Ugg Marches Deckers Onward

Analysts remain bullish on Deckers Outdoor Corp. as the Ugg Australia brand continues to drive the firm’s top line.

The brand is poised to surpass $1 billion in annual sales, as it has already done $633.4 million year-to-date and is expected to ramp up in the last quarter.

“Our view on Deckers remains unchanged, [as] our recent domestic store checks were positive [and we continue to look to] the seasonal importance of the second half, the diversification of Ugg’s classic business and the rebound of Teva,” said Susquehanna Financial analyst Christopher Svezia.

Angel Martinez, Deckers’ chairman, president and CEO, said last week that higher domestic wholesale demand for the Ugg fall line versus a year ago was driven by the introduction of several new styles and new collections, including a broader assortment of men’s product.

“At the same time, our international sales more than doubled, fueled by the growth in wholesale unit volumes in the U.K. and Benelux, coupled with an increase in sales resulting from our conversion to wholesale operations in these regions,” he added.

Deckers’ third-quarter income spiked by nearly half, which sent its shares up about 9 percent in after hours trading last Thursday.

Profit was $62.5 million, or $1.59 a share, up from $42.1 million, or $1.07, a year ago. Revenue was $414.4 million, a 49 percent increase from $277.9 million the previous year. The firm handily topped estimates, which predicted earnings per share of $1.35 on revenue of $387 million, as polled by Yahoo Finance.

Deckers ended the quarter with $90.4 million in cash and now expects its full-year revenue to increase 33 percent, and full-year EPS to increase 22 percent, year-over-year.

“[That’s] sheepish guidance,” said Sterne Agee analyst Sam Poser. “The company can offset some of the price increases through new production technologies, targeted price increases, a larger mix of retail and international sales, and less use of sheepskin. Also, there continues to be an optical benefit from the new subsidiaries, and Sanuk drives higher margins as well.”

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