Shares of Deckers (DECK) are up 13% to $46 today after reporting earnings last night that were deemed good. Still, I’m not convinced the stock — or its UGGs brand– has regained its luster.
Miserable 2012
Deckers had a terrible 2012 as inventories piled up. The stock opened the year at $76 and closed at $40. I used to own DECK in my portfolios. I bought in at $24 on 6/11/09 and sold it at $69 on 3/7/12.
I still keep up with the stock, but have been disapointed with fundamentals lately.
When the company reported earnings two quarters ago, I was thougough when I read through the numbers. I wanted to buy back into stock, but the figures were some of the worst I have seen from a growth stock in quite some time. Everything looked sick.
Last quarter’s report (which came out yesterday) wasn’t as sick, but inventories were still high. 2013 profit estimates will likely fall again. High inventories mean your stuff isn’t selling like it should, and that means you’ll have to mark that stuff down just to get rid of it. Markdowns mean lower profit margins and lower profits. High inventory is like the worst thing for a retail manufacturer (that’s why I sold DECK a year ago).
I want to get back in DECK, the trouble is I don’t know if the UGG brand (which is around 90% of Decker’s business) is as hot as it once was. Here in New York City I see a lot of people settling for knockoffs.
Hire A Stylist
The real problem with Deckers is the company hasn’t livened up the UGG assortment. They still look like the boring UGGs from five years ago. Get some style, seriously. I own a pair of Men’s UGGs and they are great! Warm, waterproof, leather with shearling. I just wish they were more stylish. They aren’t as high-end as dress shoes, and that would help in NYC when you’re going to a nice event when its snowing/raining out.
Sharek’s Take
I think DECK is a good buy when it falls into the $30s. Here at $45 you’re reaching. This stock was a big winner for a very long time, so there’s the possibility it could regain its luster. But for the stock to gain back its luster, the shoes have to first. Hire a good stylist Deckers, you need it.
