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Deckers (DECK) Solid on Omni-Channel Efforts & Brand Progress

·5 min read

Renowned brands like HOKA ONE ONE coupled with a robust direct-to-consumer (DTC) business model and product innovations are acting as catalysts for Deckers Outdoor Corporation DECK. The company has been expanding brand assortments, introducing more innovative line of products, targeting consumers digitally and optimizing omni-channel distribution for a while. Incidentally, this Goleta, CA-based company’s shares have increased 63.1% in a year’s time, outperforming the industry’s growth of 35.1%.

Markedly, this outperformance is also attributed to the company’s sturdy fourth-quarter fiscal 2021 results. Both the top and the bottom line outpaced the Zacks Consensus Estimate and also compared favorably with the year-ago quarter’s figures. Quarterly results were backed by strength in the HOKA ONE ONE and UGG brands as well as solid gains from the DTC channels. We note that gains from the HOKA ONE ONE brand's innovative products and UGG brand’s unique fashion assortment coupled with robust e-commerce capabilities that drove consumer acquisition and demand creation through disciplined marketplace management were tailwinds.

Following a sturdy quarter, management issued an upbeat sales and earnings guidance for fiscal 2022. It projects a net sales growth rate of mid-to-high teens in the $2.950-$3 billion range, up from $2.546 billion generated in fiscal 2021. Brandwise, management expects revenue growth of 40% for HOKA ONE ONE, hence estimating to recognize $800 million revenues. For UGG, the metric is likely to grow in the high single-digit to low double-digit range on domestic wholesale strength and restoration of international growth. While Koolaburra revenues are anticipated to improve in the low double-digit range, Teva brand revenues are projected to increase in the mid-single digit band.

Further, earnings per share are forecast in the bracket of $14.05-$14.65 for fiscal 2022, suggesting growth from $13.47 reported last fiscal. Impressively, the Zacks Consensus Estimate for fiscal 2022 earnings has increased to $14.86 from $14.27 pegged 30 days ago.

Zacks Investment Research
Zacks Investment Research

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More on Strategic Initiatives

Resonating well with the changing consumer trends, Deckers is constantly developing its e-commerce portal to capture incremental sales. The company made substantial investments to strengthen its online presence and improve the overall shopping experience. Notably, its direct-to-consumer (DTC) net sales jumped 64.3% to $379.2 million during the fourth quarter of fiscal 2021. Also, DTC comparable sales were up 76.3% year over year. The company is continuously witnessing impressive new customer acquisition online. Management informed that the DTC business is trending up in the high-40% range from Apr 1 through May 15.

Deckers is also focusing on customer-centric product and marketing strategies. The company is on track to develop the HOKA ONE ONE brand’s online consumer acquisition and retention. We note that the brand’s digital is a constant key driver of customer retention and customer wins. Going forward, management continues to invest in HOKA ONE ONE to drive growth. For the second-quarter through May 15, the brand is trending up in the low 30% range.

Brand advancement, balance sheet strength and stability of operating model poise Deckers well for success. Over the long term, management is focused on key catalysts like building HOKA ONE ONE to a $1-billion plus brand, driving DTC business toward 50% of its global revenues, tapping international markets and capturing opportunities beyond footwear. Although the company’s Sanuk brand remains sluggish, its focus on reverting the brand to growth remains unaffected. This could be achieved by rightsizing its distribution, product innovations and targeting wholesale channel leaders and owned DTC.

Although the volatile landscape with respect to COVID-19 lingers, contributions from the DTC business and HOKA ONE ONE brand will continue boosting the performance of this presently Zacks Rank #3 (Hold) company. A VGM Score of B further highlights its strength.

Don’t Miss These Solid Bets

Rocky Brands RCKY has an earnings surprise of 157% in the trailing four quarters, on average. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PVH Corp PVH has a long-term earnings growth rate of 18% and a Zacks Rank of 1 at present.

Crocs CROX has a long-term earnings growth rate of 15% and is currently Zacks #1 Ranked.

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Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

PVH Corp. (PVH) : Free Stock Analysis Report

Crocs, Inc. (CROX) : Free Stock Analysis Report

Rocky Brands, Inc. (RCKY) : Free Stock Analysis Report

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