QUOTE AND NEWS
Benzinga  Jun 20  Comment 
Wells Fargo analyst Evren Kopelman initiated coverage on Deckers Outdoor (NYSE: DECK) with an Outperform rating and $92.00 to $98.00 valuation range. Kopelman noted the sales momentum for several of Deckers brands including the strong demand...
Market Intelligence Center  May 21  Comment 
The patented options-trade picking algorithms used by MarketIntelligenceCenter.com found a trading opportunity with Deckers Outdoor Corp (DECK) that should provide a 5.21% return in just 87 days. Sell one Aug. '14 call at the $72.50 level for each...
StreetInsider.com  May 19  Comment 
The following is a list of notable articles to help get you through the lunch hour: AT&T (T) Bounces, Drags DIRECTV (DTV) With It -> Read this! Tesla Motors (TSLA) Pushes Back U.S. Delivery Dates as Model S Expansion Continues -> Read...
Benzinga  May 19  Comment 
Citi on Monday initiated coverage of Skechers USA (NYSE: SKX) and Deckers Outdoor (NYSE: DECK) with a Buy rating for both firms due to expecting strong momentum in 2014. Citi analyst Corinna Van der Ghinst backs the rating, citing that both...
Market Intelligence Center  May 9  Comment 
Thursday’s trading in Deckers Outdoor Corp (DECK) gives options traders an opportunity for a 4.60% return. By selling the Jul. '14 $72.50 call and buying the Jan. '15 call at the $35.00 level for a net debit of $35.85, traders will book a profit...
TheStreet.com  May 8  Comment 
NEW YORK (TheStreet) -- Sales of Deckers Outdoor's  HOKA running shoes could surge in the next two years, wrote research firm Piper Jaffray in a note to investors earlier today. WHAT'S NEW: After surveying more than 100 elite runners over the...
Market Intelligence Center  May 2  Comment 
Thursday’s trading in Deckers Outdoor Corp (DECK) gives options traders an opportunity for a 6.08% return. By selling the Jun. '14 $77.50 call and buying the Jan. '15 call at the $40.00 level for a net debit of $35.35, traders will book a profit...
TheStreet.com  Apr 28  Comment 
NEW YORK (TheStreet) -- Deckers Outdoor shares were upgraded to "neutral" from "underperform" by analysts at Credit Suisse  on Monday. The firm set a $82 price target on the shares.Credit Suisse cited international and retail growth as reasons...
Benzinga  Apr 28  Comment 
Benzinga  Apr 25  Comment 
On Thursday, Deckers Outdoor Corp (NASDAQ: DECK) reported financial results for the three month transition period ending March 31, 2014. Deckers changed its fiscal year from December 31 to March 31. The company refers to this three month...
TheStreet.com  Apr 25  Comment 
NEW YORK (TheStreet) --Shares of Deckers Outdoor Corp. are higher 5.42% to $82.72 on Friday after the company released its report for the three month transition period that ended March 31, 2014. The company, which designs and develops footwear...




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Deckers Outdoor Corporation (NASDAQ:DECK) makes niche footwear, such as sport sandals and luxury sheepskins. Like most clothing manufacturers, Decker's is subject to both the fickle fashion tastes of its consumers and general economic conditions. These vulnerabilities take on new dimensions for Deckers, however, due to the unique nature of its business. The company's main product is its UGG boot, a trendy sheepskin boot that accounts for three-quarters of its sales. The company's reliance on a single product, however, means that any shift consumer fashion preferences away from sheepskin boots will have a dramatic impact on its business. Moreover, a large part of the company's customer base consists of young middle income women, and this increases the company's sensitivity to economic conditions. The UGG boot can cost up to $300 and as such is considered a luxury by the company's customers. As a result, during downturns, UGG will be the first thing to get the boot. The company earned $265 million in revenue and $31 million i net income in 2009.[1]

Company Overview

The company seeks to offer footwear that is distinctive and appeals broadly to men, women and children. Its products are sold through domestic retailers, international distributors, and directly to end-user consumers through its websites and catalogs. Business for Deckers Outdoor is seasonal, with the highest percentage of Teva brand net sales occurring in the first and second quarters of each year and the highest percentage of UGG brand net sales occurring in the third and fourth quarters. To date, the Simple brand has not had a seasonal impact on the Company.

