Deckers Outdoors Corp. (DECK) just hit a new multi-year high after reporting much better than expected Q1 results that included a 51% earnings surprise. The long-term view looks good too, with management raising its full-year guidance on a resurgent economy and consumer.
Company Description
Deckers Outdoor Corp. designs and sells footwear and footwear accessories worldwide. Its products are sold under high-profile brands like UGG, Simple and Teva. The company was founded in 1973 and has a market cap of $1.88 billion.
With the economy on the mend and consumer sentiment showing dramatic signs of improvement over the last few months, retailers have once again fallen into favor with investors. This macro-level shift has pushed many retailers to new 52-week highs, including Deckers, helped by awesome Q3 results from April 20.
First-Quarter Results-April 20
Revenue for the period was up 16% from last year to $156 million. Earnings came in much better than expected at $1.37, 51% ahead of the Zacks Consensus Estimate. Deckers has been very consistent over the last year with an average earnings surprise of 119%.
Deckers quarter was driven by its flagship product, UGG boots, where sales were up 14% from last year to $104 million, comprising 67% of quarterly revenue. The company’s other big product, Teva sandals also looked strong, with sales up 21% to $43 million.
Strong Margin Performance
Complementing Deckers strong top-line growth was an emphasis on managing costs and expenses, helping to expand its gross margin by an amazing 610 basis points to 50%. Sales, general and administrative expenses were only up a marginal $9.5 million, or 200 basis points to 31.5% of sales on some very solid revenue growth, a testament to the company’s ability to grow efficiently.
Healthy Balance Sheet, No Debt
Deckers is also in the very enviable position of having no long-term debt and about $316 million in cash and equivalents, giving the company the financial flexibility to invest in its growth or return value to shareholders.
Estimates Jump
With management raising its full-year guidance, estimates didn’t take long to follow suit. The current year is up 47 cents in just the last week to $9.96, while the next year is up 43 cents to $10.96, a solid 10% growth projection.
In spite of recent gains and the optimistic outlook, shares of DECK still look reasonably priced, trading with a forward P/E multiple of 15X, in line with its peer group and a pinch below the S&P. Its P/B of 3.76X is a premium to the industry average of 2.19X but a discount to the S&P.
5-Year Chart
Shares of DECK spike higher on the good quarter, hitting a new multi-year high at $152.56 before pulling back a bit on some short-term profit taking and general market weakness. Look for support between $140 and $142 on any more weakness, take a look at the chart below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service. Zacks Investment Research
