We upgraded our recommendation on Deckers Outdoor Corporation (DECK), the designer and producer of footwear and accessories, to Outperform from Neutral.
Why the Upgrade?
The challenging macroeconomic environment compelled Deckers to resort to various means for repositioning itself and keep afloat. Such measures include focusing on new product introductions, effective cost management and new store openings. This is well reflected through Deckers’ better-than-expected second-quarter 2013 bottom-line results.
The company posted a quarterly loss of 85 cents a share that fared better than the Zacks Consensus Estimate and management’s guidance due to lower operational expenses. The high note in the quarter was the 34.2% rise in eCommerce sales.
On the back of robust eCommerce sales trends, Deckers provided an improved outlook for 2013 with both revenue and earnings per share projected to increase 8%.
Following sturdy results, the analysts become more constructive on the stock’s future performance. Consequently, the Zacks Consensus Estimate for 2013 increased 2.4% to $3.80, while for 2014 it rose 2% to $4.52 per share in the last 60 days.
The earnings surprise history of this Zacks Rank #1 (Strong Buy) stock also sparks optimism about its future upbeat performance. Deckers has outperformed the Zacks Consensus Estimate in the last four quarters by an average of 44.1%.
Deckers is also expanding its footprint by targeting profitable markets. This is well evident from the company’s retail store sales that rose 29.1%, propelled by the opening of 36 new stores during the second quarter of 2013. Management is eyeing opportunities for store expansion in Asia, mainly Japan and China, and seeks to enhance the company’s presence in South Korea, Taiwan, Mongolia, Singapore and Australia.
Other Stocks that Warrant a Look
Not all retail stocks are performing as disappointingly as Staples. Other stocks worth considering in the retail sector include Brown Shoe Co. Inc. (BWS) and Skechers USA Inc. (SKX) both carrying a Zacks Rank #1 (Strong Buy), and Carter's, Inc. (CRI) holding a Zacks Rank #2 (Buy).
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