Deckers Outdoors (DECK) Investors Shout “Ugh” Rather than “Ugg” Post Earnings

February 23, 2012

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Submitted by Mark Hanna

Courtesy of MarketMontage. View original post here.

Pardon the headline; just impossible to pass up softballs like that.

After the rally off of the December lows, there are not too many “offensive” (v defensive) stocks out there still below their respective 200 day moving average. Deckers Outdoors (DECK) was one of them. I don’t want to go overboard and said “big money knew something” but it was a tad strange to see, and perhaps it is now obvious why. Despite a sales beat of substantial manner ($604M v estimates of $565M) and even a small earnings beat of 4 cents ($3.18 v estimates of $3.14) the stock is being hammered to the tune of 8-9% in after hours. Looks like guidance is the issue – due to costs.

Based upon current visibility, the Company expects full year revenues to increase approximately 15% over 2011 levels.
The Company expects full year diluted earnings per share to be approximately flat with 2011 levels due primarily to the increase in sheepskin costs in 2012 compared to 2011, which the Company projects to adversely impact profitability by approximately $1.40 per diluted share.
This guidance assumes a gross profit margin decline of 200 basis points from 2011 levels due to an increase in costs of goods sold, partially offset by selective price increases, an increased contribution from retail sales, and the addition of the Sanuk brand for the full year. This guidance also assumes SG&A as a percentage of sales of approximately 29%.

Blame it on the sheepskin….

Hence the full year 2011 EPS is now $5.08, which the company is guiding to be the same number for 2012. A far cry from analysts’ $5.79.

Full report here.

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