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Can Deckers Outdoor (DECK) Continue the Rally Amid High Costs?
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Deckers Outdoor Corporation (DECK - Free Report) has been benefiting from the strength of its HOKA brand. Omnichannel growth and a focus on core priorities have been working well for this footwear and lifestyle company. DECK’s focus on expanding brand assortments, targeting consumers digitally and optimizing omnichannel distribution has also been a driver. These upsides have been boosting this Zacks Rank #3 (Hold) company despite high SG&A costs.
In the fourth quarter of fiscal 2023, Deckers’ top and bottom lines increased year over year and beat the Zacks Consensus Estimate. Top-line growth was driven by the strength of the HOKA and Teva brands. On its fourth-quarter earnings call, management stated that despite the ever-changing operating landscape, the company maintains a strong belief in the enduring resilience of the footwear category.
The Zacks Consensus Estimate for the current fiscal-year earnings per share (EPS) has risen by 3 cents to $21.76 over the past 30 days.
Shares of DECK have surged 115.6% in the past year compared with the industry’s growth of 13.4%. The stock has also outpaced the Consumer Discretionary sector’s growth of 10.2% and the S&P 500’s increase of 16.4%.
Image Source: Zacks Investment Research
Key Drivers
Deckers’ HOKA brand has been aiding its top line for the past several quarters, as evidenced by its contribution in the fourth quarter of fiscal 2023. In the reported quarter, HOKA generated record revenues of $397.7 million as the brand nearly doubled its direct-to-consumer (DTC) business. HOKA’s growth was backed by share gains in the wholesale channel.
Deckers remains optimistic about its investments in long-term strategic priorities and its ability to maintain a disciplined approach for sustained profitability. It has been on track with its plans to build HOKA into a multibillion-dollar major player, elevating UGG as a global lifestyle brand with diverse product offerings around the year and enhancing the DTC business.
Deckers is actively expanding its omnichannel presence and investing significantly in the e-commerce platform for an enhanced online shopping experience. Smaller-concept omnichannel stores and programs like Retail Inventory Online and Click and Collect are some of the actions taken to enhance the consumer experience.
Customer-centric product and marketing strategies, along with CRM software and loyalty programs, have also been key priorities. Aligning product categories with customer demand trends and selling directly to wholesale customers are some of the initiatives which are likely to boost sales and margins.
High SG&A Costs
Deckers’ SG&A expenses have been rising year over year for a while now. In the fourth quarter of fiscal 2023, SG&A expenses rose 4.6% year over year to $290.2 million. As a percentage of net sales, SG&A expenses were 36.7%, down from 37.7% reported in the year-ago quarter. Any reduction in expenses, unless fully compensated by increased sales, can directly impact profit margins. The operating margin increased from 17.9% to 18% from fiscal 2022 to fiscal 2023.
Management now expects the operating margin to be in line with fiscal 2023 of 18% in fiscal 2024. This outlook assumes no meaningful changes to the company's business prospects or risks and uncertainties identified by management that could impact future results.
Wrapping Up
Deckers looks well-placed for growth on the aforementioned initiatives and strategies. The company expects fiscal 2024 net sales to be approximately $3.950 billion compared with $3.627 billion reported in fiscal 2023.
The gross margin is expected to be approximately 52% compared with 50.3% reported in fiscal 2023. For fiscal 2024, the company’s earnings are envisioned in the band of $21.26-$23.50 per share, suggesting a rise from the $19.37 per share reported in fiscal 2022.
Some Promising Retail Stocks
G-III Apparel Group (GIII - Free Report) , a manufacturer, designer and distributor of apparel and accessories under licensed brands, currently sports a Zacks Rank #1 (Strong Buy). GIII has a trailing four-quarter earnings surprise of 47.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for G-III Apparel’s current fiscal-year revenue and EPS suggests a nominal increase of 1.9% and 0.4%, respectively, from the year-ago reported numbers.
lululemon athletica (LULU - Free Report) , which is a yoga-inspired athletic apparel company that creates lifestyle components, currently carries a Zacks Rank #2 (Buy). LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for lululemon’s current fiscal-year revenue and EPS implies a significant increase of 17.1% and 18.4%, respectively, from the year-ago reported numbers.
The TJX Companies (TJX - Free Report) , an off-price retailer of apparel and home fashions, currently carries a Zacks Rank #2. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
The Zacks Consensus Estimate for The TJX Companies’ current fiscal-year revenue and EPS indicates an increase of 6.4% and 14.8%, respectively, from the year-ago reported numbers.
