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Bull of the Day: Deckers (DECK)

Tracey Ryniec

Decker Brands (DECK) is hitting on all cylinders as shoes remain a hot fashion item. This Zacks Rank #1 (Strong Buy) is expected to grow earnings by the double digits in fiscal 2019.

Deckers Brands designs, manufactures and distributes footwear, apparel and accessories. It's most prominent brand is UGG, but it also owns Koolaburra, HOKA ONE ONE, Teva and Sanuk.

It's products are sold around the world in department and specialty stores as well as company-owned and operated retail stores. Deckers also operates an online store at deckers.com.

Huge Beat in the Fiscal Third Quarter

On Jan 31, Deckers reported its fiscal third quarter 2019 results and blew by the Zacks Consensus by 24%. Earnings were $6.59 versus the consensus of $5.31.

It was the 8th consecutive earnings beat for the company.

Net sales jumped 7.8% to a record $873.8 million up from $810.5 million in the year ago quarter. Sales were propelled by its flagship brand, UGG, which rose 3.6% to $761 million in the quarter.

The business had momentum over the winter holidays.

HOKA ONE ONE also had a great quarter as sales rose 79.2% to $56.9 million from $31.8 million a year ago.

Teva continues to grow its market as sales jumped 17.5% to $22.9 million from $19.5 million in the prior year. Teva has apparently become a favorite of instagrammers and those in fashion per this recent article in the Daily Mail.

Deckers has to love publicity like this about one of its smaller brands.

Even the smallest brand, Sanuk, saw sales gains of 7% to $12.9 million.

Gross margin rose to 53.8% from 52.2% in the third quarter of the prior year.

Raised Full Year Guidance Again

After another strong quarter, and for the second quarter in a row, Deckers raised its fiscal 2019 full year guidance.

It gave a guidance range of $7.85 to $7.95 which is up from its prior guidance range of $6.65 to $6.85.

With such a big increase, it's not surprising that the analysts moved to raise their estimates and get within the guidance range now.

The fiscal 2019 Zacks Consensus Estimate jumped to $7.93 from $6.91 over the past 2 months as 4 estimates were revised higher.

That's earnings growth of 38.2% as the company only made $5.74 last year.

But what about fiscal 2020 that is starting in the middle of this calendar year?

Analysts are still bullish that the good times will continue. 4 estimates were revised higher for fiscal 2020 over the past 2 months as well, which pushed the Zacks Consensus up to $8.32 from $7.36 over the last 60 days.

That's another 5% earnings growth.

Shares Up Big Since 2017

If you bought into the company's turnaround plan, you would have bought in sometime in 2017.

Shares are up 140% over the last 2 years and 12% year-to-date.



Yet they still have an attractive P/E of just 18 which makes it a bargain compared to other hot retailers like lululemon (LULU) which trades at 33x.

The company is also shareholder friendly as it just increased its share purchase program by another $261 million for a total of $350 million.

For investors looking for a solid retail and consumer play for their portfolio, Deckers is one to keep on the shortlist.

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