Deckers Outdoor Corporation (DECK: 45.10 +0.95 +2.15%), one of the leading makers of sheepskin boots and slippers, is scheduled to report its second-quarter 2010 financial results after the market closes on Thursday, July 22, 2010. The company’s sustained focus on new product introductions and geographic expansion has helped achieve robust growth.First-Quarter 2010, a Synopsis
Deckers Outdoor delivered better-than-expected first-quarter 2010 results on the heels of strong demand for the UGG and Teva brand product lines. The company posted quarterly earnings of 46 cents a share that outpaced the Zacks Consensus Estimate of 30 cents, and soared 47.3% from 31 cents posted in the prior-year quarter. The earnings per share are adjusted for a 3 for 1 stock split, announced on May 28, 2010.
Deckers, which competes with Skechers USA Inc. (SKX: 33.154 +0.924 +2.87%), revealed that total net sales jumped 16.2% year over year to $155.9 million. UGG brand net sales grew 14.2% to $104.4 million and Teva brand net sales surged 21.4% to $43.2 million. Combined net sales of other Deckers brands for the quarter were $8.4 million, up 15.1%.
Guidance
Deckers now expects the second quarter and fiscal year 2010 revenue to climb by 25% and 13%, respectively. For fiscal 2010, UGG brand sales are expected to rise by approximately 11%, up from 9% previously expected, and Teva brand sales to increase in the mid-20% range, up from a low 20% range projected earlier. Combined net sales of other Deckers brands are expected to increase approximately 20%.
Second-Quarter & Fiscal 2010 Consensus
Analysts, surveyed by Zacks, expect Deckers to post second-quarter 2010 earnings of 10 cents a share, a penny ahead of the earnings delivered in the prior-year quarter. Of the 11 analysts covering the stock, one analyst raised his estimate, whereas another analyst lowered his projection in the last 30 days, having no significant impact on the consensus.
The current Zacks Consensus Estimate for fiscal 2010 remains stagnant at $3.34 per share with only one analyst revising his estimate upward in the last 30 days, and reflects a year-over-year growth of 12.1%.
The estimates in the current Zacks Consensus for the second quarter range from a low of 9 cents to a high of 13 cents a share, for fiscal 2010 from a low of $3.17 to a high of $3.42.
Earnings Surprise History
Considering the past positive earnings surprise history, the current Zacks Consensus Estimate appears somewhat conservative. With respect to earnings surprises, Deckers has topped the Zacks Consensus Estimate over the last four quarters in the range of 16.2% to 400%. The average remained at 122.6%. This suggests that Deckers has out-performed the Zacks Consensus Estimate by an average of 122.6% in the last four quarters.
Deckers to Outperform
The strong demand for the UGG brand product line, new product introductions, and in demand inventory have helped Deckers Outdoor to achieve robust growth. The company’s top line has increased at a CAGR of 32% in the last five fiscal years. Deckers’ long-term target is to achieve $1.1 billion in sales by 2012, including UGG sales of $900 million, Teva sales of $120 million and sales from other brands of $80 million.
The international markets provide a significant growth opportunity, and we remain optimistic about the company’s incremental sales and earnings potential. Internationally, the company distributes its products throughout Europe, Asia Pacific, Canada, and Latin America.
Following the expiration of existing distribution agreements, Deckers, effective January 2011, will manage the distribution of UGG, Teva and Simple brands in the U.K. and the UGG and Simple brands in the Benelux region and France. This will help capture incremental sales and margins by selling directly to wholesale customers.
Deckers portrays a healthy balance sheet with cash and cash equivalents of $357.3 million and no debt at the end of first-quarter 2010. The blend of ample liquidity positions it to capitalize on future growth opportunities.| Analysts' Targets | |
| Piper Jaffray | $144 |
| Buy | |
| Monday, April 12, 2010 | |
| RBC Capital Markets | $138 |
| Sector Perform | |
| Friday, February 26, 2010 | |
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