Stock Story -
Footwear and apparel conglomerate Deckers (NYSE:DECK) reported Q2 CY2024 results topping analysts' expectations, with revenue up 22.1% year on year to $825.3 million. On the other hand, the company's full-year revenue guidance of $4.7 billion at the midpoint came in 2.1% below analysts' estimates. It made a GAAP profit of $4.52 per share, improving from its profit of $2.41 per share in the same quarter last year.
Is now the time to buy Deckers? Find out by reading the original article on StockStory, it's free.
Deckers (DECK) Q2 CY2024 Highlights:
- Revenue: $825.3 million vs analyst estimates of $806.2 million (2.4% beat)
- EPS: $4.52 vs analyst estimates of $3.51 (28.9% beat)
- The company reconfirmed its revenue guidance for the full year of $4.7 billion at the midpoint
- Gross Margin (GAAP): 56.9%, up from 51.3% in the same quarter last year
- Constant Currency Revenue rose 23% year on year (11.1% in the same quarter last year)
- Market Capitalization: $21.5 billion
Established in 1973, Deckers (NYSE:DECK) is a footwear and apparel conglomerate with a portfolio of lifestyle and performance brands.
FootwearBefore the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales GrowthA company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for multiple years. Luckily, Deckers's sales grew at a decent 16.7% compounded annual growth rate over the last five years. This shows it was successful in expanding, a useful starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Deckers's annualized revenue growth of 16.7% over the last two years aligns with its five-year trend, suggesting its demand was stable.
We can better understand the company's sales dynamics by analyzing its constant currency revenue, which exclude currency movements that are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 18.4% year-on-year growth. Because this number is better than its normal revenue growth, we can see that foreign exchange rates have been a headwind for Deckers.
This quarter, Deckers reported remarkable year-on-year revenue growth of 22.1%, and its $825.3 million of revenue topped Wall Street estimates by 2.4%. Looking ahead, Wall Street expects sales to grow 10.6% over the next 12 months, a deceleration from this quarter.
Operating Margin
Deckers's operating margin has risen over the last year and averaged 20.5%. On top of that, its profitability was top-notch for a consumer discretionary business, showing it's an optimally-run company with an efficient cost structure.
In Q2, Deckers generated an operating profit margin of 16.1%, up 5.6 percentage points year on year. This increase was a welcome development and shows it was recently more efficient because its expenses grew slower than its revenue.
Key Takeaways from Deckers's Q2 Results We were impressed by how significantly Deckers blew past analysts' EPS expectations this quarter. We were also glad its constant currency revenue outperformed Wall Street's estimates. On the other hand, its full-year revenue and earnings guidance missed. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock remained flat at $841.50 immediately following the results.
