Deckers Outdoor Corporation · NYSE:DECK
Deckers Outdoor — Proxy Contest (November 2017)
44 slides from Deckers Outdoor's proxy contest presentation, November 2017
Slide 1: Right Plan, Right Board: The Transformation Is Working
RIGHT PLAN, RIGHT BOARD THE TRANSFORMATION IS WORKING 1
Slide 2: Disclosures
DISCLOSURES Safe Harbor We make forward-looking statements in this presentation, which represent our expectations or beliefs about future events and financial performance. Forward-looking statements are identifiable by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may”
Slide 3: Agenda
AGENDA • Share our business transformation journey over the past two years • Provide an overview of our brand building strategy and business optimization model • Discuss the details of our profit enhancement plan and its progress • Demonstrate the plan’s value to stockholders, as well as the long-te
Slide 4: Deckers at a Glance
DECKERS AT A GLANCE Snapshot Brands • Portfolio of leading footwear • Undergoing business and lifestyle brands serving transformation with new brand FASHION both casual and high- initiatives, generating $150M LIFESTYLE performance needs of cost savings that drive a GROUP (FLG) $100M operating profit
Slide 5: Build Brands That Connect with Consumers Globally
BUILD BRANDS THAT CONNECT WITH CONSUMERS GLOBALLY FASHION LIFESTYLE GROUP UGG: Iconic $1.4B+ global lifestyle brand, known primarily for its luxurious comfort-based sheepskin footwear Koolaburra: Sub-$100 priced sheepskin/wool boot category attack brand that complements premium UGG offerings PERFORM
Slide 6: Our Evolution
OUR EVOLUTION 2016 & Beyond: Leverage and Scale Pre-2010: Explosive Growth 2010 – 2015: Investment in Infrastructure and Talent 6
Slide 7: Our Business Transformation Journey
OUR BUSINESS TRANSFORMATION JOURNEY UNDER THE LEADERSHIP OF JOHN GIBBONS AS LEAD DIRECTOR AND NOW CHAIRMAN AND DAVE POWERS AS CEO, SPENT THE LAST TWO YEARS FOCUSED ON: • Optimizing the business by consolidating and enhancing brands; • Evolving and right-sizing the organization to align with strategy
Slide 8: Seismic Environmental Shift Has Created the Need for Transformation
SEISMIC ENVIRONMENTAL SHIFT HAS CREATED THE NEED FOR TRANSFORMATION Transforming our global marketplaces to leverage our infrastructure and quickly adapt to changing consumer demands Key Factors How Are We Responding? • Changes in consumer buying • Omni-channel strategy with integrated retail, ecomm
Slide 9: Further Develop Our Portfolio to Reduce Volatility and Drive Growth
FURTHER DEVELOP OUR PORTFOLIO TO REDUCE VOLATILITY AND DRIVE GROWTH We are balancing and expanding our business across brands, categories and seasons, and are utilizing and repurposing our infrastructure to enhance profitability Key Factors How Are We Responding? • Global diversification to help cou
Slide 10: Creating Stockholder Value Over the Long Term
CREATING STOCKHOLDER VALUE OVER THE LONG TERM MAJOR COMPONENTS DRIVING STOCKHOLDER VALUE EVOLVING THE ORGANIZATION TRANSFORMING BRANDS INCREASING OPERATING TO MEET THE CHANGING IN THE MARKETPLACE PROFITS MARKETPLACE Optimize existing fleet, close Align organization to business • Deliver premium bran
Slide 11: Transforming Brands in the Marketplace
TRANSFORMING BRANDS IN THE MARKETPLACE Deliver Premium Elevate the Implement A Multi-Season Brand Experience UGG Brand Product Strategy • Elevate consumer experience • Maintain loyal consumer base • Focus on becoming all-season within all brands to drive through staple Classic boot lifestyle brand a
