Deckers Outdoor Corporation
), a leading designer, producer, and brand manager of innovative,
niche footwear and accessories, posted its first-quarter 2012
results on April 26. Here we will discuss the company's scorecard
based on the recent earnings announcement, subsequent estimate
revisions by analysts as well as the Zacks Rank and long-term
recommendation for the stock.
Last Quarter Synopsis
Based in Goleta, California, Deckers posted lower-than-expected
first-quarter results as the unfavorable weather conditions
adversely impacted the sales of UGG boots. Rising sheepskin prices,
up 40% from the 2011 level, and increased operating expenses also
hurt the bottom line. Consequently, management lowered its fiscal
The first quarter earnings of 20 cents a share missed the Zacks
Consensus Estimate of 25 cents, and dropped more than 50% from 49
cents earned in the prior-year quarter.
However, Deckers' total net sales of $246.3 million came almost
in line with the Zacks Consensus Estimate, and jumped 20.2% from
the prior-year quarter, reflecting strength across the Sanuk brand
coupled with healthy demand for the UGG brand's spring collection.
However, these were partially offset by sluggishness experienced in
UGG boots sales due to unusually warm weather conditions.
(Read our full coverage on this earnings report:
Deckers Misses, Lowers Forecast
Agreement of Estimate Revisions
The agreement of estimate revisions indicates that the majority
of analysts were unidirectional following Deckers' first-quarter
In the last 7 days, 13 out of 14 analysts covering the stock
lowered their estimates, whereas none raised the same for the
second and third quarters of 2012.
For fiscal 2012 and 2013, 13 analysts trimmed their estimates,
whereas none raised the same in the last 7 days.
What Drives Estimate Revision
Clearly, a negative sentiment is palpable among most of the
analysts, who remain pessimistic on Deckers' performance. Following
the earnings release, the Zacks Consensus Estimates have been
portraying downward trends with the majority of analysts remaining
bearish on the stock.
The lower-than-expected bottom-line results and dismal guidance
failed to impress the analysts, who went on to make downward
revisions to their estimates in order to better align with
management's guidance range.
Total revenue for fiscal 2012 is now expected to increase 14%,
down from 15% forecasted earlier. Earnings for the year are
predicted to decline between 9% and 10%. Earlier, the company had
projected fiscal 2012 earnings to remain flat with the prior year.
Moreover, for the second quarter, although management forecasted an
8% growth in total revenue, it anticipates a loss per share of 60
Deckers registered growth in the top line during the quarter,
but not enough to alleviate the concern about the increasing gross
margin pressure. Gross profit margin contracted 400 basis points to
46% during the first quarter of 2012. Management now expects gross
profit margin contraction of 250 basis points for fiscal 2012 due
to increases in costs of goods sold and closeout sales levels.
Magnitude of Estimate Revisions
The magnitude of estimate revisions by the analysts is clearly
reflected through changes in the Zacks Consensus
The Zacks Consensus Estimate for the second quarter of 2012 has
deteriorated to a loss of 60 cents from a loss of 40 cents in the
last 7 days. The Zacks Consensus Estimate for the third quarter
fell 22 cents to $1.50.
For fiscal 2012, the Zacks Consensus Estimate has fallen by 53
cents to $4.61 in the last 7 days. For fiscal 2013, the Zacks
Consensus Estimate has declined by 54 cents to $5.60.
Deckers is doing to keep itself afloat in a difficult consumer
environment -- focusing on product introductions, new store
openings and geographic expansion. The company's efforts to expand
internationally are also encouraging as these provide immense
Moreover, a debt-free balance sheet with a healthy cash balance
provides enough liquidity to capitalize on future growth
opportunities. However, over-reliance on the UGG brand, intense
competition, rising sheepskin costs and a sluggish economic
recovery remain matters of concern. Currently, we have a long-term
Neutral rating on the stock.
Deckers, which competes with
Wolverine World Wide Inc.
), holds a Zacks #4 Rank that translates into a short-term Sell
rating, and well defines the company's disappointing first-quarter
2012 results, bleak outlook and falling Zacks Consensus
About Earnings Estimate Scorecard
As a PhD from MIT, Len Zacks proved over 30 years ago that
earnings estimate revisions are the most powerful force impacting
stock prices. He turned this ground breaking discovery into two
of the most celebrating stock rating systems in use today. The
Zacks Rank for stock trading in a 1 to 3 month time horizon and
the Zacks Recommendation for long-term investing (6+ months).
These "Earnings Estimate Scorecard" articles help analyze the
important aspects of estimate revisions for each stock after
their quarterly earnings announcements. Learn more about earnings
estimates and our proven stock ratings at
DECKERS OUTDOOR (DECK): Free Stock Analysis
NIKE INC-B (NKE): Free Stock Analysis Report
WOLVERINE WORLD (WWW): Free Stock Analysis
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