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Deckers Treading into Danger?



November 01, 2012 – Comments (2) | RELATED TICKERS: DECK

Board: Value Hounds

Author: LeKitKat

I have been spending some quality time getting to know Deckers to see if we want to go steady. The price on Friday dropped to $29 after what can be described as a Q3 so ugly the neighbors close their drapes when it cleans the house in the nude.

The simple story is UGGs are a fad and the company is dead, but doesn't know it, sort of like the Walking Dead on AMC. It just needs a bullet in the brain to put it out of its misery.

I think there is something there, but management has strayed too far from the core concept that brought them to the dance and has increased revenue by 20-fold in 18 years. They have forgotten their roots and are trying to play with the outrageous trends like Jimmy Choo. Jimmy Choo platform pumps can set you back about $2000 a pair. UGGs should not be playing here and investors may be making the point obvious if management will sit up and take notice.

Deckers sells some pricey UGGs that can go for around $1000 per pair. For a shoe that started as flip flops on the beach and post surfing warm up boots, there is something unsettling about the new direction.

Jimmy Choo

This is just wrong for $1000

Without the stars buying $1K boots (and UGGs seem to have disappeared from Oprah's feet), these are destined to sit on the shelves. Wake up Deckers--celebrities have dumped you for Choo. 

2 Comments – Post Your Own

#1) On November 01, 2012 at 10:42 AM, CROIC (40.71) wrote:

Down 75% from their peak and trading at 7.2x trailing earnings, it seems like their problems are mostly priced in.

Of course that is based on the assumption that "straying too far from the core concept" is a major problem but not a death sentence.

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#2) On November 03, 2012 at 6:55 PM, johaba (< 20) wrote:

They have products at all different price levels.  I don't think you can really compare Uggs to Jimmy Choo.  In my opinion they are still popular especially among teens. 

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