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Deckers (DECK) Q1 Loss Narrower than Expected, Sales Beat
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Deckers Outdoor Corporation (DECK - Free Report) continued with its better-than-expected bottom-line performance for the fifth straight quarter, as it reported first-quarter fiscal 2017 results. This footwear and apparel company posted narrower-than-expected loss of $1.80 per share for the quarter under review. Analysts polled by Zacks were expecting a loss of $2.05 per share, while management had earlier projected a loss of approximately $2.10–$2.20 per share for the quarter.
Despite faring better than analysts’ expectations and management’s own guidance on account of better-than-expected revenue, higher gross margin and the timing of certain expenses, loss widened from $1.43 per share reported in the year-ago quarter.
Net sales of this Goleta, CA-based company came in at $174.4 million, reflecting an 18.4% year-over-year fall. The top line, however, beat the Zacks Consensus Estimate of $168.8 million, thus surpassing the same for the second consecutive quarter. Moreover, the rate of decline was lower than 20%−25% expected by Deckers.
However, the decrease in the top line stemmed from the timing of order shipments between quarters, fall in Direct-to-Consumer (“DTC”) comparable sales and lower close-out sales. On a constant currency basis, net sales plummeted 18.8%.
Further, the company’s domestic net sales declined 18.6% to $109.5 million in the reported quarter. Also, international net sales plunged 18.2% to $64.9 million, while on a constant currency basis, the same fell 19.1%.
DTC net sales dropped 3.6% to $58.3 million, while on a constant currency basis, sales fell 3.8%. DTC comparable sales tumbled 7.3% year over year. On the other hand, Wholesale and distributor net sales in the reported quarter decreased 24.3% to $116.1 million, while on a constant currency basis, sales declined 24.6%.
Gross margin improved 320 basis points to 43.7% due to lower proportion of closeout sales, a higher percentage of sales from DTC and expansion of international margins.
Deckers is focused on expanding its brand assortments, bringing more innovative line of products such as the launch of the Arrowood collection of sneaker boots, targeting consumers digitally via marketing and sturdy eCommerce, and optimizing omni-channel distribution. The company is witnessing huge success with the yoga sling collection and favorable response for men's casual styles.
Management hinted that like other brick-and-mortar locations, the company’s outlets are also witnessing lower traffic. Moreover, it said that sustained promotion of classics to make way for the new classic hurt the top line and also resulted in negative comparable sales. With respect to the store fleet optimization plan that focuses on striking the right balance between digital and physical stores, during the quarter Deckers shuttered 6 of the approximately 21 outlets identified for closure during fiscal 2017.
Brand-wise Discussion
UGG brand net sales went down 19.8% to $91.9 million in the reported quarter. On a constant currency basis, sales declined 20%. Sales fell due to the shift in the timing of order shipments between quarters which hurt global wholesale and distributor sales, a fall in DTC comparable sales and fewer close-out sales.
Teva brand net sales plunged 17.3% to $34.7 million, while on a constant currency basis, the same plummeted 18.3%. The fall in sales was due to a decline in global wholesale sales.
Net sales for the Sanuk brand, known for its exclusive sandals and shoes, declined 20.2% year over year to $26.7 million. The sales drop was attributable to lower global wholesale sales.
Combined net sales of Deckers’ Other brands came in at $21.1 million in the quarter, down 11.6% year over year. On a constant currency basis, sales fell 11.8%. The decline in net sales was principally attributable to discontinued brands. HOKA ONE ONE reported sales, included in the company’s other brand sales, jumped 1.8% from the year-ago period to $17.6 million.
Other Financial Aspects
At the end of the quarter, Deckers had cash and cash equivalents of $202.3 million, short-term borrowings of $110.6 million, and shareholders’ equity of $917.2 million. Inventories grew 25.6% year over year to $469.2 million.
During the quarter, Deckers did not buy back any shares. As of Jun 30, 2016, the company had $77.9 million at its disposal under its $200 million share repurchase authorization announced in Jan 2015.
For fiscal 2017, the company continues to project net sales to be flat to down 3%. Gross margin for the fiscal year is expected to be in the range of 47%−47.5%. Further, SG&A expense as a percentage of sales is expected to be nearly 37%. In the second quarter, net sales are expected to be up by 1%−3%.
Management envisions earnings per share in the band of $1.12−$1.22 for the second quarter and in the range of $4.05−$4.40 for fiscal 2017. The current Zacks Consensus Estimate for the second quarter and fiscal 2017 stands at $1.09 and $4.15, respectively.
Zacks Rank
Deckers carries a Zacks Rank #4 (Sell). Investors interested in the retail space may consider some better-ranked stocks such as Children's Place, Inc. (PLCE - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Hanesbrands Inc. (HBI - Free Report) and Wolverine World Wide Inc. (WWW - Free Report) , both carrying a Zacks Rank #2 (Buy).
