For Immediate Release
Chicago, IL – February 10, 2020 – Zacks Equity Research Shares of Deckers Outdoor Corp. (DECK - Free Report) as the Bull of the Day, Kohl’s Corp. (KSS - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on Uber (UBER - Free Report) , Grubhub (GRUB - Free Report) and Lyft (LYFT - Free Report) .
Here is a synopsis of all five stocks:
Bull of the Day:
Deckers Outdoor Corp. is a retail holding company that owns popular performance and luxury shoe brands UGG, Teva, Sanuk, Koolaburra, and Hoka One One. Their products are sold through specialty domestic retailers, international distributors, and online and in catalogs.
Shares Pop on Great Q3 Earnings
When Deckers reported third-quarter results last month, shares climbed as much as 12.4% on the good numbers.
Sales increased over 7% year-over-year to $938.7 million and EPS hit $7.14 a share, both easily beating consensus estimates. UGG sales rose 2.8% to $781.1 million, but the real standout was Hoke One One; the running shoe brand saw quarterly sales soar over 63% compared to the prior-year quarter. Koolaburra also saw a double-digit sales increase of 94% year-over-year to $39 million.
"Our third quarter results were driven by three of our brands experiencing record levels of quarterly revenue, resulting in an updated outlook that reflects another year of strong top-line growth and earnings expansion,” said CEO Dave Powers.
Deckers now expects full-year fiscal 2020 sales to fall between $2.15 billion and $2.16 billion, up from $2.115 billion to $2.14 billion; full-year EPS guidance was also raised to $9.40 to $9.50 per share versus the prior forecast of $8.90 to $9.05.
Shares of Deckers are up over 28% in the last six months, thanks to investor optimism after the company’s Q3 earnings. Comparatively, the S&P 500 has returned about 15.7%. Earnings estimates have been rising too, and Deckers is a Zacks Rank #1 (Strong Buy) pick right now.
For the current fiscal year, five analysts have revised their bottom line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up 47 cents from $9.07 to $9.54. 2020 looks pretty strong too, with earnings expected to continue positive year-over-year growth.
Q3 showed investors and analysts both the continued effectiveness of Decker’s marketing strategy and the popularity of its products. With Hoka, the company has been able to partner with trendy lifestyle brands like Opening Ceremony, and management expects more international growth for the performance shoe; Hoka units sold internationally surpassed domestic sales for the first time in the third quarter.
If you’re an investor searching for a broader retail stock to add to your portfolio, make sure to keep DECK on your shortlist.
Bear of the Day:
Kohl’s Corp. is a major department store chain here in the U.S., operating more than 1,100 locations across 49 states. They offer moderately-priced apparel, footwear and accessories for women, men and kids, as well as beauty and home décor.
Shares Slip on Disappointing Holiday Sales
Back in early January, KSS stock was down nearly 9% after the company released disappointing holiday sales numbers. Comparable sales fell 0.2% in November and December compared to expectations of 0.4% for the full Q4.
While Kohl’s managed to outperform department store peers Macy’s and J.C. Penney, the holiday numbers were especially underwhelming since the company expanded its Amazon returns program; management had expected that initiative to lift store traffic.
“We continue to see momentum in key areas including our digital business, active, beauty and children's, and solid performance in footwear and men's. This was offset by softness in women's, which we are working with speed to address,” said CEO Michelle Glass.
Analysts have turned bearish on Kohl’s, with twelve cutting estimates in the last 60 days for fiscal 2020
Earnings are expected to see double-digit negative growth for the year, and the Zacks Consensus Estimate has dropped eight cents for that same time period from $4.84 to $4.76 per share.This sentiment has stretched into 2021, too.
KSS is now a Zacks Rank #5 (Strong Sell).
Shares of the retailer are down over 14% in the last six months, and have lost more than 34% in the last one year. The S&P 500 is up 15.4% and 23% in comparison.
Going forward, Kohl’s definitely has some work do, as comps continue to slip and reliance on markdowns and discounts grow. Just like other brick-and-mortar retailers, it needs to figure out ways to bring back shoppers to stores that does not include margin-diminishing promotions.
Earnings for fiscal 2019 are now expected to come in at the low end of its previous range of $4.75 to $4.95 per share. Kohl’s reports fourth quarter earnings on March 3, followed by an investor day conference on March 16.
Uber Rides Is Strong but Eats Is Dead Weight
Uber released a solid earnings report, and the markets got excited, trading this stock up over 10%. The results were just about in line with estimates with a marginal EPS beat and a revenue miss that was less than 1%. Investors are just happy that Uber appears to be on track.
Uber is able to turn a robust positive EBITDA for its core ridesharing business, but its other bets have been pulling down the company’s profitability. The more revenue Uber Eats brings in, the larger the losses. This past quarter Uber Eats was able to improve its sales by 154% year-over-year, but the segment’s EBITDA was down 111%, somehow losing more than it netted in sales.
Uber Eats is operating in a very competitive landscape. There are a handful of services for customers to choose from, but the largest in the space include Grubhub, DoorDash and PostMates. The meal delivery segment grew by 41% in 2019, according to the Second Measure. Grubhub had been the segment leader for some time but recently lost that title to DoorDash.
Grubhub has been struggling to stay afloat as the competition steepens. The firm has seen a significant deceleration of sales, earnings that have turned negative, and a share price breakdown of 40% in the past 52-weeks. Uber Eats may be headed in the same direction. The battle for meal delivery domination is losing these public companies an excessive amount of money, and this may be a race to the bottom (aka the end of their capital).
Uber Freight isn’t doing much better with a year-over-year revenue decline of 139%. Uber’s operations outside of its core business are losing the company a massive amount of money, and the company will need to see continued cash infusions if it wants to keep these other segments running.
In the Q4 earnings call, analysts were looking for synergies between ridesharing and Uber’s other plays for justification of keeping these. Management is saying that Uber Eats is in the early stages of development and says that they have regions where Uber Eats has positive EBITDA margins. This is a good sign for the business, but the massive growing losses from this segment are still a concern for investors like me.
Lyft’s (nearly) pure-play ridesharing strategy appears it may be becoming the company’s competitive advantage in the duopoly. Uber and Lyft’s race to profitability will prove this one way or another. Uber is substantially better capitalized with the world’s largest VC firm’s backing it and over $6 billion in cash to burn. If it is a race to the bottom of their capital Uber may survive the longest.
Lyft is releasing its Q4 earnings after the bell Tuesday, February 11th, and expect a big move with the stock’s first three quarterly reports having an average price impact of 7.9% (1 up, 2 down). Analysts are estimating an EPS of -$0.57 on sales of $984 million, according to Zacks Consensus estimates. This would represent Lyft’s best sales to date. Look for management’s guidance on a profitability timeline as this will likely be a big mover for these shares.
The ridesharing segment is working hard on creating fleets of autonomous vehicles to replace their high-cost drivers. It will likely be years before these fleets are deployed, but some investors are putting their long-term bets on these firms’ autonomous cars none the less.
Uber’s noncore businesses may be the death of the company if it can’t turn around the increasing losses. The company’s ability to turn ridesharing around has given me hope that they can do the same with these other segments.
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