Back to top

Image: Bigstock

Deckers (DECK) Beats on Q3 Earnings, Raises FY18 Outlook

Read MoreHide Full Article

Sturdy sales performance across UGG, HOKA ONE ONE and Teva brands enabled Deckers Outdoor Corporation (DECK - Free Report) to deliver better-than-expected third-quarter fiscal 2018 results. This footwear and apparel retailer reported quarterly earnings of $4.97 that beat the Zacks Consensus Estimate of $3.84 and surged approximately 21% from the year-ago period. Encouraging retail scenario and favorable weather conditions along with latest tax reform and improved margins as well as share repurchases aided the results.

The top line improved 6.6% to $810.5 million during the quarter, following a decline of 0.7% registered in the preceding quarter. Net sales also came ahead of the Zacks Consensus Estimate of $750.2 million, marking the fourth straight quarter of positive surprise. On a constant currency basis, net sales grew 6.3%.

Deckers in the last quarter had guided net sales in the range of $735-$745 million and envisioned earnings in the range of $3.65-$3.75 per share. Instead, this Goleta, CA-based company went on to post far better results than anticipated and raised fiscal 2018 view. As a result, the stock gained 8.1% during extended hours trading session yesterday. We noted that shares of this Zacks Rank #3 (Hold) company have increased about 87.2% in a year compared with the industry’s growth of 30.8%.

Deckers Outdoor Corporation Price, Consensus and EPS Surprise

 

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


Gross margin expanded 170 basis points to 52.2%, while adjusted SG&A expenses were $220.4 million up from $201.4 million for the same period last year. Adjusted operating income soared 11.5% to $203.1 million, while adjusted operating margin increased 110 basis points to 25.1%.

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.

Management had earlier projected cost savings of about $150 million on the back of improvement in cost of goods sold and SG&A savings, which includes consolidation of retail outlets and process improvement efficiencies. This will help realize $100 million operating profit improvement by fiscal 2020. Management anticipates total sales of about $2 billion with operating margin of at least 13% by fiscal 2020.

 



Sales by Geography & Channel

The company’s domestic net sales jumped 2.5% to $501.7 million in the reported quarter. Meanwhile, international net sales soared 14% to $308.8 million.

Direct-to-Consumer (“DTC”) net sales advanced 2.7% to $381.7 million. DTC comparable sales rose 1.7% year over year. Wholesale net sales in the reported quarter grew 10.3% to $428.8 million.

Brand-wise Discussion

UGG brand net sales increased 4.3% to $734.7 million in the reported quarter. Net sales for the Sanuk brand, known for its exclusive sandals and shoes, came in at $13.9 million, flat year over year.

HOKA ONE ONE brand net sales surged 65.7% to $31.8 million, while Teva brand net sales grew 33.4% to $19.5 million.

Other Financial Aspects

At the end of the quarter, Deckers had cash and cash equivalents of $493 million, total short-term borrowings and mortgage payable of $32.2 million and shareholders’ equity of $1,032.9 million. Inventories increased 6.1% year over year to $396.3 million.

During the quarter under review, Deckers bought back approximately 361,000 shares of worth $24.7 million. As of Dec 31, 2017, the company had $375.6 million remaining under its $400 million share buyback program. The company plans to repurchase roughly $75 million worth of shares before the conclusion of fiscal 2018.

Guidance

Deckers raises fiscal 2018 projection. Management now expects net sales to be in the band of $1,873-$1,878 million and envisions adjusted earnings in the range of $5.37-5.42 per share, up from $3.82 reported last year. The current Zacks Consensus Estimate for the fiscal is $4.37. Gross margin for the fiscal year is anticipated to be 49%. Further, SG&A expense as a percentage of sales is anticipated to be nearly 37%. The company stated that it plans to repatriate $250 million of international cash by the end of the fiscal year.

Earlier, the company had guided net sales to be up approximately 1-2% and adjusted earnings between $4.15 and $4.30 per share.

In the fourth quarter, net sales are estimated to be in the range of $370-$375 million compared with $369.5 million reported in the year-ago period. Management forecasts earnings in the range of approximately 15-20 cents compared with 11 cents a share delivered in the prior-year quarter. The current Zacks Consensus Estimate for the quarter is 24 cents.

3 Hot Stocks Awaiting Your Look

G-III Apparel Group, Ltd. (GIII - Free Report) delivered an average positive earnings surprise of 6.1% in the trailing four quarters. It has a long-term earnings growth rate of 15% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ross Stores, Inc. (ROST - Free Report) delivered an average positive earnings surprise of 5.5% in the trailing four quarters. It has a long-term earnings growth rate of 10% and a Zacks Rank #2.

Skechers U.S.A., Inc. (SKX - Free Report) has a long-term earnings growth rate of 14% and a Zacks Rank #2.

Breaking News: Cryptocurrencies Now Bigger than Visa

The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.

Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.

Click here to access these stocks >>