Shares of footwear maker Deckers Outdoor Corp. (DECK) are getting hammered in morning trading after the company posted higher-than-expected fourth quarter profit but forecast its 2009 profit will be below estimates.
The company, which makes innovative, functional, and fashion-oriented footwear under the Simple®, UGG®, and Teva®, TSUBO® and Deckers® brands, said it earned $4.05 per share for the fourth quarter, excluding charges, compared to $2.69 per share a year ago on the same basis. Sales increased 56 percent to $303.5 million.
Analysts on average were looking for earnings of $3.95 per share for the quarter. On a GAAP basis, which includes a pre-tax non-cash write down of $20.9 million, earnings were $3.07 per share.
For the full year, Deckers earned $7.27 per share on a non-GAAP basis compared to $5.06 per share last year. Sales grew 53 percent to $689.4 million.
But there are signs that business is weakening. While the company’s backlog of orders from its wholesale customers was up over 40 percent at December 31, inventories increased 79 percent to $92.7 million in the quarter.
One analyst, from Susquehanna Financial, said that “the inventory levels are not comforting in this economic environment,” and that there could be a huge back-up of product that they will need to move somehow.
Deckers also said it expects earnings for the current quarter to fall about 28 percent due to higher costs related to new retail stores, warehouse operations and general administrative costs.
That didn’t sit well with analysts who were looking for an earnings increase of 10 percent for the quarter. For the full-year the expectations are for flat earnings growth ($7.27 per share, non-GAAP or lower) when analysts were looking for $8.05 per share.
Deckers’ UGG sheepskin footwear brand continues to sell well. Sales rose 62 percent in the quarter to $288 million. The current economic environment is helping its sales, analysts say, as retailers are sticking with proven winners when it comes to placing orders and reorders. Teva sales fell nearly two percent in fiscal ’08, while Simple sales grew 27 percent for the year.
Chairman, President and CEO Angel Martinez said the company is fully cognizant of the challenges confronting the industry and that’s why the company made such modest growth assumptions for the year (in addition to flat earnings, the company is forecasting just 6 percent to 9 percent revenue growth).
“That said, we remain confident about our long-term prospects and believe that the current retail environment is creating new opportunities for market share gains,” he said.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
