Deckers Outdoor Earnings: Higher Expenses Shrinks Margins, Profit Declines

Rising costs hurt Deckers Outdoor Corporation (NASDAQ:DECK) in the first quarter as profit dropped from a year earlier. 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 First Quarter

Results: Net income for Deckers Outdoor Corporation fell to $8 million (20 cents per share) vs. $19.8 million (49 cents per share) a year earlier. This is a decline of 59.5% from the year-earlier quarter.

Revenue: Rose 20.2% to $246.3 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Deckers Outdoor Corporation fell short of the mean analyst estimate of 25 cents per share. Analysts were expecting revenue of $247.1 million.

Quoting Management: “Our first quarter performance was mixed versus our expectations,” stated Angel Martinez, President, Chief Executive Officer and Chair of the Board of Directors. “Sales growth was driven by the addition of the Sanuk brand combined with increased demand for the UGG brand spring line, partially offset by softness in boots due to the unusually warm weather. The difference in the channel mix versus projections, along with some higher closeouts for the Teva brand and non-Classic UGG brand styles, put some additional pressure on overall gross margins on top of the higher product costs we had forecasted.” “We’ll soon be completing our fall booking process and we’re encouraged by the level of domestic wholesale commitments for the UGG brand collection to date particularly given the mild winter,” continued Martinez. “While we believe that the macroeconomic conditions in Europe have created a difficult selling environment, we remain optimistic about our future prospects throughout the continent. Looking ahead, I have confidence that we can continue to successfully navigate through the near-term challenges facing some areas of our business, while continuing to execute against our strategic plan aimed at delivering consistent sales and earnings growth over the long-term.”

Key Stats:

The company has seen double-digit year-over-year percentage revenue growth for the past five quarters. Over that span, the company has averaged growth of 30.7%, with the biggest boost coming in the third quarter of the last fiscal year when revenue rose 49.1% from the year earlier quarter.

Gross margin shrank four percentage points to 46%. The contraction appeared to be driven by increased costs, which rose 29.9% from the year earlier quarter while revenue rose 20.2%.

The company fell short of forecasts after beating estimates in the previous two quarters. In the fourth quarter of the last fiscal year, it topped the mark by 5 cents, and in the third quarter of the last fiscal year, it was ahead by 25 cents.

Looking Forward: The average estimate for the second quarter is down from a loss of 7 cents per share ninety days ago to a loss of 40 cents, indicating that analysts are increasingly pessimistic about the company’s next quarter performance. For the fiscal year, the average estimate has moved down from $5.90 a share to $5.14 over the last ninety days.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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