Deckers Outdoor Corporation
) posted third-quarter 2013 earnings of 95 cents a share that
surpassed the Zacks Consensus Estimate of 72 cents, buoyed by
expanding direct-to-consumer operations, omnichannel strategies,
effective inventory management and optimum capital
However, the quarterly earnings dropped significantly by 19.5%
from $1.18 earned in the year-ago quarter due to higher selling,
general and administrative expenses (up 20.8%).
Deckers' total net sales jumped 2.7% year over year to $386.7
million and came almost in line with the Zacks Consensus
Estimate. Earlier, management had anticipated revenue to climb
2.5% for the quarter under review.
During the quarter, the company's domestic sales declined 1.4%
year over year to $238.8 million. However, international sales
rose 10.3% to $147.9 million.
Rising sheepskin costs has always been a concern for Deckers.
In order to safeguard against rising sheepskin costs and other
raw materials, the company 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. Also, Deckers
has developed a new material namely UGG Pure to safeguard against
The company is also targeting other profitable markets, and
remains focused on product introductions, store augmentation
along with geographic expansion. Management is eyeing
opportunities for store expansion in Asia, mainly Japan and
brand net sales rose 1.3% to $337 million, primarily due to an
increase in direct-to-consumer business on account of new store
openings and the commencement of new e-Commerce websites, partly
offset by a fall in domestic wholesale sales. The company during
the quarter opened 15 UGG brand outlets with major openings
coming up in Asia. Deckers anticipates opening 36 outlets this
year (24 in Asia), and remains on track to take the store count
to 113 by the end of the year.
brand net sales showed a marginal improvement of 0.6% to $18
million, reflecting a rise in wholesale and direct-to-consumer
sales globally, partly offset by a drop in international
Sales for the
brand, known for its exclusive sandals and shoes, were $18.4
million, up 0.5% from the year-ago quarter, reflecting higher
wholesale sales globally and rise in domestic direct-to-consumer
sales, offset by a decline in distributor sales, principally in
the Asia Pacific region and in Canada.
Combined net sales of Deckers'
brands for the quarter were $13.3 million that surged 81.3% year
over year on the back of HOKA ONE ONE brand, acquired in Sep
sales ascended 34.5% to $52.6 million, propelled by the opening
of 37 new stores after third-quarter 2012 and comparable-store
sales growth of 1.9%. Deckers witnessed comps growth in high
teens in China, a low double-digit increase in Japan, a low
single-digit rise in the European region, partly offset by a low
single-digit decline in the U.S. comps.
sales surged 12.2% to $14.9 million, reflecting robust demand of
the UGG brand in international markets and the inclusion of new
international eCommerce websites.
Gross profit climbed 4.8% to $166.9 million from the
comparable prior-year quarter, whereas gross margin expanded 90
basis points to 43.2%. Deckers reported operating income of $46.5
million, down 22% from the prior-year period, whereas operating
margin contracted 380 basis points to 12%.
Other Financial Aspects
Deckers ended the quarter with cash and cash equivalents of
$84.1 million, up significantly from $61.6 million in the
prior-year quarter. Shareholders' equity was $755.8 million at
the end of the quarter. Inventories declined 8.6% year over year
to $444.6 million. The company had borrowings of $245.5 million
under its credit facility.
Management anticipates capital expenditures between $85
million and $90 million for 2013.
During the quarter, Deckers did not buy back any shares. As of
Sep 30, the company had $79.3 million remaining at its disposal
under its $200 million share repurchase authorization declared in
This Zacks Rank #1 (Strong Buy) stock continues to project
total revenue growth of 8% for 2013, anticipating an increase of
7% to 8% in UGG brand sales, flat to marginally down sales at
Teva brand, 5% increase in Sanuk brand sales and sales worth $39
million from other brands.
Management now envisions a 10% rise in 2013 earnings per
share, up from 8% predicted earlier.
Deckers reiterated revenue growth of 14.5% for the fourth
quarter, however, with some selling, general and administrative
expenses coming in the fourth quarter from the third quarter,
earnings per share are forecasted to surge 32% from the year-ago
quarter, down from 38% projected earlier.
Other Stocks to Consider
Besides Deckers, other stocks worth considering include
Brown Shoe Co. Inc.
), both carrying a Zacks Rank #1 (Strong Buy) and
) sporting a Zacks Rank #2 (Buy).
BROWN SHOE CO (BWS): Free Stock Analysis
CARTERS INC (CRI): Free Stock Analysis Report
DECKERS OUTDOOR (DECK): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
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