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Things You Need to Know Before Deckers' (DECK) Q4 Earnings

Zacks Equity Research

Deckers Outdoor Corporation DECK is slated to report fourth-quarter fiscal 2019 results on May 23, after the market closes. In the last four quarters, this Goleta, CA-based footwear and apparel retailer outperformed the Zacks Consensus Estimate by an average of 67.8%. Investors are counting on another beat by Deckers in the to-be-reported quarter. If all goes well, this will be the ninth straight quarter of positive earnings and sales surprises.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at 8 cents compared with 50 cents reported in the year-ago quarter. We note that the Zacks Consensus Estimate has improved by a penny in the past 30 days. The consensus estimate for revenues stands at $377.4 million, indicating a decline of approximately 6% from the year-ago quarter.

Key Factors Influencing Q4

Deckers has been targeting profitable markets, and is focused on product innovation and store-augmentation plan. Further, the company’s commitment toward expanding brand assortments, bringing more innovative line of products, targeting consumers through marketing and optimizing omni-channel distribution bodes well. In keeping with the changing trends, Deckers has made substantial investments to strengthen its online presence and open smaller concept omni-channel outlets. These are likely to have a favorable impact on the fourth quarter’s performance.

However, industry experts are concerned about Deckers' over-reliance on the UGG brand. In the event of stagnation or decline in UGG sales growth, the company's overall results will be affected. This is because the percentage of contribution from the company’s other brands are too minimal to offset any slowdown in UGG sales. The company envisioned revenues from the UGG brand to be roughly flat for fiscal 2019.

We note that the company has been grappling with falling sales from the Sanuk Brand. Net sales from the brand declined 7% year over year during the third quarter of fiscal 2019. This follows a decline of 9.4% and 6.6% in the second and first quarters, respectively. Management has guided that sales from the brand will be down in mid-single digit during fiscal 2019.

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 Company Expects?

Despite posting better-than-expected third-quarter results and providing an encouraging fiscal 2019 view, Deckers had issued a muted fourth-quarter guidance. The company guided net sales in the range of $360-$374 million and bottom line in the band of break-even to earnings of 10 cents a share. The company’s fourth-quarter top-line projection includes year-over-year impact of the planned $10 million of wholesale orders that shifted out of the fourth quarter into the third, the $6 million of early European wholesale and distributor orders shipped in the third quarter, and the change in online revenue recognition.

Coming to the fiscal 2019 view, management projected net sales to be between $1.986 billion and $2 billion. The company envisioned revenues from the Teva brand to be up in low-single digit, while sales at HOKA ONE ONE brand are projected to be up in the mid-40% range.

Model Predicts Higher Probability of Earnings Beat

Our proven model shows that Deckers is likely to beat estimates this quarter. This is because a stock needs to have both — a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Deckers has a Zacks Rank #3 and an Earnings ESP of +53.19%. This makes us reasonably confident that it is likely to outperform estimates.

Other Stocks Poised to Beat Earnings Estimates

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

V.F. Corporation VFC has an Earnings ESP of +0.69% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Costco COST has an Earnings ESP of +2.10% and a Zacks Rank #3.

Abercrombie & Fitch ANF has an Earnings ESP of +1.78% and a Zacks Rank #3.

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