Slide 12: Transforming Brands in the Marketplace (Cont'd)
TRANSFORMING BRANDS IN THE MARKETPLACE (Cont’d) Position All Brands for Exploit the Grow Positive Growth Hoka Brand Internationally • Focus on margin • Capitalize on recent and • Exploit new opportunities and reach highly improvements across all proven growth, with revenue attractive demographic bas
Slide 13: Evolving the Organization to Meet the Changing Marketplace
EVOLVING THE ORGANIZATION TO MEET THE CHANGING MARKETPLACE • New CEO (Dave Powers), Fashion Lifestyle Group President (Andrea O’Donnell) and President of Omni-channel (Stefano Caroti) in • Consolidating office locations last two years and creating brand groups ALIGNING • Expanded role for President,
Slide 14: Improving Operating Profit
IMPROVING OPERATING PROFIT $150M Key principles and drivers of cost reduction plan: in cost savings 1. Marketplace dynamics $56M in COGS 2. Speed to market $94M SG&A 3. Cost efficiencies and streamlined business model 4. Driving best-in-class margins, profitability and returns on invested capital Im
Slide 15: Retail Is an Important Part of Building and Sustaining Our Global Brands
RETAIL IS AN IMPORTANT PART OF BUILDING AND SUSTAINING OUR GLOBAL BRANDS KEY BENEFITS OF RETAIL STRATEGY KEY BENEFITS OF RETAIL STORE TYPE • Critical to building premium global brands Type Benefit • Leverages high traffic locations in key markets to drive brand awareness • Ability to showcase and bu
Slide 16: Benefits of a Multi-Brand and Multi-Season Strategy
BENEFITS OF A MULTI-BRAND AND MULTI-SEASON STRATEGY The multi-brand portfolio PERFORMANCE LIFESTYLE GROUP TRENDS brings several benefits: ($ in millions) • Increased diversification and reduced seasonality Revenue Operating Contribution ² • Exposure to expanded consumer base $341 via Performance Lif
Slide 17: Transformation Is Working
TRANSFORMATION IS WORKING R E C E N T P E R F O R M A N C E I S R E F L E C T I V E O F I N I T I AT I V E S Exceeded consensus by OUR TRANSFORMATIONAL INITIATIVES, WHICH $0.17 $0.39 $0.52 BEGAN IN 2016, ARE STARTING TO PAY OFF … FY2017 Q4 FY2018 Q1 FY2018 Q2 WE ARE ALREADY OPERATING MARGIN STOCK RE
Slide 18: Transformation Is Working (Cont'd)
TRANSFORMATION IS WORKING (Cont’d) F AV O R A B L E F I N A N C I A L R E S U LT S REVENUE GROWTH NON-GAAP EBIT HAS ($ in millions) SIGNIFICANTLY 3.6% CAGR EXPANDED, AND ~$2,000 REVENUE HAS GROWN $1,825 $1,822 $1,790 EVEN WHILE TURNING OFF UNPROFITABLE FY2017 LTM FY2018 Q1 LTM FY2018 Q2 FY2020 Targe
Slide 19: Transformation Is Working – Shareholders Are Benefitting
TRANSFORMATION IS WORKING – SHAREHOLDERS ARE BENEFITTING NOTABLE IMPROVEMENT AGAINST PROXY PEER GROUP 2-Year Stock Price 2-Year Stock Price Company YoY EBIT Margin Δ 1 Company YoY EBIT Margin Δ 1 Performance Performance (50.5%) 35 bps 42.8% 122 bps (17.4%) 54 bps (49.4%) (234 bps) 29.2% 4 bps 12.6%
Slide 20: Transformation Is Working – Analysts Agree
TRANSFORMATION IS WORKING – ANALYSTS AGREE S T R O N G F E E D B A C K O N M A N A G E M E N T I N I T I AT I V E S O V E R T H E L A S T 1 2 M O N T H S “We believe management is taking the right steps for the brand (despite the near-term pain) by closing under- performing stores, optimizing distri
Slide 21: Deckers Performance Against Peers
DECKERS PERFORMANCE AGAINST PEERS INDEXED STOCK PRICE Initial Implementation of Business Transformation Plan 150% Deckers Proxy Peers ¹ 142.8% 6 125% 5 3 4 1 100% 2 85.4% 75% Dave Powers Appointed CEO 50% 10/27/15 02/25/16 06/26/16 10/26/16 02/25/17 06/27/17 10/27/17 1 02.02.17 Announced Q3 2017 re
