Deckers Outdoor Corporation

DECK : NASDAQ : US$85.90
Target: US$111.00

Deckers Outdoor Corp. engages in the design, manufacture, and marketing of footwear and accessories for outdoor activities and casual lifestyle use. DECK distributes their goods through specialty retailers, department stores, outdoor retailers, sporting goods retailers and online retailers. DECK also sells directly to consumer through its websites and retail concept stores. The company was founded in 1973 and headquartered in California

Consumer & Retail — Footwear and Apparel
Investment recommendation
In this report, we discuss our view on how 2014 will unfold for DECK and the roadmap to 30% EPS growth. The crux of our increase in sales/EPS estimates is our improved outlook for 2014 wholesale orders. After discussions with our industry contacts, we believe a positive 2013 holiday season has given retailers renewed confidence in the winter boot category which should manifest in strong 2014 orders. In addition, DECK is making solid progress on its structural gross margin expansion plan that we believe is still in the early stages as both retail and UGG Pure penetration should increase through 2015. With both sales and gross margin accelerating coupled with our expectations for a much improved inventory position, we reiterate our BUY rating and are raising our 12-month price target to $111.
Investment highlights
 We now anticipate wholesale growth in 2014 to be +6% vs. our prior estimate for -1%; an estimate that could prove conservative given a turn in Europe and an improving assortment in Asia.
 While we expect Q4 results to produce a solid beat, we are not anticipating a pre-announcement at ICR since it is not customary practice (the last preannouncement was in 2008). That said, we expect positive commentary by management to be well received.
Our $111 target is a blend of 19x our 2015E EPS /12x EBITDA/ DCF


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