ok.. The mother of all predictions.. What will happen after earnings tomorrow?
My prediction is earnings are they beat by a bit, but their guidance is will be conservative for 2013.
They will tout their new retail system that they bought from Oracle and they will tout that they are on track to lower and manage inventories. They will state that weather did cooperate but not as much as they would have liked it to compared to last year. They will state that they are continuing their expansion of retail stores, according to plan, and they are introducing new lines like the men's line. They will state that the other brands TEVA, SANUK etc have increased presence in their brand offering (but UGG will still be over 80% or their sales.) They will continue their international expansion and their brand is NOT dead.
They may state that they have bought back the remaining shares...
For argument's sake let's say this/or similar statements are what they state tomorrow evening.
Now.. What would you do? Honest answers please..
I'll start: If this was the case the stock will go down about 10% tomorrow after the end of the cc. but I will continue to hold long. Stock will recover in a month.
Lot's of good analysis, thanks everyone. It seems the market really doesn't know at this point. somebody said that DECK management has a lot to prove. I believe this is the correct analysis. They do indeed have to be very clear today. In my opinion, they are at the crux of making or breaking the company which is what concerns me, as I never saw any aggressive marketing from them in the last few months. Turning around the company is one thing, marketing is another. The brand value and the brand name are strong; however they really need to learn to sell to the masses. Yes I know they feel that they are a "luxury brand"; not anymore, they are a mass brand now (after their price drops) and they need to incorporate this. To get to Coach's level (which is where I think they want to be); they need to learn from their mistakes and aggressively market their products. For example, i have yet to see a spring UGG boot that is a mix of a winter boot and a rain boot.. so how about a sheepskin lined RAINBOOT? Bet you it will sell!
I am hoping for something positive, but as a long term investor I believe the company will continue pressing forward in spite of any issues that arise.
I think analysts are concerned about the margin, which management will have to clearly provide an analysis on. It is going to be an interesting call, one in which I hope to listen to live.
They'll beat pretty good, I'm thinking 2.82-2.85 EPS, which would best high estimates. They'll beat high estimates on revenue as well. As you state, the guidance will drive pricing. I think an AH pop on a beat, that I mention and inline guidance, is inevitable as a small portion of shorts cover quickly. Then it reverts back a bit for a few days. A msss with this short interest will drive this down pretty much the 10% you state as long as it's close. The low P/E gives it some leeway...Look at CSTR (similar short interest, died AH and for a couple days after earnings in line but terrible Q1 guidance)
i wouldn't be surprised to see 4th QTR in line. That said, first 2 months of 2013 have to be better than expected due to weather and lowered sga expenses. lower inventories and sanuk and teva spring summer sales show growth over 2012. fall bookings for ugg look great due to inventory sell through and wholesalers restocking for a cold winter 13/14. growth estimates for 2013 10%+ over 2012. 2013 revenue and eps above analyst consensus.
I find it hard to think this will swing down and then recover if the earnings/guidance is bad. Too much went "right" in the overall retail sector at the end of last year. Same store stales / Black friday sales were up and in some cases at record highs for a handful of retailers. If DECK didn't get any slices of the sales/revenue gains from the likes of JWN, etc, then I can't see them magically turning it around in 2013. On the other hand, if they got their act together last quarter, there is room for much upside. I can see this quarter as a long term trend catalyst, but I would be hard pressed to think it sells off to 35 and recovers back to 45 (or vice versa). Either this company is ridiculously undervalued at a PE of 10, or the company is dead. I can't see a middle ground.
Internet searches over the holidays show the company as not being dead. If it misses and management continues to show incompetence, then it becomes a possible buyout target. UGG has some name-brand value and it becomes a solid target if back in the low 30s. In addition, there are plenty of analysts who at 30-35 will re-affirm buy status and state that it is undersold.
If running a strangle or straddle, the play would be a swing of selling puts at 10% down and swinging them into calls. If that guidance occurs, I think you see 35 with a move back to 45 by next Q. The low volume and limited volatility this week does tell me that the market really does not know where this will go.
a corollary to what you are saying is this: this stock is going to suffer and be subject to a very large short position that has apparently incredibly deep pockets, UNLESS AND UNTIL deck shows clearly that it is no longer overly relying on the uggs classic and similar stylings. and that could take a long time. that is why i got out. that and also a complete disatisfaction with management with regard to protection the share price and protecting shareholders. this stock has possibility been one of the wost stocks in history imo.