Slide 22: Our Highly Active Board Is Driving Our Transformation
OUR HIGHLY ACTIVE BOARD IS DRIVING OUR TRANSFORMATION Independent mindset and The right set of skills and Always operates with all stockholders’ focus on accountability to experience to define best interests in mind stockholders Deckers’ corporate strategy • 8 of 9 Directors are independent • Highly
Slide 23: The Deckers Board Seeks to Maximize Shareholder Value
THE DECKERS BOARD SEEKS TO MAXIMIZE SHAREHOLDER VALUE PRIOR TO ANNOUNCING ITS $400M SHARE REPURCHASE PLAN, THE BOARD HAD U N D E R T A K E N A C O M P R E H E N S I V E R E V I E W O F S T R AT E G I C A L T E R N A T I V E S PROCESS OVERVIEW GO-FORWARD STRATEGY • Announced $400M share repurchase pl
Slide 24: $400M Stock Repurchase Overview
$400M STOCK REPURCHASE OVERVIEW KEY ELEMENTS POTENTIAL EFFECTS OF DECKERS EXPECTS STOCK REPURCHASE • Announced on TO GENERATE October 26, 2017 • Increased EPS for stockholders SIGNIFICANT FREE • $400M represents ~20% • Brings long-term stockholder CASH FLOW OF of Deckers’ market capitalization benef
Slide 25: Deckers Board of Directors Overview
DECKERS BOARD OF DIRECTORS OVERVIEW • Board is uniquely suited to oversee Deckers’ complex, global, vertically-integrated, multi-brand and multi-channel operations • Directors bring multi-faceted skillset with public company, luxury / premium retail and complex business management experience, with d
Slide 26: The Board Is Independent and Has the Right Mix of Skills and Experience
THE BOARD IS INDEPENDENT AND HAS THE RIGHT MIX OF SKILLS AND EXPERIENCE¹ O U R H I G H LY Q U A L I F I E D A N D W E L L - R O U N D E D B O A R D H A S B E E N O V E R S E E I N G O U R T R A N S F O R M AT I O N John Michael John Dave James Lauri Bonita Karyn Barsa Nelson Chan Gibbons Devine III
Slide 27: The Board Is Independent and Has the Right Mix of Skills and Experience (Cont'd)
THE BOARD IS INDEPENDENT AND HAS THE RIGHT MIX OF SKILLS AND EXPERIENCE¹ (Cont’d) O U R H I G H LY Q U A L I F I E D A N D W E L L - R O U N D E D B O A R D H A S B E E N O V E R S E E I N G O U R T R A N S F O R M AT I O N John Michael John Dave James Lauri Bonita Karyn Barsa Nelson Chan Gibbons De
Slide 28: Executive Compensation Program Overview
EXECUTIVE COMPENSATION PROGRAM OVERVIEW COMMENTARY OVERVIEW OF OUR FY2017 COMPENSATION STRUCTURE • We have effectively and consistently tied our • Balanced guaranteed pay with at-risk pay to properly manage our Base compensation program to our strategic and compensation-related risk business objecti
Slide 29: Alignment of Compensation Program with Strategic and Business Objectives
ALIGNMENT OF COMPENSATION PROGRAM WITH STRATEGIC AND BUSINESS OBJECTIVES Compensation Element FY2017 FY2018 Strategic Focus • Utilized revenue and operating income metrics to drive • Focus on core profitability metrics for all executives, with Annual Cash growth while still requiring profitability d
Slide 30: Marcato's Proposals Are Not in the Best Interests of Shareholders
MARCATO’S PROPOSALS ARE NOT IN THE BEST INTERESTS OF SHAREHOLDERS MARCATO’S WHY IT IS NOT IN THE INTEREST OF SHAREHOLDERS APPROACH BOARD Wholesale change of all • Current Board is committed to all stockholders COMPOSITION nine Board members • Current Board has deep knowledge of and involvement in cu
Slide 31: Marcato's Proposals Are Not in the Best Interests of Shareholders (Cont'd)
