Footwear company Deckers saw first-quarter net profits slump as higher costs hit margins.

The company, which owns the Ugg, Teva and Sanuk brands, saw net income fall 58.8% to US$7.8m over the quarter ended 31 March. Sales rose 20.2% to $246.3m.

Gross margin declined to 46% from 50% in the same period of the prior year, as SG&A expenses climbed to $101.3m from $74.2m in the same period of the prior year.

Ugg brand sales increased 6.5% to $158.1m, as Teva sales declined 1.1% to $49.8.
Domestic sales increased 15.1% to $170.6m, while international sales rose 33.5% to $75.7m.

"Our first quarter performance was mixed versus our expectations," said president, chairman and CEO Angel Martinez. "Sales growth was driven by the addition of the Sanuk brand combined with increased demand for the Ugg brand spring line, partially offset by softness in boots due to the unusually warm weather.

"The difference in the channel mix versus projections, along with some higher closeouts for the Teva brand and non-Classic Ugg brand styles, put some additional pressure on overall gross margins on top of the higher product costs we had forecasted."

"We'll soon be completing our fall booking process and we're encouraged by the level of domestic wholesale commitments for the Ugg brand collection to date particularly given the mild winter.

"While we believe that the macroeconomic conditions in Europe have created a difficult selling environment, we remain optimistic about our future prospects throughout the continent.

"Looking ahead, I have confidence that we can continue to successfully navigate through the near-term challenges facing some areas of our business, while continuing to execute against our strategic plan aimed at delivering consistent sales and earnings growth over the long-term."