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Deckers' (DECK) Q3 Earnings Beat, HOKA Brand Shows Strength

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Deckers Outdoor Corporation DECK reported better-than-expected third-quarter fiscal 2022 results despite the ongoing supply chain challenges. Strength in HOKA ONE ONE and UGG brands as well as growth in direct-to-consumer and wholesale channels contributed to the company’s performance. While the top line grew year over year, the bottom line declined from the prior-year period.

Let’s Delve Deeper

Deckers posted quarterly earnings of $8.42 per share that comfortably surpassed the Zacks Consensus Estimate of $8.35. However, the reported figure decreased 6.3% from the year-ago earnings of $8.99 per share. Higher SG&A expenses and margin contraction hurt the bottom-line results.

Net sales of this Goleta, CA-based company rose 10.2% year over year to $1,187.8 million and marginally came ahead of the Zacks Consensus Estimate of $1,184.6 million. On a constant currency basis, net sales grew 9.7%. Top-line growth was driven by the UGG, HOKA ONE ONE and Teva brands.

We note that gross margin contracted 470 basis points to 52.3% during the quarter owing to higher freight costs on account of a steep rise in ocean container rates. SG&A expenses climbed 14.9% year over year to $327.8 million due to higher marketing costs and increased warehouse expenses.

The company posted an operating income of $293.4 million, down 10.7% from the year-ago quarter. Again, the operating margin shrunk 580 basis points to 24.7%.

Deckers Outdoor Corporation Price, Consensus and EPS Surprise

Deckers Outdoor Corporation Price, Consensus and EPS Surprise
Deckers Outdoor Corporation Price, Consensus and EPS Surprise

Deckers Outdoor Corporation price-consensus-eps-surprise-chart | Deckers Outdoor Corporation Quote

Sales by Geography & Channel

Deckers’ domestic net sales climbed 3.3% year over year to $796.1 million during the quarter under review. We note that international net sales advanced 27.5% to $391.6 million from the year-ago period.

By channel, wholesale net sales grew 7.3% to $598.4 million. Direct-to-consumer net sales increased 13.4% to $589.4 million. Comparable direct-to-consumer net sales advanced 10.7% over the same period last year.

Brand Wise Discussion

UGG brand net sales rose 7.9% year over year to $945.9 million, while HOKA ONE ONE brand net sales increased 30.3% to $184.6 million during the reported quarter, thanks to strength in the direct-to-consumer channel. Teva brand net sales surged 31.4% to $20.6 million.

Net sales for the Sanuk brand declined 13.4% to $6.1 million. Net sales for the Other brands, mainly comprising Koolaburra, fell 16.6% to $30.6 million.

Other Financial Aspects

Cash and cash equivalents stood at $998.3 million as of Dec 31, 2021, compared with $1.157 billion as of Dec 31, 2020. The company ended the quarter with total stockholders’ equity of $1,564.7 million. There were no outstanding borrowings.

During the quarter, the company repurchased about 354 thousand shares for $130.7 million. As of Dec 31, 2021, the company had $544 million remaining under its stock repurchase authorization.

A Sneak Peek into Outlook

Deckers now envisions fiscal 2022 net sales in the range of $3.03 billion to $3.06 billion compared with the earlier projection of $3.01-$3.06 billion. This suggests a sharp increase of 19-20% from $2.546 billion reported in fiscal 2021.

The company now expects fiscal 2022 earnings to be $14.50-$15.15 per share, compared with the prior view of $14.15-$15.15. The current estimate compares favorably with earnings of $13.47 per share reported last fiscal.

Gross margin is now anticipated to be at or marginally below 51.5%. SG&A expenses, as a percentage of sales, are projected to be about 34%, with operating margin is now expected to be about 17.5%.

Shares of this Zacks Rank #2 (Buy) company have risen 1.7% in the past year compared with the industry’s growth of 2.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pick These 3 Stocks Too

Here are three more favorably ranked stocks — Wolverine World Wide WWW, Tapestry TPR and Costco COST.

Wolverine World Wide, one of the leading marketers and licensors of a branded casual, active lifestyle, work, outdoor sport, athletic, children's and uniform footwear and apparel, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 18.3%, on average.

The Zacks Consensus Estimate for Wolverine World Wide’s current financial year sales and EPS suggests growth of 34.4% and 125.8%, respectively, from the year-ago period. WWW has an expected EPS growth rate of 10% for three-five years.

Tapestry, which provides luxury accessories and branded lifestyle products, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 29%, on average.

The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 15% and 18.5%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.3% for three-five years.

Costco, which operates membership warehouses, carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 8.3%, on average.

The Zacks Consensus Estimate for Costco’s current financial year sales and EPS suggests growth of 11.6% and 14.3%, respectively, from the year-ago period. COST has an expected EPS growth rate of 8.8% for three-five years.


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Tapestry, Inc. (TPR) : Free Stock Analysis Report

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