Skullcandy (SKUL, Financial) is the original lifestyle and performance audio brand inspired by the creativity of youth culture.
Skullcandy designs, markets and distributes audio and gaming headphones and other accessory-related products under the Skullcandy, Astro Gaming and 2XL brands. Skullcandy was launched in 2003 and quickly became one of the world's most distinct audio brands by bringing unique technology, color, character and performance to an otherwise monochromatic space. It helped revolutionize the audio arena by introducing headphones, ear buds and other audio and wireless lifestyle products that possess unmistakable style and exceptional performance.
Its products are sold and distributed through a variety of channels in the U.S. and over 80 countries worldwide. Skullcandy offers a wide array of styles and price points and is expanding into complementary audio products and categories such as sports performance, women's and wireless offerings as well as partnerships with leading manufacturers to license the Skullcandy brand and enhance audio quality.
It has a strong revenue growth, and the future looks promising. It offers a varied range of products that suit the varied budgets of the customers. The new product introductions along with enhanced demand creation efforts are resonating with consumers. Skullcandy reported a solid fourth quarter and is undergoing turnaround efforts. The company is poised for a successful future. Investors should consider adding this stock to their portfolios.
It delivered another year of solid growth fueled by successful product innovation, demand creation and distribution strategies.
Strong fourth quarter
Net sales in the fourth quarter of 2015 decreased by 0.8% and were $96.1 million (which was $96.8 million during the prior-year quarter). U.S. net sales increased by 3% and were $72.7 million (which was $70.6 million during the prior year quarter). International net sales decreased by 11% and were $23.3 million ($26.3 million during the prior year quarter).
Gross profit in the fourth quarter of 2015 decreased by 8% and was $38.7 million (which was $41.9 million during the prior-year quarter). Gross margin decreased to 40.3% in the fourth quarter of 2015 from 43.3% in the same quarter a year ago primarily due to a product mix shift toward lower margin wireless and gaming products and approximately 120 basis points of negative foreign currency effects.
SG&A expenses in the fourth quarter of 2015 decreased by 3% and were $30.2 million (which was $31.1 million during the prior-year quarter). The decrease in SG&A expenses is primarily due to decreases in personnel-related expenses, partially offset by increases in demand creation spend, research and innovation investments, and increased bad debt expense, primarily associated with our largest China distributor. As a percentage of net sales, SG&A expenses decreased 70 basis points to 31% (which was 32% during the prior-year quarter).
Operating income in the fourth quarter of 2015 was $8.5 million (which was $10.8 million in the prior-year quarter).
Net income in the fourth quarter of 2015 was $6.1 million, or 21 cents per diluted share, (which was $7.4 million, or 26 cents per diluted share, during the prior-year quarter).
Net Book Value increased by $6.6 million and was $160.1 million as of Dec. 31, 2015 (which was $153.5 million during the prior-year period).
Working Capital increased by $8.6 million and was $125.0 million as of Dec. 31, 2015 (which was $116.4 million during the prior-year period).
Inventories, net decreased 24% to $41.7 million as of Dec. 31, 2015 from $55.0 million as of Dec. 31, 2014.
As of Dec. 31, 2015, cash, cash equivalents, and short-term investments totaled $23.6 million (which was $36.6 million during the prior-year period).
The company continued to have no outstanding debt.
Strong attributes of the fourth quarter
- Addition of products.
- Energized management and team.
- Strong financials.
- Strong sales of new wireless headphones.
2016 first quarter and full year financial outlook
- For the first quarter of 2016 the company expects the net sales change versus prior year to be within a range of (4%) to flat and earnings per share in a range of (15 cents) to (17 cents).
- For the full year 2016, it expects net revenue growth versus prior year of mid- to high single digits and earnings per share in a range of 24 cents to 28 cents.
(Source: Company’s website)
New products
The company is constantly innovating and bringing in new products.
- Bluetooth speakers.
- Bluetooth hesh headphone.
- Women’s audiophone line.
- Sports performance line.
On a concluding note
The performance and lifestyle audio brand founded at the intersection of innovation and creative culture is reported as the most popular brand by units sold for the second consecutive year. According to The NPD Group, the leading market research company, Skullcandy was the No. 1 selling brand by units of total headphones and in-ear headphones for 2015. Skullcandy's total quantity sold increased nearly 12%.
It is a unique lifestyle brand that is well positioned in the industry. It is a growth stock that is gaining growing popularity with customers. It is among the leading players in the headphone industry. It has a strong pipeline of innovative new products. The company wants to leverage its strong connection to youth and combine it with great products that excite the consumer and deliver amazing experiences at accessible price points.
Disclosure: I do not hold any position in the company.
