NEW YORK (AP) — Deckers tumbled more than 10 percent in premarket trading on Friday after a disappointing outlook from the maker of UGG and Teva footwear.
The rising price for sheepskin and other costs will hurt first-quarter and full-year profits, the company said Thursday.
First-quarter earnings will be about 25 cents per share on revenue of $243.8 million. For 2012, Deckers expects earnings will be unchanged from 2011's $5.07 per share and implied that revenue will come in at about $1.59 billion.
That's well off the 63 cents per share expected by Wall Street for the quarter, and it's also short of the $262.2 million in revenue most had forecast. The full year earnings per share, even though unchanged, is still below analyst predictions of $5.82 per share.
Deckers' stock dropped $9.51 to $80.70 before the market open.
Credit Suisse's Christian Buss lowered Deckers to "Neutral" from "Outperform" and cut his price target to $91 from $127. He said that there still appears to be growth opportunities for UGG, but that it likely won't translate into strong earnings near term. Buss said that commodity costs are pressuring gross margin more than expected and that there is limited opportunity for the wholesale business to contribute to revenue growth.
Taposh Bari of Jefferies & Co. reduced Deckers' price target to $120 from $125 but maintained a "Buy" rating, saying he still believes in the UGG brand. The analyst said that warmer-than-expected winter weather disrupted the business of many companies, like Under Armour and VF Corp., and said UGG was probably more sensitive to weather conditions than he initially thought.
Deckers has set lower expectations for itself going forward, and that the company should see a steady recovery against this backdrop, Bari said.
A representative for Deckers Outdoor Corp. was not immediately available for comment.