Earnings Preview: VFC, SKX, CROX, DECK

VF Corp.
Market watchers are looking for earnings per share to come in above the expected $3.49, as polled by Yahoo Finance, when the Greensboro, N.C.-based firm reports its third-quarter next Monday.

Kate McShane, analyst at Citi Investment Research, said strong gross margins should drive upside to earnings expectations, thanks to lower cotton prices, low inventories, higher selling prices sticking, a more favorable mix in international, outdoor and action sports, and direct-to-consumer.

Michael Binetti, analyst at UBS Investment Research, is predicting the firm will beat the Street by 5 cents. He wrote in a research note, “Upside [should come] from better-than-expected revenue. We expect the outdoor category to have a positive quarter, and our U.S. and Europe channel checks point to strong order growth for The North Face, which should drive a favorable fourth-quarter outlook.”

Skechers USA Inc.
Skechers will report earnings after the market closes next Wednesday, and analysts are bearish on the firm’s turnaround.

Christopher Svevia, analyst at Susquehanna Financial, is looking for EPS to come in at 25 cents, lower than the consensus estimate of 28 cents, largely reflecting weaker-than-expected international sales.

“Overall we continue to believe Skechers is making progress realigning its business after the fallout from toning … but challenges still remain,” he wrote in a research note. “European sales are running below plan and negatively impacting margins. In addition, boys’ and men’s have been sluggish to return to growth in the U.S.”

Scott Krasik, analyst at BB&T, said he anticipates positive sales growth in the domestic wholesale channel and an increase in retail same-store sales for the first time since the fourth quarter of 2010, based on good performance of its new GoWalk and updated GoRun athletic lines.

But he also noted that Skechers has begun to sell closeouts again through a national off-price chain. “As inventory returns to normal levels, closeout sales will accelerate, implying current gross margin is unsustainable,” Krasik wrote in a research note.

Crocs Inc.
Analysts are upbeat on the firm, citing increased confidence in management’s ability to achieve or beat quarterly and full-year guidance.

Sterne Agee analyst Sam Poser predicted the firm could meet or slightly beat the consensus EPS estimate of 43 cents.

“Our channel checks, and NPD data, point to strong trends at U.S. wholesale accounts,” Poser wrote in a research note. “We expect year-over-year domestic wholesale growth to be driven by the family footwear retailers and the department store segments, as those segments have stepped up the breadth and depth of their assortments.”

Steve Marotta, analyst at C.L. King & Associates, agreed: “Crocs is a global company with attractive growth prospects in Asia and the Americas, direct-to-consumer channels and a broadening product mix. Foreseeable profit margins include better geographic and channel mix combined with prudent inventory planning.”

The Niwot, Colo.-based firm reports its third quarter after the market next Wednesday.

Deckers Outdoor Corp.
With Deckers’ shares still languishing about 60 percent lower than this time last year, analysts believe the quarter’s results will be mixed given retroactive pricing reductions taken in September and lingering investor concerns.

“We expect some bright spots on corporate-level inventory, direct-to-consumer and international comps, but are well aware that the season has been a bit sluggish to start in the U.S. against a difficult September,” said Svezia. “[But] we believe the underlying business certainly has value above current levels.

As polled by Yahoo Finance, analysts are looking for a modest decline in revenue, and for EPS to come in at $1.06 from $1.10 previously, when the firm reports next Thursday after the market close. Fourth-quarter guidance, however, should be a bright spot, with 19 percent revenue growth and 22 percent EPS growth.

“Investor focus will be on guidance, inventory levels, input costs and an international update,” Svezia said.

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