Yahoo Finance Deckers (DECK) Q3 Earnings Top Estimates, HOKA Brand Aids
Deckers Outdoor Corporation DECK reported better-than-expected third-quarter fiscal 2023 results, wherein both the top and the bottom lines grew year over year. Strength in the HOKA ONE ONE brand contributed to the company’s performance.
Let’s Delve Deeper
Deckers delivered quarterly earnings of $10.48 per share, which comfortably surpassed the Zacks Consensus Estimate of $9.57. The reported figure increased from the year-ago earnings of $8.42 per share.
Net sales of this Goleta, CA-based company rose 13.3% year over year to $1,345.6 million and outpaced the Zacks Consensus Estimate of $1,258 million. On a constant-currency basis, net sales grew 17.5%. The top-line growth was driven by the increases in the HOKA ONE ONE and Teva brands.
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We note that the gross margin increased 70 basis points to 53% during the quarter, backed by a significant benefit from lower freight costs, partly offset by foreign currency exchange headwinds. Gains from a favorable channel mix with Direct-to-Consumer (“DTC”) increasing faster than wholesale coupled with positive brand mix and price increases further aided the metric.
SG&A expenses climbed 6.7% year over year to $349.9 million. As a percentage of net sales, SG&A expenses decreased 160 basis points to 26%, mainly owing to the benefits from foreign currency remeasurement.
The company posted an operating income of $362.7 million, up 23.6% from the year-ago quarter. The operating margin increased 230 basis points to 27%.
Deckers Outdoor Corporation Price, Consensus and EPS Surprise
Deckers Outdoor Corporation price-consensus-eps-surprise-chart | Deckers Outdoor Corporation Quote
Brand-Wise Discussion
HOKA ONE ONE brand net sales surged 90.8% to $352.1 million. UGG brand net sales dipped 1.6% to $930.4 million. Teva brand net sales increased 48.3% to $30.5 million.
Net sales for the Sanuk brand declined 7.4% to $5.6 million. Net sales for Other brands, mainly comprising Koolaburra, fell 12.1% to $26.9 million.
Channel & Geography-Wise Discussion
Wholesale net sales climbed 8% year over year to $646.3 million. DTC net sales rose 18.7% to $699.3 million, while comparable DTC net sales jumped 22.1%.
Domestic net sales increased 13.9% year over year to $906.8 million, while International net sales rose 12.1% to $438.8 million.
Other Financial Aspects
Cash and cash equivalents stood at $1,057.8 million as of Dec 31, 2022, compared with $843.5 million as of Mar 31, 2022. The company ended the quarter with total stockholders’ equity of $1,769.2 million. There were no outstanding borrowings.
During the quarter, the company repurchased about 127 thousand shares for $44.6 million. As of Dec 31, 2022, the company had $1.459 billion remaining under its share repurchase authorization.
A Sneak Peek into Outlook
Deckers continues to envision fiscal 2023 net sales in the range of $3.50 billion-$3.53 billion, versus $3.45 billion-$3.50 billion projected earlier. This suggests an increase from the $3.150 billion reported in fiscal 2022. This growth is likely to be driven by the HOKA ONE ONE brand as it continues to outpace expectations in DTC and expand market share across the global wholesale access points.
HOKA ONE ONE brand is likely to rise in the low 50% range for fiscal 2023, implying over $450 million of incremental revenue compared to the prior year. Due to the supply-chain bottlenecks in the prior year hurting the quarterly wholesale revenue timing, the brand’s growth rate in the fiscal fourth quarter will be lower than its typical run rate. Given this, management forecasts experiencing sturdy DTC demand and growth.
UGG revenue is likely to come in down mid-single-digits on a reported basis, reflecting a year-over-year decrease in the fiscal fourth quarter. As UGG is a highly-exposed brand globally, it is expected to witness significant headwinds from foreign currency exchange rates versus the last year.
The company continues to expect fiscal 2023 earnings in the band of $18-$18.50 per share compared to the earlier anticipation of $17.50-$18.35 a share. The current view compares favorably with the earnings of $16.26 per share reported last fiscal.
The gross margin is anticipated at approximately 50.5%. SG&A expenses, as a percentage of sales, are projected at about 33%, with the operating margin expected in the bracket of 17.5-18%.
Shares of this Zacks Rank #2 (Buy) company have risen 34.5% in the past six months against the industry’s 13.9% growth.
Eye These Solid Picks Too
Here we highlighted three better-ranked stocks, namely, Oxford Industries OXM, lululemon athletica LULU and Skechers SKX.
Oxford Industries, which designs, sources, markets and distributes lifestyle products and other brands, sports a Zacks Rank #1 (Strong Buy). Oxford Industries has a trailing four-quarter earnings surprise of 18.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for OXM’s current financial-year EPS suggests growth of 34.2% from the year-ago reported number.
lululemon athletica is a yoga-inspired athletic apparel company. LULU has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS suggests growth of 27.7% and 27.5%, respectively, from the year-ago corresponding figures. LULU has a trailing four-quarter earnings surprise of 6.7%, on average.
Skechers, a footwear dealer, has a Zacks Rank of 2 at present. SKX has a trailing four-quarter earnings surprise of 4.7%, on average.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and EPS suggests growth of 8.6% and 34.3%, respectively, from the year-ago corresponding figures.
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Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
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