MARCATO’S PROPOSALS ARE NOT IN THE BEST INTERESTS OF SHAREHOLDERS (Cont’d) MARCATO’S WHY IT IS NOT IN THE INTEREST OF SHAREHOLDERS APPROACH RETAIL Reduce retail store • Omni-channel and retail strategy are closely tied together STORES count to fewer than 80 • Lose ability to directly engage and get
Slide 32: Marcato's Proposals Are Not in the Best Interests of Shareholders (Cont'd)
MARCATO’S PROPOSALS ARE NOT IN THE BEST INTERESTS OF SHAREHOLDERS (Cont’d) MARCATO’S WHY IT IS NOT IN THE INTEREST OF SHAREHOLDERS APPROACH COST SAVINGS Annual cost savings • Would require significant store closures at significant cost and lost revenue AND should be $200M, not • Harmful to the organ
Slide 33: Under Dave Powers and the Board, Deckers Has Significantly Outpaced Its Peers
UNDER THE STEWARDSHIP OF DAVE POWERS AND THE DECKERS BOARD, DECKERS HAS SIGNIFICANTLY OUTPACED ITS PEERS 1-Year 2-Year 5-Year 42.81% 42.84% 153.20% Deckers Proxy Peer Group¹ Mean² 11.22% (14.64%) 29.31% Median³ 6.81% (12.90%) (9.36%) Source: Capital IQ Note: Returns represent nominal percentage gain
Slide 34: Conclusion
CONCLUSION HIGHLY QUALIFIED BOARD UNIQUELY 1. TRANSFORMATION PLAN WELL UNDERWAY 3. QUALIFIED TO DRIVE TRANSFORMATION • Optimizing the business by consolidating and enhancing brands • Independent mindset and focus on accountability to • Evolving and right-sizing the organization to align with strateg
Slide 35: Appendix
APPENDIX UG’ Ne KOOLABURRA HOKA% Teva
Slide 36: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S JOHN GIBBONS Chairman Director Since: • 2000 Biography: • Previously served as CEO and COO of The Learning Network, CEO and COO of The Sports Club Company and in ot
Slide 37: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S KARYN BARSA Director, Audit Committee Member Director Since: • 2008 Biography: • Previously served as CFO and COO of Patagonia, CEO of Coyuchi, CEO of Smith & Hawke
Slide 38: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S NELSON CHAN Director, Audit Committee Member Director Since: • 2014 Biography: • Previously served as CEO of Magellan Navigation and in various senior executive pos
Slide 39: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S MICHAEL DEVINE III Director, Audit Committee Chair Director Since: • 2011 Biography: • Previously worked at Coach for almost 10 years, serving as EVP & Chief Accoun
Slide 40: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S JOHN PERENCHIO Director, Corporate Governance Committee Member Director Since: • 2005 Biography: • Private investor and operator of various music industry companies
Slide 41: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S DAVE POWERS Director, CEO & President Director Since: • 2016 Biography: • Worked in various roles at Deckers since 2012, such as President of Omni-Channel and Presi
Slide 42: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S JAMES QUINN Director, Corporate Governance Committee Chair Director Since: • 2011 Biography: • Previously served as President and in other senior executive roles at
Slide 43: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S LAURI SHANAHAN Director, Compensation Committee Chair Director Since: • 2011 Biography: • 21 years of senior level retail experience, including 16 years at The Gap
Slide 44: Deckers Board of Directors
DECKERS BOARD OF DIRECTORS I N D I V I D U A L S K I L L S A N D E X P E R I E N C E C R E AT E V A L U E F O R S H A R E H O L D E R S BONITA STEWART Director, Corporate Governance Committee Member Director Since: • 2014 Biography: • Currently serves as a VP of Global Partnerships at Google Inc., w