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Susquehanna Rates Deckers Outdoor as ‘Neutral’

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Price movement

Deckers Outdoor (DECK) has a market cap of $2.1 billion. It rose by 1.1% to close at $67.01 per share on August 12, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 4.4%, 7.2%, and 42.0%, respectively, on the same day. DECK is trading 6.1% above its 20-day moving average, 12.8% above its 50-day moving average, and 23.7% above its 200-day moving average.

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Related ETF and peers

The Vanguard Extended Market ETF (VXF) invests 0.05% of its holdings in Deckers Outdoor. The ETF tracks a market-cap-weighted version of the S&P Total Market Index, excluding all S&P 500 stocks. The YTD price movement of VXF was 8.4% on August 12.

The market caps of Deckers Outdoor’s competitors are as follows:

  • Skechers USA (SKX) — $3.9 billion
  • Wolverine World Wide (WWW) — $2.4 billion
  • Steven Madden (SHOO) — $2.2 billion

Deckers Outdoor’s rating

Susquehanna has initiated the coverage of Deckers Outdoor with a “neutral” rating and set the stock price target at $59 per share.

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Performance of Deckers Outdoor in fiscal 1Q17

Deckers Outdoor reported fiscal 1Q17 net sales of $174.4 million, a fall of 18.4% from the net sales of $213.8 million in fiscal 1Q16. The company’s gross profit margin rose by 8.0% between fiscals 1Q16 and 1Q17.

Its net income and EPS (earnings per share) fell to -$58.9 million and -$1.84, respectively, in fiscal 1Q17, compared with -$47.3 million and -$1.43, respectively, in fiscal 1Q16. DECK’s cash and cash equivalents fell by 17.8% and its inventories rose by 56.5% between fiscals 4Q16 and 1Q17. Its current ratio fell to 2.3x and its debt-to-equity ratio rose to 0.48x in fiscal 1Q17, compared with 3.3x and 0.32, respectively, in fiscal 4Q16.

Projections

The company has made the following projections for fiscal 2Q17 and 2017:

Fiscal 2017

  • net sales growth in the range of -3% to flat
  • gross margin in the range of 47.0% to 47.5%
  • EPS in the range of $4.05 to $4.40, which exclude any pretax charges from restructuring charges of $10 million–$15 million

Fiscal 2Q17

  • net sales growth in the range of 1% to 3%
  • EPS in the range of ~$1.12 to $1.22

For an ongoing analysis of this sector, please visit Market Realist’s Consumer Discretionary page.

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