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Factors Likely to Decide Deckers' (DECK) Fate in Q4 Earnings

Zacks Equity Research
·4 min read

Deckers Outdoor Corporation DECK is likely to register a decline in the top line when it reports fourth-quarter fiscal 2020 numbers on May 21, after the closing bell. The Zacks Consensus Estimate for revenues is pegged at $360 million, indicating a decline of 8.7% from the prior-year reported figure.

Further, the bottom line is also expected to tumble year over year. We note that the Zacks Consensus Estimate for earnings for the quarter under review has remained stable at 16 cents over the past 30 days. The figure suggests a sharp decline from earnings of 85 cents in the prior-year quarter.

This Goleta, CA-based company’s bottom line has outperformed the Zacks Consensus Estimate in the trailing four quarters.

Key Factors to Note

Deckers has been benefiting from focus on expanding brand assortments, introducing more innovative line of products, targeting consumers digitally through marketing and sturdy e-commerce, and optimizing omni-channel distribution. Further, in keeping with the changing scenario, the company has been making substantial investments to strengthen online presence and open smaller concept omni-channel outlets. The company also has been making marketing investments to build brand awareness of HOKA ONE ONE and UGG Men’s and UGG Women’s non-core category.

However, we note that the company has been grappling with falling sales from the Sanuk Brand, which is likely to have weighed on fourth-quarter performance. Management expects reductions in the Sanuk domestic wholesale business on account of the decision to exit the warehouse channel. Moreover, headwinds related to currency, freight expense and higher promotional environment cannot be ignored. These might get reflected in margins and in turn the bottom line.

Also, the outbreak of coronavirus pandemic compelled the company to temporarily close stores. This is likely to show on the company’s top-line results.

We note that the Zacks Consensus Estimate for sales for Sanuk and Teva brands are pegged at $15.7 million and $62 million, respectively, compared with $31.5 million and $52.9 million reported in the year-ago period. Meanwhile, the consensus estimate for sales for UGG brand stands at $221 million, down from $239 million reported in the year-ago period.

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

What the Zacks Model Unveils

Our proven model does not conclusively predict a beat for Deckers this earnings season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Deckers has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%.

3 More Stocks With a Favorable Combination

Here are three other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Kroger KR has an Earnings ESP of +4.52% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lowe's LOW has an Earnings ESP of +3.33% and a Zacks Rank #3.

Dollar General DG has an Earnings ESP of +1.25% and a Zacks Rank #3.

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