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Bull of the Day: Deckers (DECK)

Tracey Ryniec

Decker Brands (DECK) is proving its not just about UGGs anymore. This Zacks Rank #1 (Strong Buy) is hitting on all cylinders as it recently raised full year guidance.

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.

Another Beat in the Fiscal First Quarter

On July 25, Deckers reported fiscal first quarter 2020 results and again blew by the Zacks Consensus Estimate, this time by 41.7%.

Earnings were a loss of $0.67 versus the consensus of a loss of $1.15.

It was the tenth earnings beat in a row which is an impressive streak given the struggles of some retailers.

In the quarter, sales jumped 10.5% to $276.8 million versus $250.6 million in the year ago period.

UGG remains its largest brand as sales rose 1.5% to $138.5 million, up from $136.5 million a year ago.

But HOKA ONE ONE continues to be on fire as sales jumped 69.2% to $79.5 million from $47 million a year ago.

Teva and Sanuk both saw year-over-year sales declines of 4.3% and 23.5%, respectively. Sanuk sales fell to $18.7 million from $24.4 million.

Wholesale sales were also up 10.7% to $196.6 million from $177.6 million a year ago.

Deckers Raised Full Year Guidance

Even though it only gave full year guidance for the first time last quarter, Deckers is already raising it based on the strong first quarter results.

The sales forecast was raised to $2.1 billion to $2.125 billion from $2.095 billion to $2.120 billion.

Earnings are expected to be in the range of $8.40 to $8.60, up from prior guidance of $8.20 to $8.40.

5 analysts raised their estimates after the report, pushing the Zacks Consensus up to $8.65 from $8.45. That's higher than the company's guidance range but it still means an earnings decline of 2.2% from a year ago as it made $8.84 last year.

Fiscal 2021 is looking upbeat as well, with 4 analysts raising and pushing the Zacks Consensus up to $9.47 from $9.28, or an earnings gain of 9.5%.

A Buying Opportunity?

Despite the beat and raise, the shares have been weak over the last month with shares falling 8.1% during that time.

They're down 25% off their 2019 highs and trade with a forward P/E of just 16.5.

The shoe retailers are a cheap group. Competitor Skechers (SKX) is trading with a forward P/E of just 13.

For investors looking for a retailer with strong brands which is trading at an attractive valuation, Deckers is one to keep on your short list.

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