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Deckers' Strategies Aid Growth: Stock Up 25% in 6 Months

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Deckers Outdoor CorporationDECK has not only outpaced the industry but also surged in the past six months. The company has been targeting profitable and underpenetrated markets and remains focused on product innovations, expanding brand assortments, enhancing omni-channel and e-commerce capabilities that bode well for the stock. In the trailing four quarters, it has delivered an average positive earnings surprise of 71.9%. The company also has a long-term earnings growth rate of 11.3%, which reflects its inherent strength.

Shares of Deckers have gained 25.1% in the past six months, outperforming the industry's 14.9% growth. Further, the stock is hovering close to its 52-week high of $122.98. There is no reason why this Zacks Rank #2 (Buy) stock cannot breach that mark in the near term. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Let's Take a Closer Look

Deckers reported solid first-quarter fiscal 2019 results and raised its earnings and net sales guidance for the year. Moreover, its top and bottom line outperformed the Zacks Consensus Estimate for six straight quarters. Both the metrics also improved on a year-over-year basis.

For 2019, management 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 company had earlier envisioned adjusted earnings in the range of $6.20-$6.40 per share. Gross margin and operating margin for the fiscal year is anticipated to be better than the previous year.

Moreover, the company is on track with its strategic endeavors to drive long-term growth. Its store fleet optimization plan focuses on striking the right balance between digital and physical stores. Additionally, management expects cost savings of about $150 million backed by improvement in cost of goods sold and SG&A savings that includes consolidation of retail outlets and process improvement efficiencies. This should help Deckers realize $100 million operating profit improvement by fiscal 2020.

Further, the company's long-term target of $2 billion sales with operating margin of 13% by fiscal 2020 highlight its long-term prospects.

The company is also constantly enhancing its e-commerce capabilities and has made substantial investments to strengthen its online presence. To counter intense competition in the retail space, the company plans to open small omni-channel outlet while expanding programs such as Retail Inventory Online; Infinite UGG; Buy Online, Return In Store; and Click and Collect to enhance customers' shopping experience. In addition, Deckers is focusing on widening its product categories as per customer purchasing trends. This apart, the company is selling directly to wholesale customers in order to capture incremental sales and margins.

Certainly, Deckers' sound fundamentals and upbeat guidance should drive additional momentum in the stock.

Three More Hot Stocks Awaiting Your Look

Rocky Brands, Inc. RCKY delivered an average positive earnings surprise of 56.3% in the trailing four quarters. The company sports a Zacks Rank #1.

Wolverine World Wide, Inc. WWW pulled off an average positive earnings surprise of 17.8% in the trailing four quarters. It has a long-term earnings growth rate of 10% and a Zacks Rank of 2.

Foot Locker, Inc. FL has a long-term earnings growth rate of 6.6% and a Zacks Rank #2.

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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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