Deckers Signaled Growth at the ICR XChange Conference



On January 17th 2013, Deckers (NASDAQ: DECK) participated in the 15th annual ICR XChange conference in Miami, Florida. There, Mr. Zohar, Chief Operating Officer gave the presentation and several pieces of information are worth mentioning. So, here is a recap of that conference.

Brand Portfolio.

The company gave us a breakdown on the sales and what percentage is attributable to each of the brands they carry.

 ·         UGG Australia           84%     -Decreased from 87% on 2011.
·         Teva.                          9%       -Reaccelerated on the 3rd quarter (growth of 21.8% y-o-y)
·         Sanuk                         6%       -Showed a 17% growth y-o-y on its first comparable quarter
·         Other                          1%       -Ahnu, Tsubo, Mozo & Hoka.

One thing I noted while reviewing their 3Q12 income statement once again, was the fact that overall revenues showed signs of improving. While in 2011 Deckers reported 1,377M on revenue, if we take a look at their last twelve months, this number shows an increase of 1.7% for a total of 1,401M.

2012 a Challenging Year.

Mr. Zohar continued the presentation reviewing what the year 2012 meant for Deckers. He noted that weather – being warmer than average – had an impact on the business. Also, he noted that the macroeconomic conditions in Europe played an important role on the sales in that part of the world. Sheepskin (a key component of the UGG boots, the main source of income) costs increased significantly, therefore, putting pressure on margins.

This is not new, management has been telling us this for a while now, and as a matter of fact that was the reason they kept lowering guidance during 2012. However, I do believe that a shift to that trend is happening right now. A Business Insider article by Kim Bhasin noted that the hottest product that shoppers were looking for during Thanksgiving holiday was in fact the UGG boots, and the results of that, has yet to be released on the next earnings report.

Weather, this small-yet-important factor, is also playing in favor of Deckers. At least in the United States, colder temperatures have been registered during the last couple of months, making the UGG boots more appealing than they were 6 months ago. This can also translate into higher sales for this 4th quarter 2012 and 1st quarter 2013.

Sheepskin costs will be lower for this 2013. Mr. Zohar said on the conference that prices of sheepskin have been locked at an 11% reduction compared to 2012. With this, margins will be wider, affecting positively the bottom line.

International Markets.

Though Europe is still struggling with the macroeconomic conditions, the company gave two good indicators of international presence and growth; Asia, Japan sales, to be more specific, grew 80% from a year ago putting Japan as the #3 market for Deckers. China also showed improvement of 70% from 2011 placing the People’s Republic of China as the 4th biggest market.

Store Count.

In my opinion, here is where the real profit for the company will come in the next couple of years. Deckers opened 30 new stores in during 2012 bringing the total store count to 77, that’s an increase of 63% in one year. Sales per square foot is averaging $1,700.00, that is pretty much in line with Coach (NYSE: COH) with $1,824 per square foot - according to Kim Peterson in an article published in 2012 - and roughly 55% of what Tiffany (NYSE: TIF) is doing - $3,085 per square foot .

That alone, is no indicative of the future performance of Deckers, but, if we consider that the company plans to have 200 stores by 2014 and that, as per Mr. Zohar, marketing campaigns budget increased to 5% from sales compared to a 4% from previous year, we can then get an idea to where the company is heading with its retail stores.

Deckers is diversifying to other products as well. Handbags, accessories and apparel are some examples of the items they are promoting in order to bring the company into a year round business and not only winter concentrated. The Sanuk brand for example, is a sports action brand targeting young individuals. This brand competes directly with Sperry Top-Sider owned by Wolverine World Wide (NYSE: WWW) and with crocs loafers which of course is a trademark of Crocs (NASDAQ: CROX).

There’s still more road to be covered by Deckers and its management team before investors realize that a positive shift in the company has occurred, but this can give us a good indication that things are improving.

If you like my work and want to support me, click on a link from one of our sponsors or do it directly by donating to my blog on the top right corner of this page.

 To read more about stocks and stock discussions, like me on Facebook or join my community on Google+


      

Comments

Post a Comment

Popular posts from this blog

The Fiscal Cliff Won't Stop Facebook From Soaring!

Image
Now that the so-called fiscal cliff is almost a certainty, and fear among investors is growing by the minute, should we run for the exit or should we embrace the pain and see it as a buying opportunity? About a month ago I wrote an article on Facebook (NASDAQ: FB) and listed the reasons why I thought the stock was poised to go higher. Now, after these few weeks I want to add to that article several new pieces of information and make an even stronger point about the stock soaring during 2013. Facebook Gifts. It was introduced as a prototype or beta version right by the time when the latest earnings call was released. Now, we can see it in full mode all over the social site. I find it very useful and as a matter of fact I became a happy customer a couple of days ago. Though it is true that I haven’t seen any of my friends used it so far, I think it’s just a matter of time for it to happen. It truly helps to be able to give a little something to the ones you care even with...
Read more

Greed Will Make You Lose!

Image
“The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works…” that’s a memorable quote from the controversial Gordon Gekko in the movie Wall Street from 1987. However, that doesn’t apply in real life, or at least not all the time. If you are too greedy looking for profits and don’t pay attention to every aspect of a company you’re investing in, you may end up paying the ultimate price of greed. And that is, losing your money! For those of you, who are investors of Sprint (NYSE: S), and got in somewhere at the beginning of last year (2012), nothing is sweeter than watching your investment almost triple in value. Shares of Sprint were trading on the low range of the $2 mark during January 2012 and have just touched their 52 week highs of $5.97 this Tuesday. Yes, that is a gain of +184% from its 52 week low. But, staying on this boat for 2013 may be too dangerous and greedy if you ask me. Let’s take a look at the reasons th...
Read more

My Positions on Under Armour 1 Day Before Earnings Release

Image
As I've mentioned in previous articles I believe the Company will go lower in the next few months. I have backed my words with some of my money on PUT options in the mid-single digits expiring in July 2018 and January 2019 as you can see on the picture of my position. I've explained how the company is expecting to be more levered in the next coming months and how their financials are deteriorating as presented in their most recent 10-K filing. I have also given you my personal opinion on why I believe the company will experience lower margins during this fiscal year and an my overall thesis on why I think there's more trouble ahead for the company. However, I am only human and my fears get to me. Market sentiment is on the rise, companies have been beating expectations and I can't do but wonder if my research will hold true. I still believe that the company still has to clear some hurdles before a turnaround is in place. Interest expense is a clear exampl...
Read more