Store Closures Likely to Impact Deckers (DECK) Q2 Earnings

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Deckers Outdoor Corp.DECK , the designer, producer and brand manager of innovative, niche footwear and accessories, is slated to report second-quarter fiscal 2018 results on Oct 26, after the closing bell.

In the preceding quarter, the company had delivered a positive earnings surprise of 23.4%. In the trailing four quarters, it outperformed the Zacks Consensus Estimate by an average of 76.4%. Let's see how things are shaping up prior to this announcement.

What to Expect?

Deckers Outdoor's bottom-line is likely to witness a year-over-year decline in the second quarter. The current Zacks Consensus Estimate for the quarter under review is $1.03, down from $1.23 reported in the year-ago period. We also note that of late the Zacks Consensus Estimate has been stable for the company.

Meanwhile, analysts polled by Zacks expect revenues of $438 million, down 12% from the year-ago quarter after registering growth of over 20% in the first quarter.

Factors Influencing the Quarter

Deckers Outdoor is likely to witness year-over-year decline in both top and bottom lines in second-quarter fiscal 2018 due to store closures and the earlier than planned shipments in the quarter under review. Moreover, the prior-year quarter also benefited from the shipment of Women's Classic II. The company had earlier stated that it expects earnings in the range of approximately $1.00-$1.05 compared with $1.23 per share delivered in the year-ago period, while sales are expected to decline by approximately 10%.

We believe the sharp decline in both top and bottom lines will be largely due to dismal performance of the company's UGG brand. The Zacks Consensus Estimate for revenues for the company's UGG brand is pegged at $368 million, down nearly 11% year over year. Meanwhile, the consensus estimate for both Sanuk and Teva brands are pegged at $13.2 million and $16 million, down 30.2% and 6.4%, respectively.

Despite the aforementioned headwinds that are likely to impact the Deckers Outdoor's financial numbers in the second quarter, we cannot ignore the company's long-term efforts.

Deckers is targeting profitable markets and remains focused on product innovations and store augmentation along with transitioning to a direct subsidiary model from a distributor model outside the United States. The company's focus on expanding brand assortments, bringing more innovative line of products, targeting consumers through marketing and optimizing omni-channel distribution also bode well. In keeping with the changing trends, Deckers has made substantial investments to strengthen online presence and improve shopping experience for customers. Further, it is focused on opening smaller concept omni-channel outlets.

Lastly, the company's store fleet optimization plan focuses on striking the right balance between digital and physical stores. To do this, Deckers Outdoor had earlier unveiled plans to close approximately 30-40 outlets over the next two years.

Deckers Outdoor Corporation Price, Consensus and EPS Surprise

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

What the Zacks Model Unveils?

Our proven model does not conclusively show that Deckers Outdoor is likely to beat earnings estimates this quarter. This is because a stock needs to have both a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Deckers Outdoor has an Earnings ESP of -0.27%. The company's Zacks Rank #1 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Stocks with Favorable Combination

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Conn's, Inc. CONN has an Earnings ESP of +50.00% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Ralph Lauren Corporation RL has an Earnings ESP of +2.63% and a Zacks Rank #2.

Big Lots, Inc. BIG has an Earnings ESP of +15.39% 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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