Why Deckers Shares Got Stomped On

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of shoemaker Deckers Outdoor (NAS: DECK) plummeted 25% today after its quarterly results and guidance fell well below Wall Street estimates.

So what: Deckers' first-quarter revenue squeaked by estimates, but a brutal bottom line -- EPS fell 59% to $0.20 versus the consensus of $0.25 -- confirms huge worries over its profitability. Management blamed the mild winter for weak sales of its UGG boots, but spiking sheepskin costs are now becoming a long-term concern for investors.

Now what: Management now expects earnings to drop 9%-10% in 2012, implying EPS of $4.56-$4.61, which was also well below Wall Street's view of $5.17. "We're managing this business for the long term," CEO Angel Martinez reassured analysts in a conference call, "and I'm very confident that the growth strategies we've developed for our brand portfolio are intact." More important, with the stock now off a whopping 55% from its October highs and trading at a single-digit forward P/E, buying into that optimism won't cost much.

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At the time thisarticle was published Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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