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Why Deckers Outdoor Stock Popped Today

By Jeremy Bowman – Feb 1, 2019 at 12:08PM

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Shares of the UGG parent jumped on a blowout earnings report.

What happened

Shares of Deckers Outdoor (DECK -3.25%) have been stepping up to the next level today as the footwear specialist posted strong results in its third-quarter earnings report and lifted its guidance for the full year. As a result, the stock was up 12.2% as of 11:04 a.m. EST.

So what 

The parent of brands like UGG boots, Sanuk, and Teva said overall sales rose 7.8% to $873.8 million, which blew past estimates at $821 million. The UGG brand, which makes up nearly all of the company's revenue, saw sales increase 3.6% to $761 million. However, the sudden growth of the Hoka One One brand, which Deckers acquired in 2013, was also a key driver as its sales were up 79.2% to $56.9 million. 

A man in Ugg boots stands on the hood of a truck on the beach.

Image source: Deckers.

The majority of growth also came through the wholesale channel, where sales rose 12.5% to $482.2 million, indicating rising demand in retail stores. Direct-to-consumer sales were up just 2.6% to $391.6 million. Gross margin jumped from 52.2% to 53.8%, a sign that the company efficiently controlled costs. Other cost-cutting initiatives and a lower tax rate helped push adjusted earnings per share up from $4.97 to $6.59, easily topping expectations of $5.28.

CEO Dave Powers said:

I am pleased to say that we are now well ahead of schedule to deliver on the long term strategic goals we laid out two years ago. Our third quarter results were propelled by the UGG brand as it successfully delivered a compelling product offering, with thoughtful and controlled distribution. In addition, we achieved impressive growth with our HOKA ONE ONE and Koolaburra brands.

Now what 

Deckers also lifted its full-year guidance across the board. The company now sees sales of $1.986 billion to $2 billion, up from a previous range of $1.935 billion to $1.96 billion. It expects operating margin of 14.5% to 14.7%, up from 13% to 13.2%, and adjusted earnings per share of $7.85 to $7.95, compared to a previous range of $6.65 to $6.85. 

The bulk of the company's profits come during the holiday quarter as it also marks the beginning of the winter. In the current quarter, Deckers sees an EPS of just break-even to $0.10, which was below estimates of $0.27.

Still, given the strong performance in the key holiday quarter, it's not surprising to see the stock surging today.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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