Deckers Up on Narrower-than-Estimated Q1 Loss, Demand Rises - Analyst Blog

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Shares of Deckers Outdoor Corporation ( DECK ) rose nearly 5.6% in the after-hours trading session as the company posted narrower-than-expected loss for first-quarter fiscal 2015. The company incurred loss of $1.07 per share that fared better than the Zacks Consensus Estimate of loss of $1.31 thanks to strong demand for UGG, Teva, Sanuk and HOKA brands. Sales trend remained sturdy across Direct-to-Consumer division, while Omni-Channel initiatives boosted consumer experience.

However, what came as a drawback was that the loss per share for the quarter under review increased from a loss of 85 cents reported in the year-ago quarter due to higher selling, general and administrative expenses.

Deckers' net sales surged 24.3% year over year to $211.5 million and came ahead of the Zacks Consensus Estimate of $191 million. The top-line growth was fueled by higher demand for the company's spring collection as well as stellar e-Commerce growth. Omni-channel capability augmented sales. The company is focusing on opening smaller concept omni-channel outlets and expanding a new tool "Retail Inventory Online" to help customers locate products before they visit the company's outlets.


During the quarter, the company's domestic sales grew 20.1% year over year to $132.3 million while international sales increased 32.1% to $79.2 million. Direct-to-Consumer comparable sales, comprising worldwide retail comparable-store sales (comps) and e-Commerce sales, rose 10%.

Gross profit climbed 24.3% to $86.8 million from the comparable prior-year quarter, while gross margin contracted 10 basis points to 41%. Deckers reported an operating loss of $50.5 million, against loss of $42.8 million in the prior-year quarter. 

Segment Discussion

UGG brand net sales rose 22.8% to $123.3 million, primarily attributable to increase in worldwide wholesale and international distributor sales, sales contribution from new retail outlets and surge in global E-Commerce sales, partly offset by decline in comps.

Teva brand net sales grew 25.7% to $39.3 million, reflecting increase in worldwide wholesale and international distributor sales, higher E-Commerce sales worldwide and increase in U.S. retail sales.

Sales for the Sanuk brand, known for its exclusive sandals and shoes, were $36 million, up 19.6% from the year-ago quarter, attributable to increase in worldwide wholesale and international distributor sales, higher E-Commerce sales globally and increase in U.S. retail sales.

Combined net sales of Deckers' Other brands for the quarter were $12.9 million, which surged 54.5% year over year primarily on the back of HOKA ONE ONE brand.

Retail Stores sales surged 29.4% to $42 million propelled by the opening of 37 new stores after Jun 30, 2013, partly offset by 2.8% decline in comparable-store sales.

e-Commerce sales soared 43.7% to $15.4 million, reflecting robust demand of the UGG Teva and Sanuk  brands globally, along with new international e-Commerce websites and HOKA ONE ONE brand domestic website.

Store Update

Deckers is still targeting to open 30-35 new outlets during fiscal 2015. The company currently operates 126 company-owned retail stores.

Other Financial Aspects

Deckers, which competes with Iconix Brand Group, Inc. ( ICON ), ended the quarter with cash and cash equivalents of $158.2 million, short-term borrowings of $3.2 million, and shareholders' equity of $855.1 million. Inventories declined 1.7% year over year to $356 million.

Guidance

This Zacks Rank #3 (Hold) company now projects total revenue growth of 14% for fiscal 2015, up from 13% forecasted earlier. It also anticipates sales growth of 12% in UGG brand (11% growth previously projected), 11% in Teva brand, 15% in Sanuk brand and sales worth $82 million from Other brands.

Management now envisions a 14.5% rise in earnings per share for the fiscal year - up from 13.5% jump envisioned earlier - taking into account estimated gross profit margin of approximately 49% and an operating margin of about 13%.

For the second quarter of fiscal 2015, Deckers now forecasts 18% revenue growth and expects earnings per share to come in at 98 cents. The current Zacks Consensus Estimate for the quarter is $1.13.

Management anticipates capital expenditures of $100 million for fiscal 2015, comprising $37 million for IT and infrastructure improvement, $30 million for new outlets and $26 million for building a new distribution center.

Other Stocks to Consider

Investors interested in the same sector could consider better-ranked stocks like Skechers USA Inc. ( SKX ) and Brown Shoe Co. Inc. ( BWS ). Both stocks carry a Zacks Rank #2 (Buy).


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BROWN SHOE CO (BWS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: SKX , DECK , ICON , BWS

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