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Deckers Upgraded to Strong Buy

Zacks Equity Research

On Dec 28, 2013, Zacks Investment Research upgraded Deckers Outdoor Corporation (DECK), the designer and producer of footwear and accessories, to a Zacks Rank #1 (Strong Buy). The stock has amassed a year-to-date return of 118.1%.

Why the Upgrade?

The challenging macroeconomic environment compelled Deckers to resort to various means for repositioning itself and keep afloat. Such measures include focusing on new product introductions, effective cost management and new store openings. This is well reflected through Deckers’ better-than-expected third-quarter 2013 bottom-line results.

The company posted quarterly earnings of 95 cents a share that surpassed the Zacks Consensus Estimate of 72 cents, buoyed by the expansion of direct-to-consumer operations, omnichannel strategies, effective inventory management and optimum capital allocation. Deckers’ total net sales jumped 2.7% year over year to $386.7 million and came almost in line with the Zacks Consensus Estimate.

Management continues to project total revenue growth of 8% for 2013, while it envisions a 10% rise in earnings per share, up from 8% predicted earlier.

Following sturdy results, the analysts become more constructive on the stock’s future performance. Consequently, the Zacks Consensus Estimate for 2013 increased 1.5% to $3.94, while for 2014 it rose 2.2% to $4.75 per share in the last 60 days.

The earnings surprise history of the company also sparks optimism about its future upbeat performance. Deckers has outperformed the Zacks Consensus Estimate in the last four quarters by an average of 48.1%.

Deckers is also expanding its footprint by targeting profitable markets. This is well evident from the company’s retail store sales that rose 34.5%. Management is eyeing opportunities for store expansion in Asia, mainly Japan and China, and seeks to enhance the company’s presence in South Korea, Taiwan, Mongolia, Singapore and Australia.

Other Stocks that Warrant a Look

Other stocks worth considering in the retail sector include Iconix Brand Group, Inc. (ICON), Finish Line Inc. (FINL) and The Men's Wearhouse, Inc. (MW) all carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on DECK
Read the Full Research Report on ICON
Read the Full Research Report on MW
Read the Full Research Report on FINL

Zacks Investment Research