Why Deckers Shares Got Decked

Why Deckers Shares Got Decked

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 footwear specialist Deckers Outdoor sank as low as 10% today after its quarterly results disappointed Wall Street.

So what: The stock has rebounded nicely in 2013 on signs of improving fundamentals, but today's second-quarter results -- loss of $29.3 million on a revenue drop of 3% -- coupled with a market-missing forecast reignites worries over waning Ugg popularity. Additionally, gross margins declined 110 basis points over the year-ago period, triggering concerns that management is overinvesting in its less-profitable retail business.

Now what: Management now expects 2013 EPS and revenues to both grow about 8%, implying earnings of $3.73 per share and sales of $1.52 billion, versus Wall Street's view of $3.99 and $1.51 billion. "We remain optimistic about our ability to expand sales and margins as we head into our highest volume sales quarters, and we continue to be excited about the many long-term growth opportunities that we believe exist for our business," said CEO Angel Martinez. With the stock still well off its 52-week lows and trading at a P/E above 15, however, I'd wait for more of a pullback before buying into that optimism.

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The article Why Deckers Shares Got Decked originally appeared on Fool.com.

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