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Can Deckers Outdoor (DECK) Continue the Rally Amid High Costs?
Deckers Outdoor Corporation (DECK - Free Report) has been benefiting from the strength of its HOKA brand. Omnichannel growth and a focus on core priorities have been working well for this footwear and lifestyle company. DECK’s focus on expanding brand assortments, targeting consumers digitally and optimizing omnichannel distribution has also been a driver. These upsides have been boosting this Zacks Rank #3 (Hold) company despite high SG&A costs.
In the fourth quarter of fiscal 2023, Deckers’ top and bottom lines increased year over year and beat the Zacks Consensus Estimate. Top-line growth was driven by the strength of the HOKA and Teva brands. On its fourth-quarter earnings call, management stated that despite the ever-changing operating landscape, the company maintains a strong belief in the enduring resilience of the footwear category.
The Zacks Consensus Estimate for the current fiscal-year earnings per share (EPS) has risen by 3 cents to $21.76 over the past 30 days.
Shares of DECK have surged 115.6% in the past year compared with the industry’s growth of 13.4%. The stock has also outpaced the Consumer Discretionary sector’s growth of 10.2% and the S&P 500’s increase of 16.4%.
Image Source: Zacks Investment Research
Key Drivers
Deckers’ HOKA brand has been aiding its top line for the past several quarters, as evidenced by its contribution in the fourth quarter of fiscal 2023. In the reported quarter, HOKA generated record revenues of $397.7 million as the brand nearly doubled its direct-to-consumer (DTC) business. HOKA’s growth was backed by share gains in the wholesale channel.
Deckers remains optimistic about its investments in long-term strategic priorities and its ability to maintain a disciplined approach for sustained profitability. It has been on track with its plans to build HOKA into a multibillion-dollar major player, elevating UGG as a global lifestyle brand with diverse product offerings around the year and enhancing the DTC business.
Deckers is actively expanding its omnichannel presence and investing significantly in the e-commerce platform for an enhanced online shopping experience. Smaller-concept omnichannel stores and programs like Retail Inventory Online and Click and Collect are some of the actions taken to enhance the consumer experience.
Customer-centric product and marketing strategies, along with CRM software and loyalty programs, have also been key priorities. Aligning product categories with customer demand trends and selling directly to wholesale customers are some of the initiatives which are likely to boost sales and margins.
High SG&A Costs
Deckers’ SG&A expenses have been rising year over year for a while now. In the fourth quarter of fiscal 2023, SG&A expenses rose 4.6% year over year to $290.2 million. As a percentage of net sales, SG&A expenses were 36.7%, down from 37.7% reported in the year-ago quarter. Any reduction in expenses, unless fully compensated by increased sales, can directly impact profit margins. The operating margin increased from 17.9% to 18% from fiscal 2022 to fiscal 2023.
Management now expects the operating margin to be in line with fiscal 2023 of 18% in fiscal 2024. This outlook assumes no meaningful changes to the company's business prospects or risks and uncertainties identified by management that could impact future results.
Wrapping Up
Deckers looks well-placed for growth on the aforementioned initiatives and strategies. The company expects fiscal 2024 net sales to be approximately $3.950 billion compared with $3.627 billion reported in fiscal 2023.
The gross margin is expected to be approximately 52% compared with 50.3% reported in fiscal 2023. For fiscal 2024, the company’s earnings are envisioned in the band of $21.26-$23.50 per share, suggesting a rise from the $19.37 per share reported in fiscal 2022.
Some Promising Retail Stocks
G-III Apparel Group (GIII - Free Report) , a manufacturer, designer and distributor of apparel and accessories under licensed brands, currently sports a Zacks Rank #1 (Strong Buy). GIII has a trailing four-quarter earnings surprise of 47.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for G-III Apparel’s current fiscal-year revenue and EPS suggests a nominal increase of 1.9% and 0.4%, respectively, from the year-ago reported numbers.
lululemon athletica (LULU - Free Report) , which is a yoga-inspired athletic apparel company that creates lifestyle components, currently carries a Zacks Rank #2 (Buy). LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
The Zacks Consensus Estimate for lululemon’s current fiscal-year revenue and EPS implies a significant increase of 17.1% and 18.4%, respectively, from the year-ago reported numbers.
The TJX Companies (TJX - Free Report) , an off-price retailer of apparel and home fashions, currently carries a Zacks Rank #2. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
The Zacks Consensus Estimate for The TJX Companies’ current fiscal-year revenue and EPS indicates an increase of 6.4% and 14.8%, respectively, from the year-ago reported numbers.