Q1 Earnings Preview: Deckers, VF

Weather will be a major theme for footwear firms reporting their first-quarter earnings in the coming week, analysts said.

“This cold weather was positive for closing out the winter season and clearing cold-weather merchandise, but it was negative for starting the spring season and fueling demand for warm-weather goods,” Mitch Kummetz, analyst at Baird Equity Research, wrote in a research note.

“There’s an underlying expectation that, once the weather improves [in the second quarter], pent-up demand will be unleashed, but we expect the overall spring/summer season to be worse than a year ago [given the slow start],” he added.

Christopher Svezia, analyst at Susquehanna Financial agreed: “From a top-line perspective, we believe cold weather led to higher-than-expected sales of winter apparel and footwear, which likely had the added benefit of cleaning up inventory at retail. This was likely partially offset by a slower start to the spring season,” he wrote in a research note.

Analysts predicted that Deckers Outdoor Corp. likely will benefit from the cold weather.

When the firm reports its first quarter this Thursday after the market, Scott Krasik, analyst at BB&T Capital Markets, expects inventory at retail to be significantly cleaner than it was at the end of the fourth quarter “and will be reflected in a smaller backlog decrease than the 17 percent decline reported at the end of the year.”

Sterne Agee analyst Sam Poser anticipates Ugg Australia’s same-store sales and e-commerce business will increase 5 percent and 15 percent, respectively. He believes there is potential upside to full-year earnings in 2013, but quipped, “Everyone needs to keep their pants on [about it].”

In a research note, he wrote, “Over 70 percent of the sales and over 120 percent of the full-year earnings will come in the back half of the year.”

The consensus estimate on Deckers is for a loss of 10 cents a share, on revenue of $252.3 million, as polled by Yahoo Finance.

VF Corp., which is scheduled to report its first quarter on Friday before the market opens, should also benefit from lower-than-expected temperatures.

Jim Duffy, analyst at Stifel Nicolaus, said he sees potential upside for both revenue and earnings per share, driven by higher-than-expected direct-to-consumer sales in the Outdoor & Action Sports segment.

“Outdoor product industry data suggests markdowns of outdoor products were meaningfully lower year over year, and the units sold likely positioned outdoor product inventories favorably exiting the first quarter as a result of the colder weather in the U.S.,” Duffy said. “Colder first-quarter weather in Europe was likely [also] a positive for sell-through and clearing outdoor product inventories.”

Analysts are expecting VF to report income of $2.18 a share, on revenue of $2.64 billion, as polled by Yahoo Finance.

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