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Key Takeaways
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Deckers Outdoor shares were down nearly 20% Friday afternoon, despite the fact that the shoemaker reported fiscal third-quarter earnings that topped analysts' expectations late the day before.
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Deckers, which sells Hoka, Ugg, and Teva shoes, is facing questions from some analysts about demand for its footwear.
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Deckers executives said they expect their top shoe brands to remain sought-after, and at least one analyst agreed.
Deckers Outdoor (DECK) shares plunged Friday, despite the shoemaker reporting sales results for the latest quarter that beat analysts' estimates.
The company, which sells Hoka, Ugg, and Teva footwear, told investors late Thursday that the company doesn't see demand flagging for its most sought-after shoes. Still, Deckers shares were down 19% in afternoon trading Friday, leading S&P 500 decliners, amid investor concerns about demand trends.
The footwear company said fiscal third-quarter quarter’s sales hit a record $1.83 billion, growing 17% year-over-year and coming in higher than the $1.73 billion analyst consensus estimate from VisibleAlpha. Deckers reported $3 in earnings per share (EPS) for the quarter ended Dec. 31, while analysts polled by VisibleAlpha had estimated the company would have $2.60 in EPS.
Deckers Raises Full-Year Sales Outlook
Deckers now expects sales to grow 15%—rather than 12%—and hit $4.9 billion for the full fiscal year, Chief Financial Officer Steven Fasching said in a Thursday earnings conference call, according to a transcript provided by AlphaSense. He said Deckers doesn't expect Ugg or Hoka to lose traction after they had year-over-year sales increases of about 16% and 24%, respectively, last quarter.
“The demand for these brands is still incredible,” Fasching said on the call.
UBS Says Investor Concerns 'Misplaced'
The pullback presents an opportunity to buy Deckers shares, UBS analysts wrote in a Friday note. Investors may worry that Hoka is decelerating and Ugg can’t repeat its strong results, but the report called these fears “misplaced.”
“Hoka has a robust new product pipeline,” the UBS note said, while calling Ugg one of “the strongest casual footwear brands in the world” that's transforming into a “true four-season brand" after launching as a winter shoe.
UBS raised its price target for Deckers to $284 from $267. The new target represents a premium of about 57% over the stock's current price.
Even with today's selloff, the stock is up 45% over the past 12 months, easily outpacing the S&P 500 over that period.