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Deckers (DECK) Q1 Loss Narrower than Expected, Sales Beat
Deckers Outdoor Corporation (DECK - Free Report) continued with its better-than-expected bottom-line performance for the fifth straight quarter, as it reported first-quarter fiscal 2017 results. This footwear and apparel company posted narrower-than-expected loss of $1.80 per share for the quarter under review. Analysts polled by Zacks were expecting a loss of $2.05 per share, while management had earlier projected a loss of approximately $2.10–$2.20 per share for the quarter.
Despite faring better than analysts’ expectations and management’s own guidance on account of better-than-expected revenue, higher gross margin and the timing of certain expenses, loss widened from $1.43 per share reported in the year-ago quarter.
Net sales of this Goleta, CA-based company came in at $174.4 million, reflecting an 18.4% year-over-year fall. The top line, however, beat the Zacks Consensus Estimate of $168.8 million, thus surpassing the same for the second consecutive quarter. Moreover, the rate of decline was lower than 20%−25% expected by Deckers.
However, the decrease in the top line stemmed from the timing of order shipments between quarters, fall in Direct-to-Consumer (“DTC”) comparable sales and lower close-out sales. On a constant currency basis, net sales plummeted 18.8%.
Further, the company’s domestic net sales declined 18.6% to $109.5 million in the reported quarter. Also, international net sales plunged 18.2% to $64.9 million, while on a constant currency basis, the same fell 19.1%.
DTC net sales dropped 3.6% to $58.3 million, while on a constant currency basis, sales fell 3.8%. DTC comparable sales tumbled 7.3% year over year. On the other hand, Wholesale and distributor net sales in the reported quarter decreased 24.3% to $116.1 million, while on a constant currency basis, sales declined 24.6%.
Gross margin improved 320 basis points to 43.7% due to lower proportion of closeout sales, a higher percentage of sales from DTC and expansion of international margins.
Deckers is focused on expanding its brand assortments, bringing more innovative line of products such as the launch of the Arrowood collection of sneaker boots, targeting consumers digitally via marketing and sturdy eCommerce, and optimizing omni-channel distribution. The company is witnessing huge success with the yoga sling collection and favorable response for men's casual styles.
Management hinted that like other brick-and-mortar locations, the company’s outlets are also witnessing lower traffic. Moreover, it said that sustained promotion of classics to make way for the new classic hurt the top line and also resulted in negative comparable sales. With respect to the store fleet optimization plan that focuses on striking the right balance between digital and physical stores, during the quarter Deckers shuttered 6 of the approximately 21 outlets identified for closure during fiscal 2017.
Brand-wise Discussion
UGG brand net sales went down 19.8% to $91.9 million in the reported quarter. On a constant currency basis, sales declined 20%. Sales fell due to the shift in the timing of order shipments between quarters which hurt global wholesale and distributor sales, a fall in DTC comparable sales and fewer close-out sales.
Teva brand net sales plunged 17.3% to $34.7 million, while on a constant currency basis, the same plummeted 18.3%. The fall in sales was due to a decline in global wholesale sales.
Net sales for the Sanuk brand, known for its exclusive sandals and shoes, declined 20.2% year over year to $26.7 million. The sales drop was attributable to lower global wholesale sales.
Combined net sales of Deckers’ Other brands came in at $21.1 million in the quarter, down 11.6% year over year. On a constant currency basis, sales fell 11.8%. The decline in net sales was principally attributable to discontinued brands. HOKA ONE ONE reported sales, included in the company’s other brand sales, jumped 1.8% from the year-ago period to $17.6 million.
Other Financial Aspects
At the end of the quarter, Deckers had cash and cash equivalents of $202.3 million, short-term borrowings of $110.6 million, and shareholders’ equity of $917.2 million. Inventories grew 25.6% year over year to $469.2 million.
During the quarter, Deckers did not buy back any shares. As of Jun 30, 2016, the company had $77.9 million at its disposal under its $200 million share repurchase authorization announced in Jan 2015.
DECKERS OUTDOOR Price, Consensus and EPS Surprise
DECKERS OUTDOOR Price, Consensus and EPS Surprise | DECKERS OUTDOOR Quote
Guidance
For fiscal 2017, the company continues to project net sales to be flat to down 3%. Gross margin for the fiscal year is expected to be in the range of 47%−47.5%. Further, SG&A expense as a percentage of sales is expected to be nearly 37%. In the second quarter, net sales are expected to be up by 1%−3%.
Management envisions earnings per share in the band of $1.12−$1.22 for the second quarter and in the range of $4.05−$4.40 for fiscal 2017. The current Zacks Consensus Estimate for the second quarter and fiscal 2017 stands at $1.09 and $4.15, respectively.
Zacks Rank
Deckers carries a Zacks Rank #4 (Sell). Investors interested in the retail space may consider some better-ranked stocks such as Children's Place, Inc. (PLCE - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Hanesbrands Inc. (HBI - Free Report) and Wolverine World Wide Inc. (WWW - Free Report) , both carrying a Zacks Rank #2 (Buy).
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