As Deckers Outdoor Corporation (DECK Quick QuoteDECK - Free Report) prepares to announce its second-quarter fiscal 2025 earnings results on Oct. 24 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 $1.20 billion, which indicates an improvement of 9.6% 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 a penny over the past 30 days to $1.22 per share, calls for 7% growth compared to the same period last year.

Deckers has a trailing four-quarter earnings surprise of 47.2%, on average. In the last reported quarter, this Goleta, CA-based company’s bottom line outperformed the Zacks Consensus Estimate by a margin of 25.9%.

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

Key Factors to Observe for Deckers' Q2 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 strength in the UGG and HOKA brands, with sales anticipated to increase by 2% and 20.9% year over year, respectively. However, the Teva brand is likely to face challenges, leading to an estimated 3.3% 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 their favorite 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 15.8% year over year.

The 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. The company has seen positive traction in key regions like China and the EMEA (Europe, Middle East and Africa), and recent store openings are expected to enhance the visibility and accessibility of the brand’s offerings.

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 180 basis points in the second quarter. Challenges in the SG&A domain stemming from higher marketing spend are expected to compress margins. We anticipate SG&A expenses, as a percentage of net sales, to deleverage 120 basis points. As a result, we foresee an operating margin contraction of 300 basis points.

What the Zacks Model Says About DECK

As investors prepare for Deckers’ second-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 has a Zacks Rank #3 and an Earnings ESP of +2.77%. 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:

Abercrombie & Fitch (ANF Quick QuoteANF - Free Report) has an Earnings ESP of +3.97% and sports a Zacks Rank of 1 at present. ANF is likely to register top-line growth when it reports third-quarter fiscal 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.18 billion, which suggests 11.3% growth from the figure reported in the year-ago quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for Abercrombie & Fitch’s third-quarter earnings is pegged at $2.31 per share, which calls for 26.2% growth from the figure reported in the year-ago quarter. ANF delivered an earnings beat of 28%, on average, in the trailing four quarters.

Tapestry (TPR Quick QuoteTPR - Free Report) currently has an Earnings ESP of +1.95% and a Zacks Rank of 2. TPR's top line is anticipated to decline year over year when it reports first-quarter fiscal 2025 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $1.47 billion, which suggests a 2.6% fall 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 first-quarter earnings is pegged at 95 cents a share, up 2.2% from the year-ago quarter. TPR has a trailing four-quarter earnings surprise of 10.3%, on average.

Gildan Activewear (GIL Quick QuoteGIL - Free Report) has an Earnings ESP of +0.40% and currently carries a Zacks Rank of 2. GIL's top line is anticipated to advance year over year when it reports third-quarter 2024 results. The Zacks Consensus Estimate for its quarterly revenues is pegged at $882.2 million, which suggests a 1.4% increase from the figure reported in the year-ago quarter. 

The company is expected to register a rise in the bottom line. The consensus estimate for Gildan Activewear’s third-quarter earnings is pegged at 84 cents a share, up 13.5% from the year-ago quarter. GIL has a trailing four-quarter earnings surprise of 5.5%, on average.