Ugg brand owner Deckers Brands has reported a rise in sales and narrowed its net loss for the first quarter but warned of possible supply chain disruptions in the future.

The company said it experienced certain capacity constraints within its strategic sourcing network during the first quarter – which includes material vendors and third-party manufacturers – in addition to disruptions related to travel restrictions between country borders and production facilities.

Speaking to analysts on the firm’s first-quarter earnings call yesterday (30 July), chief financial officer Steve Fasching added that the company faces higher expenses to ship less product due to “social distancing measures in place at our Moreno Valley and third-party logistics distribution centres.”

Deckers also anticipates operational challenges related to capacity constraints at these distribution centres, including higher levels of e-commerce shipments during peak wholesale volume periods.

To help mitigate some of these workload impacts, Deckers is partnering with wholesalers to potentially ship some product earlier, “which could result in the cadence of revenue looking different than previous years.”

First-quarter results

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For the three months to 30 June, the company, whose brands also include Koolaburra, Hoka One One, Teva and Sanuk, posted a net loss of US$7.97m, compared to a loss of $19.35m a year earlier. Gross margin widened to 50.3% from 47% for the same period last year.

Net sales, meanwhile, edged up 2.3% to $283.2m from $276.8m last time. On a constant currency basis, net sales were up 2.8%.

Each of the group’s brands posted net sales decline in the period, apart from Hoka One One, which saw revenues jump 37.1% to $109m, compared to $79.5m in the prior year.

Ugg brand net sales were down 10% to $124.7m, while those at Teva dropped 7.9% to $35.2m from $38.3m last year. Sanuk net sales fell 29.2% to $13.2m. 

Domestic net sales, meanwhile, grew by 10.2% in the period to $184.3m, while international net sales fell 9.7% to $98.9m.

“First quarter performance was a testament to the resilience of our brands, the strength of our e-commerce platform, and the hard work of our employees,” said CEO Dave Powers. “While we are encouraged by the positive start to fiscal year 2021, we expect further challenges related to the Covid-19 pandemic, depending on the duration and severity of economic effects.”

As of this week, approximately 95% of the company’s global stores are open. However, Deckers said it anticipates additional closures or limitations during peak periods given the ongoing and uncertain pandemic conditions.