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Deckers' (DECK) Solid Run on the Bourses Likely to Continue

Zacks Equity Research

Shares of Deckers Outdoor Corporation DECK have displayed a decent run on the bourses in the past three months. We note that shares of this Goleta, CA-based company have gained approximately 12% in the aforementioned time frame. This compared favorably with the industry’s growth of 11.4%. Also, the stock has comfortably outperformed the Consumer Discretionary sector and the S&P 500 Index that advanced 3.9% and 6.1%, respectively, in the said time frame.

Notably, this Zacks Rank #2 (Buy) company is benefiting from its focus on expanding brand assortments, introducing more innovative line of products, targeting consumers digitally through marketing and sturdy e-commerce along with optimizing omni-channel distribution. These factors also helped it deliver robust second-quarter fiscal 2020 results, wherein both top and bottom lines beat the consensus mark, and grew year over year. As a result, management raised its fiscal 2020 view.

For fiscal 2020, the company expects net sales of $2.115-$2.140 billion, which indicates year-over-year growth of 5-6%. The company had earlier projected net sales between $2.100 billion and $2.125 billion. Management expects sales from HOKA ONE ONE brand to be up in the mid to high 40% range for the year. Sales at Koolaburra brand is expected to increase in the mid 50% range. For the third quarter, Deckers anticipates net sales of $885-$900 million. Net sales of $873.8 million were reported in the year-ago period.

Moreover, Deckers now expects adjusted earnings between $8.90 and $9.05 per share for fiscal 2020. The same was $8.84 per share in fiscal 2019. Management had previously estimated earnings of $8.40-$8.60 per share.

Deckers Outdoor Corporation Price and Consensus


Deckers Outdoor Corporation Price and Consensus

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

Factors Driving Deckers’ Performance

Deckers’ is concentrating on product and marketing strategies that are more skewed toward customers. In order to capture incremental sales and margins, the company is selling directly to wholesale customers. Also, it is constantly developing its e-commerce portal to capture incremental sales. The company has made substantial investments to strengthen its online presence and improve shopping experience for its customers. It is focused on expanding programs such as Retail Inventory Online; Infinite UGG; Buy Online, Return In Store; and Click and Collect to enhance customers’ shopping experience.

Apart from these, the company is undertaking efforts to bolster its portfolio. It is making marketing investments to build brand awareness of HOKA ONE ONE, and UGG Men’s and UGG Women’s non-core category. Impressive performance across HOKA ONE ONE, Teva and Koolaburra brands and strength witnessed in early shipments, with respect to the UGG brands’ domestic operations, aided the second-quarter results.

All said, we are optimistic that Deckers’ growth plans will help keep its stellar show on.

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