Deckers Taking Actions to Combat Global Supply Chain Disruptions
Senior executives at Deckers Brands, the UGG, HOKA and Teva parent, told investors last week that approximately 45 percent of company inventory was in transit at the end of September versus 20 percent typically.
“Even with product beginning to move off the water, as well as packed and staged at the warehouse, some of our wholesale partners are experiencing labor shortages and logistic constraints in their operations, which is further hindering our ability to deliver shipments in a timely manner,” commented CFO Steve Fasching.
While Deckers does not currently expect Asian factory shutdowns in Q2 to materially impact its FY22 revenue guidance, the company is taking steps to alleviate potential pitfalls. These have included shifting additional production lines in new geographic locations, planning to carry more inventory for the remainder of FY21 and into FY22, and implementing targeted price increases to specific HOKA branded products to help offset higher air freight costs. Nonetheless, the company is anticipating some gross margin compression due to the additional costs. DECK has lowered its operating margin target to 17 percent, citing port congestion issues that may require additional air freight costs.
Deckers has reiterated its FY22 topline revenue forecast of 18-20 percent growth to a range of $3.01 billion to $3.06 billion. HOKA is projected to grow over 50 percent for the period to $875 million. UGG, meanwhile, should see sales increase in high single digits due to shipment disruptions. Teva annual sales are forecast to increase in the high teens with Koolaburra and Sanuk revenues pegged at flat for the FY.
In Q2, UGG global revenues rose 8 percent to $448 million. HOKA revenues rose 47 percent to $210 million for the period as the brand prioritized digital marketing avenues that target 18- to 34-year-old consumers.