NEW DIRECTIONAL PUT PLAYS
Deckers Outdoor - DECK - close: 72.08 change: -1.14
Stop Loss: 75.25
Target(s): To Be Determined
Current Option Gain/Loss: Unopened
Average Daily Volume = 922 thousand
Entry on March -- at $---.--
Listed on March 09, 2015
Time Frame: Exit prior to April option expiration
New Positions: Yes, see below
Why We Like It:
Consumers can be a fickle lot. When one brand falls out of favor the drop off in sales can be earth shaking for the manufacturer. One company that appears to be seeing some trouble is DECK.
According to the company's marketing material, "Deckers Brands is a global leader in designing, marketing and distributing innovative footwear, apparel and accessories developed for both everyday casual lifestyle use and high performance activities. The company's portfolio of brands includes UGGÂ®, I HEART UGGÂ®, TevaÂ®, SanukÂ®, AhnuÂ® and HOKA ONE ONEÂ®. Deckers Brands products are sold in more than 50 countries and territories through select department and specialty stores, 138 Company-owned and operated retail stores, and select online stores, including Company-owned websites. Deckers Brands has a 40-year history of building niche footwear brands into lifestyle market leaders attracting millions of loyal consumers globally."
DECK started seeing trouble last year. Back in July they reported earnings that beat expectations but management lowered guidance. They did it again in October with DECK delivering results above estimates but lowering guidance. Their most recent report was January 29th where DECK delivered their December quarter. Earnings were up +11% from a year ago to $4.50 a share. That actually missed Wall Street's estimate. Revenues rose +6.6% to $784.7 million. This too missed analysts' expectations of $812.5 million.
If that wasn't bad enough the company lowered their Q4 and 2015 guidance. They downgraded their 2015 revenue growth from +15% down to +13.5% largely due to slowing sales of their UGG brand. That's definitely a warning signal since UGG accounts for more than 80% of DECK's sales.
The stock crashed -19.5% the next day on its disappointing earnings results and lowered guidance. The following two weeks saw an oversold bounce but that bounce is over. Shares are starting to breakdown again. A Morgan Stanley analyst was not enthusiastic on DECK and said they don't see any catalyst between now and the next holiday shopping season to drive the stock higher.
DECK was definitely showing relative weakness today and broke below short-term support near $72.50. Tonight I'm suggesting a trigger to buy puts at $71.65.
Trigger @ $71.65
- Suggested Positions -
Buy the APR $70 PUT (DECK150417P70) current ask $2.00
Option Format: symbol-year-month-day-call-strike