Analysts generally cheered Deckers Brands’ second-quarter performance, attributing an upbeat outlook to better visibility at the Ugg brand and the firm’s solid positioning heading into the holiday season.
Deckers Brands yesterday reported Q2 numbers that beat Wall Street’s estimates for revenues and profits. Net revenues for the period hit $486.9 million.
“While the near-term focus remains on the important Q3, we do see many tailwinds forming as we think about next year,” Christopher Svezia, an analyst at Susquehanna Financial Group LLLP, wrote in a note. “For one, important inputs become more favorable such as leather and sheepskin, while comparisons ease against strong f/x, tourism and air freight pressure this year. In addition, we believe the company can begin to see powerful SG&A leverage as long as sales growth remains strong, as it appears that management’s investment cycle is largely complete following many years of investing toward e-commerce, systems and retail expansion.”
Other analysts also cited the Goleta, Calif.-based company’s efforts to move to year-around product as starting to pay off.
In particular, Camilo Lyon, an analyst at Canaccord Genuity Inc., said in a note the company’s push into “more diversified product” would cause less sales volatility.
“Consistent with our channel checks, Deckers’ strategic move to reduce its reliance on the weather dependent core classic Uggs while shifting to casual and weatherized fashion product is working well, with some styles already selling out. Moreover, the company has not had cancellations of consequence thus far, despite the slow start for classic Uggs in the U.S.”
Still, at least one analyst was cautious on the company.
Sam Poser, of Sterne Agee CRT, said Deckers’ guidance for the rest of the year “reflects a best case scenario” and that the outlook for 2016 “was a bit too rosy.”
“Inventory levels are elevated,” Poser wrote, “and the weather shows no signs of becoming seasonal.”