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Why Deckers Outdoor Stock Soared 59.4% in 2018


Jan. 2 2019, Updated 4:25 p.m. ET

Stock price movement

In 2018, Deckers Outdoor (DECK) stock soared 59.4% and last closed trading at $127.95. In the trailing five quarters, Deckers has beat both sales and adjusted EPS analysts’ estimates. The good show has been driven by product innovation, developing digital capabilities, and improving speed-to-market initiatives.

The bottom-line performance was also supported by buybacks and reduced tax rates. In the first half of fiscal 2019, Deckers repurchased shares worth $135 million and had $116 million worth of stock left under its authorization as of September 30, 2018.

Deckers has also been trimming its store footprint and optimizing its supply chain to control costs. Its focus remains on generating higher sales from international markets.

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UGG remains the primary catalyst

Deckers’ UGG brand remains the primary contributor to top-line growth. Deckers’ UGG brand contributed over 79.2% to total sales in fiscal 2018. For the UGG brand, the company is focused on category expansion, especially spring and summer products. It is aiming to make UGG a year-round brand.

However, for the third quarter of fiscal 2019, the management has forecast UGG sales to be down in the low single digits as the company works on its product segmentation strategy and closes stores. Also, fewer reorders will likely dent UGG sales in the third quarter of fiscal 2019.

Peers’ stock price gains and losses in 2018

Foot Locker (FL) stock has risen ~13.5% in 2018. Improving sales of its premium products have been driving its top line. It is also upbeat about its power stores concept. In the third quarter, it opened a power store in Hong Kong. Foot Locker is also exercising strong inventory management.

Meanwhile, Nike (NKE) stock has gained 18.5% in 2018. Its performance in North America is improving, while international and Nike Direct operations remain sturdy.

Skechers (SKX) stock has lost 39.5% of its value in 2018. Weakness in the domestic wholesale business remains an issue. The robust international wholesale segment and global retail business are expected to drive growth.


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