Deckers Outdoor Corporation Earnings Cheat Sheet: Margins Shrink

Increasing costs did not help Deckers Outdoor Corporation (NASDAQ:DECK) in the second quarter as the company reversed to a loss. Deckers Outdoor Corporation is a designer, producer, marketer, and brand manager of innovative, high-quality footwear and accessories.

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Deckers Outdoor Earnings Cheat Sheet for the Second Quarter

Results: Swung to a loss of $7.3 million (19 cents per diluted share) in the quarter. Deckers Outdoor Corporation had a net income of $9 million or 23 cents per share in the year earlier quarter.

Revenue: Rose 12.5% to $154.2 million from the year earlier quarter.

Actual vs. Wall St. Expectations: DECK beat the mean analyst estimate of a loss of 24 cents per share. It beat the average revenue estimate of $143.4 million.

Quoting Management: “We had a productive second quarter highlighted by year-over-year sales increases in our domestic and international wholesale channels as well as our consumer direct channels,” commented Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. “The growth of our domestic business was primarily driven by strong sell through of the UGG brand spring line. We also experienced increased demand for the Teva brand light hiking and multi-sport footwear. Overseas, higher sales of the Teva brand spring collection and an increase in the UGG brand fall product shipments to distributors helped offset the shift of UGG brand revenues that occurred from our conversion to wholesale operations in the United Kingdom, Benelux, and France. While our bottom line declined year over year due primarily to the additional costs associated with the transition to wholesale operations in the U.K. and Benelux, eleven new retail stores, and other infrastructure investments, we were able to leverage our higher than planned sales to generate a net loss that was better than originally expected.

Key Stats:

The company has enjoyed double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 24.6%, with the biggest boost coming in the second quarter of the last fiscal year when revenue rose 33.7% from the year earlier quarter.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 2 cents in the first quarter, by 28 cents in the fourth quarter of the last fiscal year, and by 14 cents in the third quarter of the last fiscal year.

Gross margin shrank 1.6 percentage points to 42.7%. The contraction appeared to be driven by increased costs, which rose 15.7% from the year earlier quarter while revenue rose 12.5%.

DECK’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $19.2 million in the first quarter, a profit of $89.2 million in the fourth quarter of the last fiscal year and $42.1 million in the third of the last fiscal year.

Competitors to Watch: Crocs, Inc. (NASDAQ:CROX), NIKE, Inc. (NYSE:NKE), The Timberland Company (NYSE:TBL), Skechers USA, Inc. (NYSE:SKX), Steven Madden, Ltd. (NASDAQ:SHOO), LaCrosse Footwear, Inc. (NASDAQ:BOOT), Wolverine World Wide, Inc. (NYSE:WWW), and Phoenix Footwear Group, Inc. (AMEX:PXG).

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(Source: Xignite Financials)

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