Deckers Outdoor Corporation (DECK) has surprised on estimates 4 quarters in a row by average of 113.42%. The UGG brand is hot and pushed sales, and earnings, higher in the third quarter.
Company Description
Deckers Outdoor manufactures several well-known shoe brands including UGG Australia, Teva and Simple Shoes. The company sells its product through retail stores and its own ecommerce site.
Deckers Had a Record Third Quarter
On Oct 22, Deckers reported record third quarter results as earnings per share rose 31.5% to $2.59 compared to $1.97 a year ago. EPS also surprised on the Zacks Consensus by 36 cents, or 16.14%.
Sales rose 15.8% to $228.4 million from $197.3 million in the third quarter of 2008. UGG sales were especially hot, rising 19.1% to $212.8 million from $178.7 million in the year ago period.
The Teva and Simple Shoes brands saw sales declines of 19.5% and 31.4%, respectively. But both of those segments are a small percentage of overall sales, just $9 million and $3.5 million, compared to the UGG powerhouse.
Bucking the retail trend, inventories actually increased by 18.9%, including a big increase in the UGG brand. Teva and Simple Shoe inventories both decreased. The majority of the UGG brand’s business is pre-booked so the inventory is necessary to fulfill the order volume currently on the books.
Guidance Raised
Given the strong third quarter, Deckers Outdoor is optimistic about the fourth quarter and the full year. Its prior estimate had called for a slight revenue decrease in the fourth quarter but that has been revised higher to growth in the low single digits.
It also expects EPS to climb about 9% over the $7.27 it earned in 2008. That would put EPS around $7.92 per share.
Analysts raised estimates to meet the forecasts. The fourth quarter Zacks Consensus Estimate is up 6.5% to $4.22 from $3.96 per share. The 2009 Zacks Consensus Estimate jumped to $7.97 from $7.36 in the last 2 months.
Value Fundamentals
Deckers Outdoor is a Zacks #1 Rank (strong buy) stock. The company trades with a forward P/E of 12. Deckers has a price-to-book ratio of 2.99. It also has an outstanding 5-year average return on equity (ROE) of 22.35%.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.
