Increased cost pressures as well as higher markdowns took a
toll on the financials of
Deckers Outdoor Corporation
), as the company's fourth-quarter 2012 earnings reached $2.77
per share, down 12.9% year over year.
However, the quarterly earnings came ahead of the Zacks
Consensus Estimate of $2.58 per share and also fared better than
the projected decline of 14% in the bottom line, thanks to the
Deckers' total net sales inched up 2.2% year over year to
$617.3 million but fell short of the Zacks Consensus Estimate of
$632 million. The company had earlier forecasted top-line growth
During the quarter, the company's domestic sales declined 2.1%
year over year to $446.7, whereas international sales jumped
15.6% year over year to $170.5 million.
Deckers, which competes with
Wolverine World Wide Inc
), has been grappling with increased inventory and higher input
costs, primarily an 80% rise in sheepskin costs. Moreover, warm
weather conditions adversely impacted the demand of the UGG
To counter this, Deckers decided to make retrospective
adjustment in prices of selected Classic styles that were shipped
since Jul 1, 2012. Moreover, in order to safeguard against rising
sheepskin costs and other raw materials, Deckers has undertaken
certain long term programs, which include increasing the mix of
non-sheepskin merchandises, new casual footwear materials less
prone to weather, and innovative production technologies.
The company is also eyeing other profitable markets, and
remains focused on product introductions, store augmentation
along with geographic expansion.
brand net sales increased 2.9% to $584.8 million primarily driven
by increased sales through new outlets and higher worldwide
eCommerce sales. The increases were partly offset by fall in
domestic and international wholesale sales and decreased
The sales for the
brand, known for exclusive sandals and shoes, were $15.3 million,
up 39.2% from the year-ago quarter, attributable to increased
domestic wholesale and eCommerce sales on account of higher
brand net sales plunged 29.5% to $13.7 million as the quarter
lacked reorders resulting in lower distributor sales
Combined net sales of Deckers'
brands for the quarter were $3.5 million, down 29.6% year over
year as the company stopped the distribution of Simple brand.
sales ascended 37.1% to $135.5 million, propelled by the opening
of 30 new stores but offset by a 3.4% decline in comparable-store
sales jumped 30.6% to $87.6 million, reflecting robust demand of
the UGG brand in both domestic and international markets.
Moreover, inclusion of new international eCommerce websites and
higher domestic demand of Sanuk brand bolstered sales.
Gross profit waned 7.1% to $286 million from the comparable
prior-year quarter due to an increase in cost of goods sold.
Gross profit margin contracted 470 basis points to 46.3% due to
higher product costs, increased markdowns and closeout sales and
adverse product mix.
Operating income declined 18.5% year over year to $144.1
million, whereas operating margin contracted 600 basis points to
23.3%, reflecting lower gross profit and higher expenses.
Other Financial Aspects
Deckers ended the quarter with cash and cash equivalents of
$110.2 million down significantly from $263.6 million in the
year-ago quarter, while short-term borrowings increased to $33
million. The company had no short-term borrowings in the
prior-year quarter. Shareholders' equity was $738.8 million at
the end of the quarter.
During the quarter, Deckers bought back approximately 932,000
shares, aggregating $36 million or at a price of $38.64 per
share. As of Dec 31, 2012, the company still had $79.3 million
remaining at its disposal under its $200 million share repurchase
authorization declared in Jul 2012.
On account of lower pre-bookings for the UGG brand, the
company's backlog went down significantly (by 17%) to $323
million as of Dec 31, 2012.
This Zacks Rank #3 (Hold) stock now projects total revenue
growth of 7% for 2013, anticipating an increase of 4% in UGG
brand sales, 6% in Teva brand sales, 15% in Sanuk brand and sales
worth $40 million in net sales of other brands.
Management now envisions a 5% rise in 2013 earnings per share.
Deckers also forecasts gross profit margin to expand by 180 basis
points to 46.5% expecting lower input costs, while operating
margin is expected to be 12.5% of sales.
The company typically generates lowers sales during the first
half of the year and hence foresees revenues to remain flat in
the first quarter of 2013. Moreover, the company expects to post
a loss of 12 cents per share.
Other Stocks to Consider
Until any further upward revision in the rating of Deckers,
other stocks in the same industry worth considering include
) carrying a Zacks Rank #1 (Strong Buy) and
) carrying a Zacks Rank #2 (Buy).
ADIDAS AG-ADR (ADDYY): Get Free Report
DECKERS OUTDOOR (DECK): Free Stock Analysis
SKECHERS USA-A (SKX): Free Stock Analysis
WOLVERINE WORLD (WWW): Free Stock Analysis
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