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Deckers (DECK) Q1 Earnings & Sales Beat, FY24 EPS View Rises

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Deckers Outdoor Corporation (DECK - Free Report) reported first-quarter fiscal 2024 results, wherein the top and bottom lines outpaced the Zacks Consensus Estimate and compared favorably with the year-ago quarter’s reported numbers. As a result, management raised the sales and earnings view for fiscal 2024.

Quarterly results were backed by strength in the HOKA ONE ONE brand, as well as solid gains from the direct-to-consumer (DTC) channels. Growth in brands, strong balance sheet and a stable operating model poise Deckers well for success. Over the long term, management is focused on key drivers, which include building HOKA to a $1-billion plus brand, growing the UGG brand, driving DTC business via consumer acquisition and retention, and scaling international markets to boost growth.

Shares of this Goleta, CA-based company have risen 10.6% in the past three months against the industry’s 11.9% decline.

Let’s Delve Deeper

Deckers delivered quarterly earnings of $2.41 per share, which surpassed the Zacks Consensus Estimate of earnings of $2.22 per share. The reported figure increased nearly 45% from the year-ago quarter’s earnings of $1.66 per share.

Deckers Outdoor Corporation Price, Consensus and EPS Surprise


Deckers Outdoor Corporation Price, Consensus and EPS Surprise

Deckers Outdoor Corporation price-consensus-eps-surprise-chart | Deckers Outdoor Corporation Quote

Net sales of this Zacks Rank #3 (Hold) company rose 10% year over year to $675.8 million and outpaced the consensus estimate of $667 million. On a constant-currency basis, net sales grew 11.1%. Top-line growth was driven by the global HOKA brand expanding 27%, global DTC rising 35% to account for 37% of the portfolio revenues, and international UGG generating solid growth. The UGG DTC business also witnessed growth, backed by more than 20% increase internationally.

Gross margins for the quarter were 51.3%, up 330 basis points from last year's 48%. This was buoyed by lower freight costs, a higher mix of the HOKA brand’s revenues and an increased mix of DTC business, slightly offset by adverse foreign currency exchange rates and select closeouts of the seasonal inventory.

SG&A expenses climbed 15.6% year over year to $275.7 million. This was driven by reinvestment in major areas of the business, including strategic marketing, supply-chain footprint, enhanced e-commerce capabilities and talent across the organization.

The company’s operating income came in at $70.7 million, up 25.6% from the year-ago quarter. The operating margin increased 130 basis points to 10.5%.

Brand-Wise Discussion

HOKA brand’s net sales climbed 27.4% to $420.5 million. UGG brand’s net sales dipped 6% to $195.5 million. Teva brand’s net sales decreased 18.8% to $48.4 million.

Net sales for the Sanuk brand declined 32.3% to $9.6 million. Net sales for Other brands, mainly comprising Koolaburra, fell 33.9% to $1.8 million.

The consensus mark for sales at the UGG and Sanuk brands is currently pegged at $197.6 million and $14 million, respectively. These show corresponding year-over-year declines of 5% and 1.2%. However, our consensus estimate for the HOKA brand presently stands at $392.2 million, representing growth of 18.8% year over year.

Channel & Geography-Wise Discussion

Wholesale net sales dipped 0.9% year over year to $425.4 million. DTC net sales rose 35.3% to $250.4 million, while comparable DTC net sales jumped 33.4%.

Domestic net sales increased 9.1% year over year to $419.5 million, while International net sales rose 11.4% to $256.3 million.

Other Financial Aspects

Cash and cash equivalents stood at $1,046.9 million as of Jun 30, 2023, compared with $695.2 million as of Jun 30, 2022. The company ended the quarter with total stockholders’ equity of $1,802.1 million. There were no outstanding borrowings.

During the quarter, the company repurchased about 52 thousand shares for $25.5 million. As of Jun 30, 2023, the company had $1.331 billion remaining under its share repurchase authorization.


Zacks Investment Research
Image Source: Zacks Investment Research


A Sneak Peek Into Outlook

Deckers envisions fiscal 2024 net sales of about $3.980 billion, up from the earlier projection of $3.950 billion. This suggests an increase of about 10% from the $3.627 billion reported in fiscal 2023. This growth is likely to be driven by the HOKA brand as it continues to outpace expectations in DTC.

HOKA brand is expected to rise more than 20% in fiscal 2024, with most of the increase likely to come from the brand's DTC business. UGG’s revenues are anticipated to rise in the low single-digits, backed by international expansion and gains from DTC.

The gross margin is still anticipated to be approximately 52%, representing more than 150 basis point improvement compared to the last year. SG&A expenses, as a percentage of sales, are projected at about 34%, while the operating margin is expected to be about 18%. The company expects the effective tax rate to be approximately 22-23%.

Deckers now expects fiscal 2024 earnings in the band of $21.75-$22.25 per share, up from the $21.10-$21.60 per share projected earlier. The current view compares favorably with the earnings of $19.37 per share reported in fiscal 2023.

Key Picks

Some better-ranked companies are Royal Caribbean (RCL - Free Report) , lululemon athletica (LULU - Free Report) and Ralph Lauren (RL - Free Report) .

Royal Caribbean sports a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

RCL has a trailing four-quarter earnings surprise of 26.4%, on average. The Zacks Consensus Estimate for RCL’s 2023 sales and earnings per share (EPS) indicates increases of 48.7% and 162.9%, respectively, from the year-ago period’s reported levels.

lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 17.1% and 18.4%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.

Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank of 2 at present. RL has a trailing four-quarter earnings surprise of 17.4%, on average.

The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 2.8% and 13.1%, respectively, from the year-ago corresponding figures.

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