Shares of Deckers (DECK 2.26%) were taking a dive today after the footwear maker beat fiscal fourth-quarter earnings estimates but offered disappointing guidance for the current quarter. Sales of the Hoka brand also decelerated faster than expected.
As of 9:59 a.m. ET, the stock was down 22.2% on the news.
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Deckers takes a breather
Fiscal fourth-quarter results for the period ended March 31 showed a notable slowdown from earlier in the year as revenue rose 6.5%, compared to 16.3% for the full year, to $1.02 billion, which essentially matched estimates at $1.01 billion.
Hoka sales growth slowed to just 10%, compared to 23.6% for the full fiscal year, while growth in Ugg, its other marquee brand, also slipped to just 3.6%, compared to 13.1% growth for the year.
Margins were strong as gross margin expanded from 56.2% to 56.7%, and selling, general, and administrative expenses rose just 2.7% to $405.8 million. As a result, operating income jumped from $144.3 million to $173.9 million, up 20.5%, and earnings per share (EPS) rose from $0.82 to $1, which was much better than the consensus at $0.61.
CEO Stefano Caroti said the company delivered "another exceptional year," but also acknowledged, "the global trade environment has introduced greater near-term uncertainty."
NYSE: DECK
Key Data Points
What's next for Deckers
For the first quarter, management expects growth to remain slow, calling for revenue of $890 million to $910 million, which was below the consensus at $925.3 million, and represents 9% growth at the midpoint of that range. It also sees adjusted EPS of $0.62 to $0.67, below estimates at $0.79 and down from $0.75 in the quarter a year ago.
Management acknowledged that uncertainty in tariffs would have an impact on the business this fiscal year, and it was not providing guidance due to uncertainty.
The company also increased its share repurchase authorization, showing it's prepared to capitalize on the sell-off in the stock, which is now down more than 50% from its peak earlier this year.
Given the weak guidance and the pressure from the trade war, the sell-off is understandable, but the valuation now looks cheap, especially for a stock that has a long track record of beating the market. If Deckers can get through the near-term challenges, the stock should be a winner.
