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Deckers Beats on Q2 Earnings on Strong Demand, Guides Up - Analyst Blog

Deckers Outdoor Corporation ( DECK ) posted better-than-expected second-quarter fiscal 2015 results driven by a compelling products offering and customer-focused strategy. The quarterly earnings of $1.17 per share surpassed the Zacks Consensus Estimate of $1.01, and surged 23.2% year over year buoyed by strong demand for UGG, Teva, Sanuk and HOKA brands.

Sales trends remained sturdy across the Direct-to-Consumer division, while Omni-Channel initiatives boosted consumer experience. This facilitated net sales to soar 24.2% to $480.3 million that also came ahead of the Zacks Consensus Estimate of $457 million. Stellar e-Commerce performance also contributed to the sales growth.

The company is focusing on opening smaller concept omni-channel outlets and is concentrating on 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 21.1% to $289.1 million while international sales increased 29.2% to $191.2 million. Direct-to-Consumer comparable sales, comprising worldwide retail comparable-store sales (comps) and e-Commerce sales, rose 3.3%.

Gross profit climbed 34.1% to $223.9 million from the comparable prior-year quarter, while gross margin expanded 340 basis points to 46.6%. Deckers reported operating income of $59.6 million, up 28.1% from the year-ago period, whereas operating margin increased 40 basis points to 12.4%.

Segment Discussion

UGG brand net sales rose 23.8% to $417.1 million, primarily on an increase in worldwide wholesale sales, contribution from new retail outlets and surge in global E-Commerce sales, partly offset by decline in comps and international distributor sales.

Teva brand net sales grew 14.9% to $20.7 million, reflecting an increase in domestic wholesale and E-Commerce sales worldwide, partly offset by fall in international wholesale and distributor sales.

Sales for the Sanuk brand, known for its exclusive sandals and shoes, were $19 million, up 3.2% from the year-ago quarter, attributable to an increase in international wholesale and distributor sales, higher E-Commerce sales globally and increase in U.S. retail sales, partly offset by decline in domestic wholesale sales.

Combined net sales of Deckers' Other brands for the quarter were $23.5 million that surged 76.5% year over year primarily on the back of HOKA ONE ONE brand.

Retail Stores sales soared 20.1% to $63.2 million, propelled by the opening of 33 new stores after Sep 30, 2013, partly offset by 8.8% decline in comparable-store sales.

E-commerce sales surged 45.1% to $21.6 million, reflecting robust demand of the UGG, Teva and Sanuk brands globally, along with new international e-Commerce websites and the HOKA ONE ONE brand domestic website.

Store Update

Deckers, the designer, producer and brand manager of footwear and accessories, is targeting to open 30 new outlets during fiscal 2015. There are currently 130 company-owned retail stores.

Other Financial Aspects

Deckers, which competes with Wolverine World Wide Inc. ( WWW ), ended the quarter with cash and cash equivalents of $114.7 million, short-term borrowings of $154.6 million, and shareholders' equity of $896 million. Inventories jumped 8.3% year over year to $481.7 million.

Guidance

Management yet again raised its full-year outlook following UGG brand's performance, solid backlog and E-commerce activity.

This Zacks Rank #1 (Strong Buy) stock now projects total revenue growth of 15% for fiscal 2015, up from 14% forecast earlier, and anticipates sales growth of 14% in UGG brand (12% growth previously projected), low double-digits growth at both Teva and Sanuk brands and sales worth $82 million from Other brands.

Management now projects a 15.8% rise in earnings per share for the fiscal year - up from the 14.5% jump predicted earlier - taking into account an estimated gross profit margin of approximately 49% and an operating margin of about 13%.

For both the third and fourth quarters of fiscal 2015, Deckers now forecasts 10% revenue growth and earnings per share of $4.46 and 15 cents, respectively. The current Zacks Consensus Estimate for the third quarter is $4.72.

Other Stocks to Consider

Investors interested in the same sector could consider stocks like Skechers USA Inc. ( SKX ) and Brown Shoe Co. Inc. ( BWS ) both sporting a Zacks Rank #1 (Strong Buy).

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DECKERS OUTDOOR (DECK): Free Stock Analysis Report

WOLVERINE WORLD (WWW): Free Stock Analysis Report

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 Nasdaq, Inc.


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

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