Analysts Focus On Deckers Outdoor Q2 Beat; Shares Sink
Deckers Outdoor Corp (NYSE: DECK) shares suffered Friday on a disappointing earnings outlook for the holiday period but analysts mostly looked on the bright side.
Deckers lost 7 percent in the afternoon session Friday, trading at $81.27 per share. The company on Thursday forecast earnings for the December quarter of $4.46 per share, versus a consensus estimate of $4.75.
Yet a couple of analysts shrugged off the indicator, plus an 8 percent decline in recent same-store sales, focusing instead on the company's second-quarter earnings, which beat Wall Street's expectations.
The company distributes its Ugg, Teva and Sanuk footwear brands both through wholesale channels as well as its own website and chain of retail stores.
"It's by far the furthest along in figuring out the omni-channel puzzle," Wunderlich's Danielle McCoy said in a note Friday that maintained a Buy rating.
McCoy, who maintained a $121 target, said the company's current advertising campaign "is connecting with the consumer on a deeper emotional level" and its Ugg brand is "on track for a strong Holiday season."
Also reiterating a Buy rating, Tigress' Ivan Feinseth nonetheless acknowledged recent negative results from Wal-Mart Stores and eBay suggesting that retailers face difficult circumstances.
"Consumers are handcuffed by low wage growth," Feinseth said. But he said Deckers' omni-channel distribution and "optimism" about the continued popularity of Uggs make Deckers "one of the most attractive companies in the segment."
Deckers' return on capital has been trending lower in the last two years, Feinseth said. "But we project it will rebound to 12.4 percent over the next twelve months, an improvement of 11 percent."
Yet Credit Suisse's Christian Buss harbors doubts about Deckers' retail expansion that has tripled its square footage in the past three years.
Although the company had high hopes for offering a "more aggressive price point" on its fall fashion lineup, Buss eyed the same-store sales decline with mild dismay.
"Our caution remains present," Buss said, reiterating a Neutral rating and $94 target.
Higher spending to support continued growth of the retail chain could result in lower-than-expected returns, "leaving earnings growth challenged over the long term," Buss said.
Latest Ratings for DECK
Oct 2014 | Piper Jaffray | Downgrades | Outweight | Neutral |
Oct 2014 | Wunderlich | Initiates Coverage on | Buy | |
Jul 2014 | Jefferies | Upgrades | Hold | Buy |
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