Deckers (DECK) Is Riding on Strong Direct-to-Consumer Business
Deckers Outdoor Corporation DECK, a recognized name in the shoe and retail apparels space, has outperformed the Industry in the past six months. HOKA ONE ONE and UGG brands have contributed toward Deckers’ upbeat performance, boosting the confidence of investors in the stock.
In the above-mentioned period, shares of this Zacks Rank #2 (Buy) company have rallied about 22.4%, compared with the industry’s 12.6% rise. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s Delve Deeper
Deckers has made substantial investment to strengthen its online presence and improve shopping experience of its customers by constantly developing e-commerce portals. The company is targeting underpenetrated market with focus on product innovations, store expansion and enhancement of e-commerce capabilities to capture incremental sales directly from customers.
Evidently, the company’s main objective is to enhance its direct-to-consumer (DTC) business by moving toward its long-term goal of 50% mix of DTC business. In the third quarter of fiscal 2023, company’s direct-to-consumer net sales increased 18.7% and comparable DTC net sales increased 22.1% year over year. Taking a dig in the past, it is evident that direct-to-consumer net sales increased 35.3% and 15.4% in the second and first quarters, respectively. In the third quarter, DTC mix increased to 52% from 50%, achieving the highest mix in any quarter.
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Markedly, the company is progressing toward building HOKA ONE ONE into a multi-billion dollar player and UGG as a global lifestyle brand as they contribute a major part of company’s DTC business.
HOKA ONE ONE builds its consumer base through combining discipline marketing approach and disruptive product innovation. From a dollar growth prospective, the brand’s DTC volume more than doubled in the third quarter from its year ago period. HOKA ONE ONE net revenues increased 90.8% during the quarter under review. Management expects revenues to increase in low 50% range for the fiscal year 2023.
Coming to UGG, the brand delivered global gains in DTC across genders and categories demonstrating strong consumer demands in the third quarter. Although UGG’s DTC business was impacted by unfavorable foreign currency exchange rate, it increased 8% year over year.
Wrapping Up
Deckers has been strengthening omnichannel solutions, expanding its customer reach and focusing on diversified product offerings to gain market share in direct-to-consumer sales. Management expects net sales for fiscal 2023 in the range of $3.50 billion to $3.53 billion, major part of it contributed by the HOKA brand. It projects earnings in the band of $18.00-$18.50 per share, which suggests an increase from the earnings of $16.26 per share reported in year ago period.
3 Stocks Looking Red Hot
Here we have highlighted three better-ranked stocks, namely Urban Outfitters URBN, Arhaus ARHS and Albertsons Companies ACI.
Urban Outfitters, a leading lifestyle product and services company, currently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year revenues suggests growth of 5% from the year-ago reported figure.
Arhaus, which operates as a lifestyle brand and premium retailer in the home furnishing market, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 16.1%.
The Zacks Consensus Estimate for Arhaus’ current financial-year revenues and EPS suggests growth of 54% and 26.1%, respectively, from the year-ago reported figure. Arhaus has a trailing four-quarter earnings surprise of 112%, on average.
Albertsons Companies, which operates food and drug stores in the United States, carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 5.4%.
The Zacks Consensus Estimate for Albertsons Companies’ current financial-year revenues and EPS suggests growth of 7.8% and 6.5%, respectively, from the year-ago reported figure. Albertsons Companies has a trailing four-quarter earnings surprise of 17.2%, on average.
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Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
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Arhaus, Inc. (ARHS) : Free Stock Analysis Report
