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Deckers (DECK) Q4 Earnings Beat Estimates, HOKA Brand Aids

Deckers Outdoor Corporation DECK reported better-than-expected fourth-quarter fiscal 2023 results, wherein both the top and bottom lines grew year over year. Strength in the HOKA and Teva brands contributed to the company’s performance.

Let’s Delve Deeper

Deckers delivered quarterly earnings of $3.46 per share, which comfortably surpassed the Zacks Consensus Estimate of $2.61. The reported figure increased from the year-ago earnings of $2.51 per share.

Net sales of this Goleta, CA-based company rose 7.5% year over year to $791.6 million and outpaced the Zacks Consensus Estimate of $709 million. On a constant-currency basis, net sales grew 10.2%. Top-line growth was driven by the strength of the HOKA and Teva brands.

We note that the gross margin increased 130 basis points to 50% 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 strength in the HOKA Direct-to-Consumer (“DTC”) business further aided the metric.

SG&A expenses climbed 4.6% year over year to $290.2 million. As a percentage of net sales, SG&A expenses decreased 100 basis points to 36.7%, owing to the benefits of marketing leverage.

The company posted an operating income of $105.9 million, up 30.3% from the year-ago quarter. The operating margin increased 240 basis points to 13.4%.

For fiscal 2023, the company’s adjusted earnings came in at $19.37, up 19.1% year over year. Revenue increased 15.1% year over year to $3,627.3 million.

Deckers Outdoor Corporation Price and Consensus

Deckers Outdoor Corporation Price and Consensus
Deckers Outdoor Corporation Price and Consensus

Deckers Outdoor Corporation price-consensus-chart | Deckers Outdoor Corporation Quote

Brand-Wise Discussion

HOKA brand net sales surged 40.3% to $397.7 million. UGG brand net sales dipped 16.1% to $314.3 million. Teva brand net sales increased 14.6% to $62.8 million.

Net sales for the Sanuk brand declined 10.5% to $10.7 million. Net sales for Other brands, mainly comprising Koolaburra, fell 46.2% to $6 million.

Channel & Geography-Wise Discussion

Wholesale net sales remained relatively flat year over year at $448.4 million. DTC net sales rose 19.5% to $343.1 million, while comparable DTC net sales jumped 18.4%.

Domestic net sales increased 4.1% year over year to $542.4 million, while International net sales rose 15.8% to $249.1 million.

Other Financial Aspects

Cash and cash equivalents stood at $981.8 million as of Mar 31, 2023 compared with $843.5 million as of Mar 31, 2022. The company ended the quarter with total stockholders’ equity of $1,765.7 million. There were no outstanding borrowings.

During the quarter, the company repurchased about 243 thousand shares for $102.5 million. As of Mar 31, 2023, the company had $1.357 billion remaining under its share repurchase authorization.

A Sneak Peek Into Outlook

Deckers envisions fiscal 2024 net sales of about $3.950 billion. This suggests an increase from the $3.627 billion reported in fiscal 2023. This growth is likely to be driven by the HOKA brand as it continues to outpace expectations in DTC and expand market share across global wholesale access points.

HOKA brand is likely to rise in the range of 20% in fiscal 2024. Also, management forecasts experiencing sturdy DTC demand and growth as it focuses on driving consumer acquisitions and retention, margin improvement and marketplace management.

UGG revenues are expected to increase in the low single digits, supported by international expansion and a flat U.S. marketplace, as the company focuses on maintaining the brand’s pull model.

The company expects fiscal 2024 earnings in the band of $21.10-$21.60 per share. The current view compares favorably with the earnings of $19.37 per share reported in fiscal 2023.

The gross margin is anticipated to be approximately 52%. SG&A expenses, as a percentage of sales, are projected at about 34%, with the operating margin expected to be about 18%. The company expects the effective tax rate to be approximately 22%-23%.

Shares of this Zacks Rank #3 (Hold) company have risen 10.7% in the past three months against the industry’s 7.2% decline.

3 Key Picks

Some better-ranked stocks are Tecnoglass TGLS, Skechers U.S.A., Inc. SKX and The Kroger Co. KR.

Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the corresponding year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.

Skechers, a worldwide producer and distributor of footwear for men, women and children, currently carries a Zacks Rank #1.

The Zacks Consensus Estimate for Skechers’ current financial-year sales suggests growth of 7.8%, while earnings per share are expected to rise by 31.9% from the corresponding year-ago reported figures. SKX has a trailing four-quarter earnings surprise of 18.8%, on average.

Kroger Co. operates in the thin-margin grocery industry. It currently carries a Zacks Rank #2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.

The Zacks Consensus Estimate for Kroger’s current financial year sales and earnings suggests growth of 2.5% and 6.6%, respectively, from the prior-year reported numbers.

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