• Q4 net losses narrowed to $15.7m from $23.7m a year earlier
  • Gross margin widened to 43.0% from 40.9%
  • Net sales fell 2.4% to $369.5m from $378.6m

US apparel and footwear group Deckers Brands – which last month said it was exploring strategic alternatives, including a potential sale of the firm – narrowed its net loss in the fourth quarter, and said an ongoing savings plan is expected to drive $100m in operating profit improvement by fiscal 2020.

The maker of Ugg footwear says that for the three months ended 30 March, losses narrowed to $15.7m from $23.7m a year earlier. Gross margin widened to 43.0% from 40.9% in the year-ago period, due to less domestic promotional activity and supply chain improvements, partially offset by foreign exchange headwinds from the strengthening of the US dollar.

Net sales however, decreased 2.4% to $369.5m, compared to $378.6m for the same period last year. Domestic net sales for the quarter decreased 4.3% to $230m, while international sales increased 0.9% to $139.5m.

Ugg brand net sales fell 1.1% to $243m, compared to $245.6m a year ago, while Teva brand net sales also slipped, down 13.3% to $51.3m. Meanwhile, net sales for the Sanuk brand fell 16.1% to $32.3m, compared to $38.5m last year.

For the full year, Deckers booked net income of $5.7m, a 95.3% drop from earnings of $122.3m a year earlier. Gross margin widened to 46.7% compared to 45.2% last year, primarily due to lower input costs and supply chain efficiencies, partially offset by foreign exchange headwinds from the strengthening of the US dollar.

Meanwhile, net sales slipped 4.5% to $1.79bn compared to $1.88bn last year.

Domestic net sales for the full year decreased 6.4% to $1.14bn, while international sales decreased 1% to $648.8m.

For fiscal 2017, Ugg brand net sales decreased 4.8% to $1.45bn, while  Teva brand net sales also slipped, down 11.5% to $117.7m. Meanwhile, net sales for the Sanuk brand fell 13.6% to $91.8m.

"Over the course of the last year, the organisation has been hard at work identifying margin enhancing initiatives and detailing plans that significantly improve the profitability of the company," says Powers.

He adds the company believes that the previously identified $150m in cumulative savings before reinvestment will drive operating profit improvement of $100m that will be fully realised by the end of fiscal year 2020. The savings are expected to come from both cost of sales improvements and SG&A reductions.

Cost of sales improvements are expected to come from reducing product development cycle times, optimising material yields, consolidating the company's factory base, and moving production outside of China.

Meanwhile, other plans include further retail store consolidations, process improvement efficiencies, and lower unallocated indirect spend.

Based on the implementation of these initiatives over the next three years, Deckers is providing long-term outlook for fiscal year 2020, and expects total sales of around $2bn.

For fiscal 2018, the company expects net sales to be in the range of down 2% to flat, gross margin at 47.5%, and non-GAAP diluted earnings per share in the range of $3.95 to $4.15.

Last month, Deckers revealed it is exploring "strategic alternatives", including a potential sale of the firm, on the back of a disappointing third-quarter, which saw profit drop by nearly three-quarters.

Deckers mulls sale amid Q3 profit tumble