs for finished goods, freight, commodities, labor, and potentially borrowing, alongside possible effects on consumer demand.
Management’s strategy emphasizes global HOKA growth, continued UGG product and geographic diversification, DTC development, selective pricing, expanded sourcing and distribution capacity, and investment in planning systems and e-commerce. The business remains seasonal and sensitive to weather, consumer preferences, and discretionary spending. Other significant risks include dependence on a small number of sheepskin tanneries, Asian manufacturing concentration, labor and logistics constraints, customer credit and order cancellations, foreign-exchange movements, competition, cybersecurity, and geopolitical uncertainty including the Russia-Ukraine conflict.
Management believed available cash, operating cash flow, and borrowing capacity would cover working-capital needs, contractual obligations, and debt service for at least 12 months. Legal proceedings arise in the ordinary course, including intellectual-property enforcement; management did not expect their aggregate outcome to materially affect the company. The auditor issued unqualified opinions on the financial statements and internal controls. The audit identified wholesale sales-return liability estimation as a critical audit matter; this does not modify the overall audit opinion.
Most important facts for investors to verify
- Whether elevated freight costs, supply interruptions, and new sourcing capacity continue to constrain gross margin or product availability.
- Whether the large inventory increase converts into sales at planned prices rather than requiring markdowns, and how working capital affects operating cash flow.
- Whether HOKA’s rapid growth and UGG’s performance remain durable across channels and regions, and whether weaker Other-brand sales persist.
- Whether the $809.8 million of product purchase obligations and planned capital spending align with demand and liquidity needs.
- Whether share repurchases, including activity after year-end, remain consistent with operating investment priorities and available cash.
- How customer concentration in receivables, sheepskin sourcing concentration, tax uncertainties, and the wholesale sales-return estimate develop.