Ugg, A Downgrade: Stifel Moves Deckers Outdoor To Hold On Limited Upside Forecast

Deckers Outdoor Corp DECK reported Thursday after the close with forecast-beating results for the fiscal 2019 first quarter. 

The Analyst

Stifel analyst Jim Duffy downgraded Deckers Outdoor from Buy to Hold and increased the price target from $120 to $123.

The Thesis

Deckers Outdoor's strong quarterly results are reflective of execution toward multiyear margin improvement plans, Duffy said in a Thursday note. (See the analyst's track record here.) 

Stifel's downgrade comes due to concerns that meaningful upside may prove limited for Decker, the analyst said. 

Duffy attributed the narrower-than-expected loss for the quarter to higher revenues, higher gross profit dollars, lower adjusted SG&A expenses, non-operating income and a 1-cent benefit from an adjusted tax rate.

Much of the earnings beat came about due to the timing of earlier-than-expected shipments, Duffy said. 

Revenue growth was driven by increases in the UGG, Hoka and Teva brands and partly offset by declines in Sanuk sales, the analyst said. Domestic sales grew 17.4 percent year-over-year and international sales rose 22.3 percent.

The company updated its fiscal 2019 guidance, raising the low end of its revenue guidance and increasing the adjusted EPS guidance. 

"Management characterized inventory on the books and in the channel as supportive of full-priced selling going into the key selling season." 

The Price Action

Deckers Outdoor shares have gained about 49 percent year-to-date. The stock was sliding 10.61 percent to $106.58 at the time of publication Friday.

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