Bull of the Day: Deckers (DECK)
The maker of HOKA ONE ONE is one of the hottest retailers in the world.
Decker Brands DECK is one of the hottest retailers in the world. This Zacks Rank #1 (Strong Buy) is hitting on all cylinders as it raised full year guidance even with COVID-19 uncertainties still looming.
Deckers Brands designs, manufactures and distributes footwear, apparel and accessories. It's most prominent brand is UGG, but it also owns Koolaburra, HOKA ONE ONE, Teva and Sanuk.
It's products are sold around the world in department and specialty stores as well as company-owned and operated retail stores. Deckers also operates an online store at deckers.com.
A Huge Beat in the Fiscal 2022 Q1
On July 29, Deckers reported its fiscal 2022 first quarter results and blew by the Zacks Consensus Estimate reporting $1.71 versus a loss of $0.04.
It was the company's most profitable first quarter ever.
Revenue rebounded 78.2% from last year's pandemic hit Q1 to $504.7 million from $283.2 million.
Gross margin rose to 51.6% from 50.3% a year ago.
For the first time HOKA ONE ONE brought in higher sales than the flagship brand UGG. HOKA ONE ONE sales jumped 95.5% to $213.1 million from $109 million a year ago.
UGG rose 70.8% to $213 million from $124.7 million last year.
Teva sales jumped 65.9% to $58.5 million from $35.2 million last year. While Sanuk brand sales rose 13.7% to $15 million from $13.2 million in the year ago period.
In the other brands, which primarily included Koolaburra, sales rose 435.9% to $5 million from $0.9 million last year.
Wholesale net sales rose 140.2% to $344.3 million from $143.3 million last year when the stores were closed.
Direct-to-Consumer remained hot, with sales adding another 14.7% to $160.4 million from $139.8 million.
Deckers Raised Full Year Guidance
With a blow out quarter, Deckers felt bullish enough to raise full year guidance despite ongoing challenges with COVID-19, including with a tight supply chain and logistics at capacity.
In the first quarter, only 66% of the company's global stores were open the entire first quarter, which was up from about 20% in the prior year.
Deckers anticipated that store closures and operating limitations in certain locations may continue for at least a portion of the fiscal second quarter, and potentially beyond.
Yet, they still raised guidance.
Net sales are now expected in the range of $3.010 billion to $3.060 billion from $2.950 billion to $3.000 billion.
Earnings are now expected to be between $14.45 to $15.10 up from the prior guidance given in May of $14.05 to $14.65.
Analysts Raise Earnings Estimates
The analysts are even more bullish as 4 have raised their estimates in the last 30 days and it has pushed up the Zacks Consensus to $15.65, which is higher than the company's own guidance range.
That's earnings growth of 16.2%.
Analysts are bullish about fiscal 2023 as well.
3 estimates have been revised higher for the next fiscal year, pushing up the fiscal 2023 Zacks Consensus Estimate to $18.23 from $17.24.
That's another 16.5% earnings growth.
Deckers have been steadily growing its earnings, year-after-year, the last 5 years, even during the pandemic.
Shares Near 5-Year Highs
Deckers shares have soared off the coronavirus lows and continue to hit new highs in 2021.
They're up 47.5% year-to-date and now trade with a forward P/E of 27.6.
That's not cheap, but investors should expect to pay a premium for one of the top global retailers.
Deckers has been rewarding shareholders with a $750 million stock repurchase, which was announced in May 2021.
In the first quarter, it repurchased about 249,000 shares for a total of $82.2 million at an average price of $329.55.
As of June 30, 2021, the company had $728.5 million remaining under the stock repurchase reauthorization.
Deckers is in rare territory in the retail industry. It belongs on the same "best" list with other top retailers such as Lululemon LULU.
For those looking for a retail play into the holiday season, Deckers is one to keep on your short list.
[In full disclosure, the author of this article owns shares of LULU in her personal portfolio.]
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