Deckers’ Shares Fall on Outlook
Deckers Outdoor Corp. reported sharply higher first-quarter earnings Thursday, but its stock slumped 25% after the Ugg boot maker said profit in the current quarter would fall short of Wall Street’s expectations.
For the three months ended March 31, the Goleta, Calif.-based company reported net income of $8.9 million, or 69 cents a share, up 65% from $5.4 million, or 49 cents, in the same period last year. Analysts had expected profit of 70 cents a share, according to Thomson First Call. Sales for the quarter rose 45% to $64.3 million.
Deckers, which also makes Teva and Simple brand shoes, forecast second-quarter profit of 28 cents to 30 cents a share -- well below the 43 cents analysts were expecting.
The company said sales for the quarter would be $40 million to $41 million, basing the forecast on unseasonable weather hurting the sales of Teva’s open-toe shoes and expectations of lower international sales.
Investors are fretting over how long the Ugg trend will last, Randall Scherago, an analyst at First Albany Capital, said in a report Thursday. Deckers’ stock plunged $8.59 to $25.57 on Nasdaq and is down almost 46% this year.
The company, however, said that demand for Ugg products remained strong and that the brand had considerable growth potential outside California, its strongest market.
Ugg sales more than quadrupled in the first quarter to $22.5 million.
The popularity of Uggs, especially in California, has been fueling Deckers’ sales growth for several years. Demand for the sheepskin boots soared in late 2003, when they became a must-have Christmas gift just as stores were running out.
To keep demand high, the company rolled out Ugg boots and slippers in new colors last Christmas, along with handbags and other products.
But if Ugg demand slackens in the second half of the year, Scherago said, the company might have to cut prices, which would hurt profit.
Scherago lowered his 2005 per-share earnings estimate for Deckers to $2.25 from $2.55 and his 2006 projection to $2.20 from $2.85.
For 2005, Deckers said profit probably would remain in line with its previous projection of $2.45 to $2.55 a share on sales of $250 million to $260 million.
