Bear Of The Day: Deckers
Another day, another disappointing earnings report out of a retail stock. It’s been the trend now for the last several quarters and retailers around the world struggle with lower foot traffic at malls and an increasing online marketplace. Today’s Bear of the Day is one of these retailers, Deckers Outdoor (DECK).
Deckers Outdoor Corporation (DECK - Free Report) designs and markets a range of global lifestyle brands that include UGG, Teva, Sanuk, Hoka One One, and Koolaburra. You remember UGG boots, the hot fashion item of 2004. With footwear slowing as a category, it’s no wonder that niche brands like this would also struggle a bit.
Just how bad is the struggle right now? Q3 provided not only a disappointing report but also a bleak outlook. The name of the game in Q4 now isn’t expansion and profits but cost-cutting initiatives. EPS fell 14% at $4.11 in Q3 versus consensus estimates calling for $4.25. Revenues were off 4.5% to $760.3 million, versus $789 million. Even margins contracted to 24%. A big chunk of the revenue shortfall came from the US where sales were off 9.9%. UGG brand dipped 5.3%. This was followed by cuts in Q4 outlook that included EPS guidance to $3.45 to $3.55, down 22 to 24%, on revenues that are expected to dip 5%.
It’s no wonder that the stock is a Zacks Rank #5 (Strong Sell) right now. Four analysts have come in and dropped their estimates for the current quarter while five have come in and dropped their estimates for next year. The bearish sentiment has brought our Zacks Consensus Estimate down from 43 cents to a loss of 5 cents for the current quarter while sinking next year’s number from $4.52 to $4 even. Next quarter’s number has gone from a loss of $1.60 to a loss of $1.72.
Investors looking for other stocks within the same industry should take a look at Zacks Rank #2 (Buy) stocks Francesca’s (FRAN) and Rocky Brands (RCKY).