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Bull of the Day: Deckers (DECK)

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Decker Brands (DECK - Free Report) continues to prove that it belongs among the elite of the niche retailers. This Zacks Rank #1 (Strong Buy) is hitting on all cylinders as it recently raised full year guidance for the second time this year.

Deckers Brands designs, manufactures and distributes footwear, apparel and accessories. It's most prominent brand is UGG, but it also owns Koolaburra, HOKA ONE ONE, Teva and Sanuk.

It's products are sold around the world in department and specialty stores as well as company-owned and operated retail stores. Deckers also operates an online store at deckers.com.

Another Beat in the Fiscal Second Quarter

On Oct 24, Deckers reported its fiscal second quarter results and beat the Zacks Consensus Estimate by $0.37. It reported earnings of $2.71 versus the Zacks Consensus of just $2.34.

It was Deckers' 11th consecutive earnings beat with its last miss in early 2017.

The HOKA ONE ONE brand remains the main driver of outperformance as second quarter sales jumped 49.9% to $78.1 million from $52.1 million a year ago.

UGG, it's largest brand, grew sales by 2.2% to $404.9 million from $396.3 million in the prior year's quarter.

Teva turned it around from the first quarter, as sales increased 6.7% to $23 million, up from $21.5 million in the same period last year.

Only Sanuk failed to grow sales, as they declined 22.4% to $10.7 million from $13.8 million a year ago.

Wholesale net sales grew 8.7% to $443.5 million compared to $408.0 million for the same period last year.

Direct to consumer (DTC) net sales for the second quarter increased 5.1% to $98.7 million compared to $93.9 million for the prior year. DTC comparable sales increased 7.2% over the same period last year.

Deckers saw better sales growth domestically, than internationally in the quarter. Domestic net sales roes 14.9% to $358 million while international net sales fell 3.2% in the second quarter to $184.2 million.

Raised Guidance Again

For the second time this year, Deckers raised its full year revenue and earnings guidance.

Revenue is now expected to be in the range of $2.115 billion to $2.140 billion up from prior guidance given in July of $2.1 billion to $2.125 billion.

It raised full year earnings guidance to a range of $8.90 to $9.05, up from its prior guidance of $8.40 to $8.60.

Not surprisingly, the analysts are bullish too. 5 estimates were revised higher in the last week pushing the Fiscal 2020 earnings to $9.07 from $8.72 over that time period.

That's earnings growth of just 2.6%, however, as the company made $8.84 last year.

They're bullish on next year too with Fiscal 2021 jumping to $9.99 from $9.67, which is another 10.1% growth.

Shares Tread Water: Is it a Buying Opportunity?

Given the magnitude of the beat, and that the company raised, you'd think the shares would rally but instead they've gone the other way since the earnings announcement.

Year-to-date they're up only 4.4% but that's after skyrocketing 124% over the past 2 years.



Is it being punished for being a growth stock?

Shares are trading with a forward P/E of just 16.6 which doesn't make them expensive compared to popular niche retail peers.

Lululemon (LULU - Free Report) , for example, is trading at 43x.

The company is shareholder friendly. In the second quarter, it repurchased 1.1 million shares of its stock for $155 million. As of Sep 30, 2019, it had $160 million remaining on its stock repurchase authorization.

For those looking for a retailer to play the upcoming big holiday season, Deckers is one that should be on the short list.

[In full disclosure, the author of this article owns shares of LULU in her personal portfolio.]

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