As Deckers Outdoor Corporation DECK prepares to announce its third-quarter fiscal 2025 earnings results on Jan. 30 after market close, investors are keen to assess the company's performance amid ongoing market challenges and opportunities. 

Deckers, known for its portfolio, including UGG and HOKA brands, has been navigating a dynamic landscape with strategic initiatives to sustain growth. The Zacks Consensus Estimate for revenues is pegged at $1.70 billion, which indicates an improvement of 9.1% from the prior-year reported figure.

The company is expected to witness a year-over-year increase in its bottom line. The Zacks Consensus Estimate, which has increased by 4 cents over the past seven days to $2.56 per share, calls for 1.6% growth compared to the same period last year.

Deckers has a trailing four-quarter earnings surprise of 41.1%, on average. In the last reported quarter, this Goleta, CA-based company’s bottom line outperformed the Zacks Consensus Estimate by a margin of 30.3%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Key Factors to Observe for Deckers' Q3 Earnings

Deckers’ focus on innovation and expanding brand reach are key drivers. The company has been investing in product development across its leading brands, HOKA and UGG, introducing new styles that resonate with consumers. The company’s strategic product segmentation and introduction of limited editions across its distribution channels have helped sustain demand. 

We expect UGG sales to grow 1% and HOKA sales to increase 19.7% year over year. However, the Teva brand is likely to face challenges, leading to an estimated 1.4% decline in sales.

Deckers' commitment to expanding its direct-to-consumer channels is another significant factor contributing to revenue growth. The company has been enhancing its online and in-store experiences, making it easier for consumers to access and purchase products. This strategy not only increases sales volumes but also allows Deckers to capture higher profit margins. We expect direct-to-consumer revenues to increase 7% year over year.

Expansion into international markets has been a crucial component of Deckers' growth strategy. By targeting key global regions and tailoring marketing efforts to resonate with local consumers, Deckers has been able to increase its market share and brand recognition outside the United States.

While Deckers has several tailwinds, investors should be mindful of margin pressures. This anticipated margin compression stems from rising costs, particularly increased freight expenses and a shift toward a more normalized promotional environment. We expect the gross margin to shrink 320 basis points in the third quarter. Challenges in the SG&A domain are expected to compress margins. We anticipate SG&A expenses, as a percentage of net sales, to deleverage 150 basis points. As a result, we foresee an operating margin contraction of 480 basis points.

What the Zacks Model Says About DECK

As investors prepare for Deckers’ third-quarter earnings, the question looms regarding earnings beat or miss. Our proven model predicts an earnings beat for Deckers this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat, which is the case here.

Deckers sports a Zacks Rank #1 and has an Earnings ESP of +6.84%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks With the Favorable Combination

Here are three other companies you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat this season:

Urban Outfitters URBN has an Earnings ESP of +2.99% and currently sports a Zacks Rank of 1. URBN's top line is anticipated to advance year over year when it reports fourth-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.63 billion, which suggests a 9.4% increase from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is expected to register a rise in the bottom line. The consensus estimate for Urban Outfitters’ fourth-quarter earnings is pegged at 89 cents a share, up 29% from the year-ago quarter. URBN has a trailing four-quarter earnings surprise of 22.8%, on average.

Abercrombie & Fitch ANF has an Earnings ESP of +0.48% and a Zacks Rank of 2 at present. ANF is likely to register top-line growth when it reports fourth-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.56 billion, which suggests a 7.7% rise from the figure reported in the year-ago quarter. 

The consensus estimate for Abercrombie & Fitch’s fourth-quarter earnings is pegged at $3.51 per share, which calls for 18.2% growth from the figure reported in the year-ago quarter. ANF delivered an earnings beat of 14.8%, on average, in the trailing four quarters.

Tapestry TPR currently has an Earnings ESP of +5.66% and a Zacks Rank of 2. TPR's top line is anticipated to increase year over year when it reports second-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $2.11 billion, which suggests a 1.3% jump from the figure reported in the year-ago quarter. 

The company is expected to register an increase in the bottom line. The consensus estimate for Tapestry’s second-quarter earnings is pegged at $1.74 per share, up 6.8% from the year-ago quarter. TPR has a trailing four-quarter earnings surprise of 11.3%, on average.

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