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Deckers (DECK) Q4 Earnings Beat, HOKA & UGG Show Strength
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Deckers Outdoor Corporation (DECK - Free Report) witnessed an 8.6% jump in its share price during the after-market trading session on May 23. This rally was in response to the company's outstanding fourth-quarter fiscal 2024 performance and optimistic fiscal 2025 sales forecast. The strong quarterly results were underpinned by the exceptional performance of the HOKA ONE ONE and UGG brands.
Deckers has shown robust growth through its strategic focus on expanding its brand presence and strengthening direct-to-consumer channels. This approach, along with a commitment to innovation in product development and a keen focus on international market expansion, has positioned the company for continued success.
Shares of this Goleta, CA-based company have advanced 37.8% in the past six months compared with the industry’s 17.3% growth.
Let’s Delve Deeper
Deckers delivered quarterly earnings of $4.95 per share, which surpassed the Zacks Consensus Estimate of $2.82 per share. The reported figure increased substantially from the prior-year quarter’s tally of $3.46 per share.
Net sales of this Zacks Rank #3 (Hold) company increased 21.2% year over year to $959.8 million and outpaced the consensus estimate of $880 million. On a constant-currency basis, net sales grew 21.1%.
The gross margin in the fourth quarter expanded to 56.2% from 50% in the year-ago period and also significantly surpassed our expectation of 50.8%. This improvement can be attributed to several factors, including the higher mix of UGG full-price selling, freight savings, strategic pricing adjustments, and a favorable brand and product mix.
SG&A expenses climbed 36.2% year over year to $395.2 million. As a percentage of net sales, SG&A stood at 41.2%, 450 basis points higher than the last year. We had anticipated a year-over-year increase of 27.9% in the metric.
The company’s operating income came in at $144.3 million, up from $105.9 million in the year-ago quarter. The operating margin increased to 15% from 13.4% in the prior-year period.
Deckers Outdoor Corporation Price, Consensus and EPS Surprise
The HOKA brand maintained its impressive performance, achieving a 34% increase in sales, reaching $533 million, which exceeded our projected figure of $487.2 million.
The UGG brand exhibited remarkable growth of 14.9% in net sales of $361.3 million, which surpassed our estimate of $282 million.
Teva brand faced continued challenges, experiencing a 15.6% decline in net sales, amounting to $53 million. However, the figure fared better than our projected number of $50.4 million in sales.
The Sanuk brand's dismal performance persisted, resulting in a 39.1% decrease in net sales to $6.5 million, which was lower than our estimated figure of $7.3 million. Meanwhile, net sales for Other brands, primarily comprising Koolaburra, were approximately flat at $6 million, exceeding our estimate of $5.5 million.
Channel & Geography-Wise Discussion
Wholesale net sales increased 21.4% year over year to $544.6 million. DTC net sales advanced 21% to $415.2 million, while DTC comparable net sales surged 20.5%.
Domestic net sales increased 19.4% to $647.7 million, while International net sales rose 25.2% to $312 million.
Other Financial Aspects
Cash and cash equivalents stood at $1,502.1 million as of Mar 31, 2024. The company ended the quarter with a total stockholders’ equity of $2,107.5 million. There were no outstanding borrowings.
During the quarter, Deckers repurchased about 119 thousand shares for $104.3 million. As of Mar 31, 2024, the company had $941.7 million remaining under its share repurchase authorization.
A Sneak Peek Into Outlook
Deckers expects a 10% increase in fiscal 2025 net sales, reaching $4.7 billion. HOKA is expected to increase approximately 20%, driven by consumer acquisition and retention gains in the DTC channel, strategic expansion with key partners and international market share growth. UGG is expected to increase in mid-single digits, primarily driven by international expansion and maintaining a healthy U.S. marketplace.
The fiscal 2025 gross margin is expected to be approximately 53.5%, suggesting a contraction of 210 basis points from last year due to a more normalized promotional environment and higher freight costs.
