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Deckers (DECK) Posts Narrower-than-Expected Q1 Loss, Ups View


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Deckers Outdoor CorporationDECK reported narrower-the-expected first-quarter fiscal 2019 loss. This footwear and apparel retailer posted quarterly loss of 98 cents a share that fared better than the Zacks Consensus Estimate of loss of $1.42 and the prior-year quarter loss of $1.28. This was the sixth straight quarter that the company's bottom line has outperformed the consensus mark.

The top line also sustained its winning streak improving 19.5% to $250.6 million during the quarter, following an increase of 8.4% in the preceding quarter. Net sales also came ahead of the Zacks Consensus Estimate of $228.9 million, marking the sixth successive quarter of positive surprise. On a constant currency basis, net sales grew 17.6%. Sturdy top-line performance was driven by sales increase across UGG, HOKA ONE ONE and Teva brands.

Deckers in the last quarter had guided net sales in the range of $225-$235 million and loss per share in the range of approximately $1.41-$1.50. Instead, this Goleta, CA-based company went on to post far better results than anticipated. However, in spite of reporting better-than-expected results not much movement was noticed in the stock during the post-market trading hours. Analysts pointed that this may be due to the company's subdued second-quarter view that overshadowed the upbeat projection for fiscal 2019.

Nevertheless, we note that shares of this Zacks Rank #1 (Strong Buy) company have increased about 35% in the past six months outperforming the industry 's growth of 12%. Deckers is focused on expanding brand assortments, introducing more innovative line of products, targeting consumers digitally through marketing and sturdy e-commerce along with optimizing omni-channel distribution.

Gross margin expanded 270 basis points to 45.9% on the back of cost containment efforts and improved full-price selling. Adjusted SG&A expenses were $153.9 million up from $144.9 million for the same period last year, while as a percentage of revenue SG&A expenses came in at 61.4% down from 69.1% in the year-ago period.

Adjusted operating loss came in at $38.9 million compared with loss of $54.3 million in the year-ago period.

Deckers Outdoor Corporation Price, Consensus and EPS Surprise

Deckers Outdoor Corporation Price, Consensus and EPS Surprise | Deckers Outdoor Corporation Quote



Sales by Geography & Channel

The company's domestic net sales jumped 17.4% to $141.7 million in the reported quarter. Meanwhile, international net sales rose 22.3% to $108.9 million.

Direct-to-Consumer ("DTC") net sales advanced 12% to $73 million. DTC comparable sales rose 6.2% year over year. Wholesale net sales in the reported quarter grew 22.9% to $177.6 million.

Brand-wise Discussion

UGG brand net sales increased 18.9% to $136.5 million in the reported quarter. Net sales for the Sanuk brand, known for its exclusive sandals and shoes, came in at $24.4 million, down 6.6% year over year.

HOKA ONE ONE brand net sales surged 53.1% to $47 million, while Teva brand net sales grew 6.2% to $40 million.

Other Financial Aspects

At the end of the quarter, Deckers had cash and cash equivalents of $417.9 million, total short-term borrowings and mortgage payable of $31.9 million and shareholders' equity of $902.2 million.

During the quarter under review, Deckers bought back approximately 86,000 shares of worth $10 million. As of Jun 30, 2018, the company had $241 million remaining under its $400 million share buyback program.

Guidance

Deckers provided an encouraging view for fiscal 2019. Management now anticipates net sales to be in the band of $1,930-$1,955 million, up from its prior projection of $1,925-$1,950 million.

Further, adjusted earnings are projected to be in the range of $6.25-$6.45 per share, which portrays an improvement over $5.74 reported in fiscal 2018. The current Zacks Consensus Estimate for fiscal 2019 is $6.34. The company had earlier guided adjusted earnings in the range of $6.20-$6.40 per share.

Gross margin for the fiscal year is anticipated to be marginally better than 49%. Further, SG&A expense as a percentage of sales is projected to be marginally better than 36.5%. Operating margin is envisioned to be in the range of 12.6-12.8%.

In the second quarter, net sales are estimated to be in the range of $485-$495 million compared with $482.5 million reported in the year-ago period. Analysts polled by Zacks envisions revenue of $511.6 million for the quarter. Management forecasts earnings of approximately $1.60 to $1.70 compared with $1.54 per share in the prior-year quarter. The current Zacks Consensus Estimate for the quarter is $1.95.

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Columbia Sportswear COLM delivered an average positive earnings surprise of 18.1% in the trailing four quarters. It carries a Zacks Rank #2 (Buy).

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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 Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: DECK , VFC , COLM , GIII



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