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Deckers Outdoor Corp. (DECK)

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Deckers Outdoor's (DECK) first-quarter 2012 earnings of $0.20 per share missed the Zacks Consensus Estimate of $0.25, and fell over 50% from the prior-year quarter as the unfavorable weather conditions adversely impacted the sales of UGG boots. Rise in sheepskin prices and increased operating expenses also hurt the bottom line. Consequently, management lowered its fiscal 2012 outlook.

Management now projects earnings to decline between 9% and 10%. Earlier, the company had forecasted earnings to remain flat. Deckers now expects total revenue growth of 14%, down from 15% forecasted earlier. The company also forecasts a gross profit margin contraction of 250 basis points due to increase in costs of goods sold and higher closeout sales level.

For the second quarter of 2012, management now anticipates 8% growth in total revenue and a loss per share of $0.60. Further, over-reliance on the UGG brand, intense competition and sluggish economic recovery remain matters of concern. Consequently, we have downgraded our recommendation on Deckers to Underperform.

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