SG&A is expected to be approximately 34% of net sales, reflecting increased marketing spend, and investment in talent and infrastructure. The operating margin is projected to be approximately 19.5%, down from 21.6% reported a year ago.
Management foresees fiscal 2025 earnings in the range of $29.50-$30.00 per share compared with $29.16 reported last year.
For fiscal 2025, capital expenditures are expected to be in the range of $115 million-$125 million, focusing on the supply chain and warehouse capabilities, capital IT projects, retail refreshments and updates to office facilities.
For the first quarter of fiscal 2025, Deckers expects revenue growth in the high teens and gross margin, slightly above the full fiscal year guided rate.
3 Stocks Looking Hot
Here, we have highlighted three better-ranked stocks, namely Levi Strauss & Co. (LEVI - Free Report) , Canada Goose (GOOS - Free Report) and Abercrombie & Fitch (ANF - Free Report) .
The Zacks Consensus Estimate for Levi Strauss’ current financial-year revenues and earnings suggests growth of 2.9% and 15.5%, respectively, from the year-ago reported figures. Levi Strauss has a trailing four-quarter earnings surprise of 16.4%, on average.
Canada Goose, a performance luxury outerwear, apparel, footwear and accessories brand, sports a Zacks Rank #1.
The Zacks Consensus Estimate for Canada Goose’s current financial-year revenues and earnings suggests growth of 4% and 13.7%, respectively, from the year-ago reported figures. GOOS has a trailing four-quarter earnings surprise of 70.9%, on average.
Abercrombie & Fitch, an omnichannel specialty retailer of apparel and accessories for men, women and kids, carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year revenues and earnings calls for growth of 6.3% and 22.5%, respectively, from the year-ago reported figures. Abercrombie & Fitch has a trailing four-quarter earnings surprise of 715.6%, on average.
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Deckers (DECK) Q4 Earnings Beat, HOKA & UGG Show Strength
Deckers Outdoor Corporation (DECK - Free Report) witnessed an 8.6% jump in its share price during the after-market trading session on May 23. This rally was in response to the company's outstanding fourth-quarter fiscal 2024 performance and optimistic fiscal 2025 sales forecast. The strong quarterly results were underpinned by the exceptional performance of the HOKA ONE ONE and UGG brands.
Deckers has shown robust growth through its strategic focus on expanding its brand presence and strengthening direct-to-consumer channels. This approach, along with a commitment to innovation in product development and a keen focus on international market expansion, has positioned the company for continued success.
Shares of this Goleta, CA-based company have advanced 37.8% in the past six months compared with the industry’s 17.3% growth.
Let’s Delve Deeper
Deckers delivered quarterly earnings of $4.95 per share, which surpassed the Zacks Consensus Estimate of $2.82 per share. The reported figure increased substantially from the prior-year quarter’s tally of $3.46 per share.
Net sales of this Zacks Rank #3 (Hold) company increased 21.2% year over year to $959.8 million and outpaced the consensus estimate of $880 million. On a constant-currency basis, net sales grew 21.1%.
The gross margin in the fourth quarter expanded to 56.2% from 50% in the year-ago period and also significantly surpassed our expectation of 50.8%. This improvement can be attributed to several factors, including the higher mix of UGG full-price selling, freight savings, strategic pricing adjustments, and a favorable brand and product mix.
SG&A expenses climbed 36.2% year over year to $395.2 million. As a percentage of net sales, SG&A stood at 41.2%, 450 basis points higher than the last year. We had anticipated a year-over-year increase of 27.9% in the metric.
The company’s operating income came in at $144.3 million, up from $105.9 million in the year-ago quarter. The operating margin increased to 15% from 13.4% in the prior-year period.
