Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of footwear specialist Deckers Outdoor (NYSE:DECK) plunged 16% today, after its quarterly results and guidance missed Wall Street expectations.
So what: Deckers' disappointing third-quarter results -- profit and revenue plunged 31% and 9%, respectively -- and full-year warning, reinforces serious concerns over the waning popularity for its sheepskin UGG boots. Management said that price hikes designed to offset spiking sheepskin costs are largely to blame, and that they're going to roll back prices to stimulate demand, but many investors are skeptical that the seemingly faddish brand has any life left in it.
Now what: Management expects full-year revenue to increase just 5% -- down from its previous growth outlook of 14% -- and now sees a 33% plunge in EPS, versus its prior view of only a 9%-10% drop. As CEO Angel Martinez reassured investors:
Based on positive consumer feedback, the performance of new product introductions, and market research data, we continue to be confident in the strength and popularity of our brand portfolio and the multiple growth opportunities that still lie ahead.
While I wouldn't buy into that bullishness just yet, Deckers' still rock-solid balance sheet and paltry-looking price multiples make the stock a turnaround candidate certainly worth monitoring.
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