Deckers Outdoor Corporation (DECK - Free Report) is targeting profitable markets and remains focused on product innovations as well as store augmentation plan. Also, the company’s focus on expanding brand assortments, bringing more innovative line of products, targeting consumers through marketing and optimizing omni-channel distribution bode well.
In keeping with the changing trends, Deckers has made substantial investments to strengthen online presence and improve shopping experience for customers. Furthermore, it is focused on opening smaller concept omni-channel outlets and expanding programs such as — Retail Inventory Online, Infinite UGG; Buy Online, Return In Store; and Click and Collect — to enhance shopping experience.
Additionally, the company has undertaken strategic initiatives in an effort to drive long-term growth. Its store-fleet optimization plan focuses on striking the right balance between digital and physical stores. Deckers also expects cost savings of about $150 million backed by improvement in cost of goods sold and SG&A savings, which includes consolidation of retail outlets and process improvement efficiencies. This, in turn, should help it realize $100-million operating profit improvement by fiscal 2020.
Management had earlier projected total sales of about $2 billion, with operating margin of 13% by fiscal 2020. For fiscal 2018, Deckers has set operating margin goal of 12%. Management now envisions net sales to be in the band of $1,873-$1,878 million and adjusted earnings in the range of $5.37-5.42 per share, up from $3.82 last year.
The strategic efforts taken by the company has helped the stock to outperform industry in the past six months. While the stock surged 45.9%, the industry gained 23.8%.
We believe there is still momentum left in this Zacks Rank #1 (Strong Buy) stock, which is reflected from its VGM Score of A. Stocks such as NIKE, Inc. (NKE - Free Report) , Wolverine World Wide, Inc. (WWW - Free Report) and Carter's, Inc. (CRI - Free Report) which belong to the same industry has witnessed a gain of 23.6%, 7.6% and 17.7%,respectively, in the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
A brief glance at some valuation metrics seems to indicate that Deckers has enough room to run in bourses.
Deckers with a price to sales ratio of 1.6 compared with that of industry’s 2.7 indicate that the stock has enough upside potential. The stock also looks attractive with respect to a forward price-to-earnings (P/E) multiple of 16.9x versus industry’s 23.6x. A more-or-less similar picture emerges when comparing EV/EBITDA ratios. Deckers holds the edge here with an EV/EBITDA ratio of 7.8 lower than 17.6 for the industry.
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