Shoes maker Deckers (DECK, Financial) experienced a significant stock decline following the release of its fiscal fourth-quarter earnings report. Despite surpassing earnings estimates, the company's guidance for the current quarter missed expectations, with notable slowing in sales of its Hoka brand. As a result, DECK's stock fell by 20.51% to a price of $100.24.
In the fourth quarter ending March 31, revenue increased by 6.5% to $1.02 billion, which met estimates but reflected a slowdown from the full year's growth of 16.3%. Hoka sales rose by just 10%, a stark slowdown compared to the full-year growth of 23.6%. The Ugg brand also experienced reduced growth of 3.6%, down from 13.1% during the last fiscal year.
Despite strong margins, with the gross margin rising to 56.7% and operating income increasing by 20.5% to $173.9 million, challenges persist for Deckers. Notably, earnings per share exceeded projections, coming in at $1 compared to the expected $0.61.
Looking ahead, Deckers anticipates slower growth in the upcoming first quarter, with revenue guidance between $890 million and $910 million, falling short of the $925.3 million consensus. The company also projects adjusted EPS between $0.62 and $0.67, trailing the anticipated $0.79 and last year's $0.75 for the same quarter.
The management acknowledged tariff uncertainties impacting business operations this fiscal year and has decided to withhold full-year guidance. Amid the stock's significant drop, Deckers enhanced its share repurchase authorization.
From a valuation perspective, Deckers (DECK, Financial) displays strong financial health, with a P/E ratio of 16.25 and a price-to-book ratio of 5.78. The GF Value indicates that the stock is currently "Modestly Undervalued" with a GF Value estimate of $123.7. For detailed valuation metrics, please refer to the GF Value page. Other financial metrics, such as a Piotroski F-Score of 9 and an Altman Z-Score of 12.4, further underscore its robust financial position.
In terms of profitability, DECK's operating margin continues to expand, reflected by an operating margin of 23.35%. The company's strong cash flow, evidenced by a free cash flow yield of 6.6%, further highlights its financial strength.
While the immediate outlook suggests challenging conditions, DECK's long-term growth potential remains supported by its diverse brand portfolio and strong financial foundation.
