Deckers' (DECK) Q4 Earnings Beat, HOKA Brand Shows Strength
Deckers Outdoor Corporation DECK reported better-than-expected fourth-quarter fiscal 2022 results despite the ongoing supply-chain challenges. Both sales and earnings improved year over year. Strength in HOKA ONE ONE and UGG brands as well as growth in direct-to-consumer and wholesale channels contributed to DECK’s performance.
Shares of this presently Zacks Rank #3 (Hold) stock have risen 1.3% in the past three months against the industry’s decline of 10.2%.
Let’s Delve Deeper
Deckers posted quarterly earnings of $2.51 per share that surpassed the Zacks Consensus Estimate of $1.35. Also, the reported figure increased significantly from $1.18 per share earned in the year-ago quarter. Higher sales and margins aided the bottom-line results.
Deckers Outdoor Corporation Price, Consensus and EPS Surprise
Deckers Outdoor Corporation price-consensus-eps-surprise-chart | Deckers Outdoor Corporation Quote
Net sales of this Goleta, CA-based player rose 31.2% year over year to $736 million and came ahead of the Zacks Consensus Estimate of $644.2 million. On a constant currency basis, net sales grew 31.7%. Top-line growth was driven by the UGG and HOKA ONE ONE brands as well as increased domestic and wholesale sales.
We note that the gross margin contracted 450 basis points to 48.7% during the quarter due to higher freight costs of 490 bps, mainly from elevated air usage and higher ocean rates, adverse channel mix and unfavorable foreign currency translations, partly offset by HOKA margins gaining from price increases and a favorable brand mix.
SG&A expenses climbed 13.7% year over year to $277.4 million due to increased headcount, marketing and performance-related compensation.
DECK posted an operating income of $81.3 million, up 48.9% from the year-ago quarter’s level. Again, the operating margin expanded 130 basis points to 11%.
Sales by Geography & Channel
Deckers’ domestic net sales climbed 37.4% year over year to $521 million during the quarter under review. We note that international net sales advanced 18.2% to $215.1 million from the year-ago period’s level.
By channel, wholesale net sales grew 37.6% to $448.8 million. Direct-to-consumer net sales increased 22.2% to $287.2 million. Comparable direct-to-consumer net sales advanced 19.3% from the same-period level last year.
Brand Wise Discussion
UGG brand net sales rose 24.7% year over year to $374.6 million, while HOKA ONE ONE brand net sales increased 59.7% to $283.5 million during the reported quarter. Teva brand net sales declined 8.8% to $54.8 million.
Net sales for the Sanuk brand dipped 1.7% to $11.9 million. Net sales for the Other brands, mainly comprising Koolaburra, inched up 2.4% to $11.2 million.
Other Financial Aspects
Cash and cash equivalents stood at $843.5 million as of Mar 31, 2022, compared with $1.089 billion as of Mar 31, 2021. DECK ended the quarter with total stockholders’ equity of $1,538.8 million. There were no outstanding borrowings.
During the quarter, Deckers repurchased about 308 thousand shares for $90 million. DECK bought back 1.044 million shares for $356.7 million during the full fiscal. As of Mar 31, 2022, DECK had $454 million remaining under its share repurchase authorization.
Deckers envisions fiscal 2023 net sales in the range of $3.45-$3.50 billion, indicating growth from $3.150 billion reported in fiscal 2022.
Gross margin is anticipated to be 51.5% for fiscal 2023. SG&A expenses, as a percentage of sales, are projected to be about 34%, with the operating margin now expected in the 17.5-18% range.
DECK now expects fiscal 2023 earnings to be $17.40-$18.25 per share, higher than $16.26 earned last fiscal year.
Eye These Solid Picks
A few better-ranked stocks in the Consumer Discretionary space are Oxford Industries OXM, G-III Apparel GIII and Gildan Activewear GIL.
Oxford Industries currently sports a Zacks Rank # 1 (Strong Buy). OXM has a trailing four-quarter earnings surprise of 112.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and EPS suggests growth of 10.2% and 13%, respectively, from the corresponding year-ago reported numbers.
G-III Apparel currently sports a Zacks Rank of 1. GIII has a trailing four-quarter earnings surprise of 160.6%, on average.
The Zacks Consensus Estimate for G-III Apparel 's current financial-year sales suggests growth of 8.7% while the same for EPS indicates a rise of 5.2% from the respective year-ago reported figures.
Gildan Activewear has a Zacks Rank #2 (Buy) at present. GIL has an expected long-term earnings growth rate of 8%.
The Zacks Consensus Estimate for Gildan Activewear’s 2022 sales and EPS suggests growth of 8.9% and 3.3%, respectively, from the corresponding year-ago reported figures. GIL has a trailing four-quarter earnings surprise of 66.6%, on average.
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