Deckers Outdoor Corp. crushed estimates in the first quarter, but forecast a second quarter loss, sending its shares down 8 percent in Friday morning trading.
Analysts said the firm is guiding well below consensus.
“What needs to be understood about the second quarter is that the weak outlook is due to a sales shift related to the company’s transition in Europe [to a direct model],” said Mitch Kummetz, analyst at R.W. Baird.
Management expects $50 million to shift out of distributor sales, meaning earnings will be affected by the impact of significantly higher selling, general and administrative expenses, increased legal and marketing expenses and other investments. At the same time, the second quarter is the smallest one for the firm, BB&T Capital Markets analyst Scott Krasik explained.
“The company is also [coming up on comparing with] $3.1 million in duty refunds from a year ago,” added Kummetz.
But Angel Martinez, chairman, president and CEO, said on a call with analysts that global sales momentum is intact “based on current sell-through trends and the results of our fall pre-book.”
To counter product costs going up approximately 10 percent over 2010, said Martinez, prices on several Ugg and Teva styles will increase between 5 and 10 percent for the fall.
“And in terms of the sales blend… you’re going to see us offering a much more diversified product line. Even in the fall season, you’ll see a lot more cold weather products,” said Martinez. “The men’s initiative is very important. We’ve had great response to the men’s fall line and we anticipate it performing well at retail. So it continues to evolve as a total complete brand, four seasons a year.”
Deckers, which became a $1 billion company in fiscal 2010, saw total revenue surge 31 percent to $204.9 million for the first quarter ended March 31. Ugg sales swelled 42 percent in the quarter, while Teva brand sales increased 17 percent.
Net income rose 7 percent to $19.2 million, or 49 cents a share, from $17.9 million, or 46 cents, in the same quarter a year ago.
Deckers raised its guidance for fiscal 2011 to earnings of $4.55 a share on revenue of $1.21 billion.
The firm closed the quarter with $437.9 million in cash and cash equivalents, up 23 percent from a year earlier.