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Are You Ready to Jump Into This Rewarding Pick?

May 08, 2014 | About:
Suravi Thacker

Suravi Thacker

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Cold weather does not always lead to lower sales, if managed efficiently. In fact, if strategized well, it can lead to better opportunities. An apt example is that of footwear retailer Deckers Outdoor Corporation (DECK). The company posted its quarterly results recently which beat the Street’s expectations and sent its share price soaring.

The Quarter in Detail

Revenue for the quarter stood at $294.7 million, a jump of 11.7% over the year-ago period. The retailer witnessed growth across most of its segments which drove sales higher. The UGG brand was one of the key drivers and the largest business segments for Deckers. Sales from UGG grew 15.8% over last year.

Also, comparable sales from the Direct-to-Consumer segment increased 16.9% over last year’s quarter. The Direct-to-Consumer segment witnessed growth across regions, especially in China and Japan. This segment includes growing sales from the retail segment as well as the E-commerce segment, which registered revenue growth of 26% and 45%, respectively. Growth in the retail segment was driven by same-store sales growth of 4% and 42 new stores opened during the quarter.

E-commerce segment witnessed higher sales since bad weather kept customers at home, enabling them to make their purchases online. Hence, growing online sales compensated for weak store traffic seen during the quarter.

Earnings, on the other hand, dropped to a loss of $0.08 per share. However, this was way ahead of the expectation of a loss of $0.15 per share. However, the gross margin grew 210 basis points to 48.9%, mainly due to higher sales and lower cost of sales. Hence, the bottom line suffered because of higher selling, general and administrative costs.

Key Drivers

Deckers has taken a number of efforts to drive sales higher. Its new products, introduced during the quarter, lured customers. Launch of HOKA running shoe brand proved to be quite successful. Also, Yoga sling for women became quite popular. The company plans to remain focused on the women category since this segment has been doing really well.

Also, the footwear company had undertaken a winter marketing campaign called "Let It Snow," which helped the retailer’s sales grow during the winter season. Hence, demand for products such as boots increased.

On the other hand, spring season in various parts drove sales of spring collection higher. For instance, summer styles such as slip-on shoes, beach footwear and sandals resonated well with customers. In fact, sales of such products are expected to increase further in the coming months.

The retailer also plans to expand its reach by adding more stores. It declared its target to open 30 to 35 new stores in the year 2014. Moreover, it will continue to add more products to its portfolio, which will give customers more reasons to visit its stores.

Conclusion

Deckers Outdoor has been performing well as is evident from its quarterly results. It has also provided a bright outlook for the current quarter and for the full year. Additionally, its efforts to drive sales through various promotions and new product introduction should add to its strengths. Moreover, the launch of HOKA brand should continue to drive sales higher. Hence, this company deserves a closer look.


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