Deckers Outdoor Corporation Price, Consensus and EPS Surprise
Deckers Outdoor Corporation price-consensus-eps-surprise-chart | Deckers Outdoor Corporation Quote
Brand-Wise Discussion
The HOKA brand maintained its impressive performance, achieving a 34% increase in sales, reaching $533 million, which exceeded our projected figure of $487.2 million.
The UGG brand exhibited remarkable growth of 14.9% in net sales of $361.3 million, which surpassed our estimate of $282 million.
Teva brand faced continued challenges, experiencing a 15.6% decline in net sales, amounting to $53 million. However, the figure fared better than our projected number of $50.4 million in sales.
The Sanuk brand's dismal performance persisted, resulting in a 39.1% decrease in net sales to $6.5 million, which was lower than our estimated figure of $7.3 million. Meanwhile, net sales for Other brands, primarily comprising Koolaburra, were approximately flat at $6 million, exceeding our estimate of $5.5 million.
Channel & Geography-Wise Discussion
Wholesale net sales increased 21.4% year over year to $544.6 million. DTC net sales advanced 21% to $415.2 million, while DTC comparable net sales surged 20.5%.
Domestic net sales increased 19.4% to $647.7 million, while International net sales rose 25.2% to $312 million.
Other Financial Aspects
Cash and cash equivalents stood at $1,502.1 million as of Mar 31, 2024. The company ended the quarter with a total stockholders’ equity of $2,107.5 million. There were no outstanding borrowings.
During the quarter, Deckers repurchased about 119 thousand shares for $104.3 million. As of Mar 31, 2024, the company had $941.7 million remaining under its share repurchase authorization.
A Sneak Peek Into Outlook
Deckers expects a 10% increase in fiscal 2025 net sales, reaching $4.7 billion. HOKA is expected to increase approximately 20%, driven by consumer acquisition and retention gains in the DTC channel, strategic expansion with key partners and international market share growth. UGG is expected to increase in mid-single digits, primarily driven by international expansion and maintaining a healthy U.S. marketplace.
The fiscal 2025 gross margin is expected to be approximately 53.5%, suggesting a contraction of 210 basis points from last year due to a more normalized promotional environment and higher freight costs.
SG&A is expected to be approximately 34% of net sales, reflecting increased marketing spend, and investment in talent and infrastructure. The operating margin is projected to be approximately 19.5%, down from 21.6% reported a year ago.
Management foresees fiscal 2025 earnings in the range of $29.50-$30.00 per share compared with $29.16 reported last year.
For fiscal 2025, capital expenditures are expected to be in the range of $115 million-$125 million, focusing on the supply chain and warehouse capabilities, capital IT projects, retail refreshments and updates to office facilities.
For the first quarter of fiscal 2025, Deckers expects revenue growth in the high teens and gross margin, slightly above the full fiscal year guided rate.
3 Stocks Looking Hot
Here, we have highlighted three better-ranked stocks, namely Levi Strauss & Co. (LEVI - Free Report) , Canada Goose (GOOS - Free Report) and Abercrombie & Fitch (ANF - Free Report) .
Levi Strauss, one of the world's largest brand-name apparel companies and a global leader in jeanswear, sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Levi Strauss’ current financial-year revenues and earnings suggests growth of 2.9% and 15.5%, respectively, from the year-ago reported figures. Levi Strauss has a trailing four-quarter earnings surprise of 16.4%, on average.
Canada Goose, a performance luxury outerwear, apparel, footwear and accessories brand, sports a Zacks Rank #1.
The Zacks Consensus Estimate for Canada Goose’s current financial-year revenues and earnings suggests growth of 4% and 13.7%, respectively, from the year-ago reported figures. GOOS has a trailing four-quarter earnings surprise of 70.9%, on average.
Abercrombie & Fitch, an omnichannel specialty retailer of apparel and accessories for men, women and kids, carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year revenues and earnings calls for growth of 6.3% and 22.5%, respectively, from the year-ago reported figures. Abercrombie & Fitch has a trailing four-quarter earnings surprise of 715.6%, on average.