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Deckers Outdoor Corp. (DECK)

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Deckers Outdoor Corp. (DECK) posted a second-quarter 2012 loss of $0.53 per share. This fared better than the Zacks Consensus Estimate of loss of $0.59, but widened from a loss of $0.19 delivered in the year-ago quarter due to sluggishness in the European market. International sales during the quarter dropped 14.7%. UGG brand net sales fell marginally by 0.3%, whereas Teva brand net sales tumbled 15.4%.

Despite 14% growth expected in the top line, management projects fiscal 2012 earnings to decline between 9% and 10%, and anticipates 1% growth in total revenue and a 31% decline in earnings per share for the third quarter. Deckers 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 fiscal 2012.

Further, over-reliance on the UGG brand, intense competition and sluggish economic recovery still remain matters of concern. Consequently, we downgraded our recommendation on Deckers to Underperform.




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