Products[2]

The company's products are sold under Teva, Simple, and UGG brand names. T

  • UGG - is the company's luxury comfort brand and the category creator for luxury sheepskin footwear.
  • Teva - is the company's outdoor performance and lifestyle brand and pioneer of the sport sandal market.
  • Simple - as a response to the massive amount of waste produced by the footwear industry, the Simple brand launched a new collection of sustainable footwear called Green Toe®. Green Toe represents a revolutionary shift in thinking about footwear by building a shoe from the inside out using sustainable materials and processes.

Business Growth

FY 2009 (ended December 31, 2009)[1]

  • Net sales fell 13% to $265 million.
  • Net income increased 2% to $31 million.

Trends and Forces

Consumer preferences for sheepskin determine DECK's success

The retail business depends on a company's ability to react to the rapidly changing fashion tastes of consumers and to provide appealing merchandise in a timely and cost effective manner. Specifically for Deckers Outdoor, the continued strength of Teva, UGG and Simple brands is paramount. The success of Deckers depends on UGG boots remaining fashionable. If UGG boots were ever to go out of style, as is often the case with fashion trends, Deckers could potentially lose up to 80% of its revenue. However, some features of the UGG boot that have allowed it to persist longer than most fashion trends of this kind, is that it comfortable, and, due to the sheepskin, allows a "breathability" that keeps the foot warm in cold temperatures and cool in the summer.

DECK has greater exposure to U.S. economic cycles than other retailers

A depressed economy hurts businesses that appeal to niche markets and rely on a consumer’s disposable income. Deckers is a niche market because their UGG boots, their primary source of revenue, at upwards of $200 are a luxury brand of shoe. Consumers can find cheaper shoes, even cheaper UGGs (albeit it knock-offs) if need be. Furthermore, because a significant portion of Deckers' consumers are in the middle class, Deckers will face a difficult 2008 if the economy goes through a recession as predicted.

Limited resources for supply of sheepskin

Sheepskin, which is in high demand and limited supply, is the principal raw material for most of Deckers' UGG brand products. These skins are available only during the Spring lambing season. Several problems that sheep tend to suffer from are having about a 10% natural fatality rate and many births which are still born. Two suppliers provided all of the sheepskin purchased by Deckers' independent manufacturers.[3] Furthermore, sheep are susceptible to hoof and mouth disease, which can result in the extermination of an infected herd. Additionally, the supply of sheepskin can be adversely impacted by weather conditions and harvesting decisions.

DECK is almost completely reliant the UGG boot

The success of Deckers Outdoor is linked with the success of the UGG boot, which represents 77% of their net sales. In 1998 the UGG boot began to be marketed as a high fashion luxury item with price tags of up to several hundred dollars. The success of UGGs took off as more celebrities bought into the comfortable lifestyle and were pictured in more and more magazines. However, aside from being a trendy boot, the UGG is generally recognized as comfortable and, as a result of 100% sheepskin, breathable. Deckers believes that the luxury and comfort features of UGG brand products will continue to drive long-term consumer demand, however, as a result of the significant fashion element to UGG brand they seek to prolong its longevity by offering a broader product line suitable for wear in a variety of climates and occasions and by limiting distribution to selected higher-end retailers. As part of this strategy, They have increased their product offering to approximately 150 styles for men, women and children.

Competition

A number of Deckers' competitors have significantly greater financial resources, as well as greater brand awareness in the footwear market. Competitors include athletic and footwear companies, branded apparel companies and retailers with their own private labels. Two of note are Nike (NKE) and The Timberland Company (TBL).

References

  1. 1.0 1.1 DECK 2009 10-K "Selected Financial Data" pg. 24
  2. DECK 2009 10-K "Products" pg. 3-4
  3. DECK 2009 10-K pg. 14
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