Though the raw expense of boot materials (sheepskin) may weigh on the company’s fundamentals in the near term, we think the market has generally overreacted to the these headwinds. Regardless of how fashionable men think the company’s flagship Ugg boots are (often nicknamed „Ugg-ly), we think they’re among the most dominant women’s winter footwear brands, along with Sorel (NASDAQ:COLM) and North Face (NYSE:VFC). And why wouldn’t they be? Other than their subjective and questionable appearance, objectively they are among the warmest and most durable winter boots for women (and men). Football star Tom Brady’s advertising campaign may not have struck a chord with too many men,Uggs äkta päls but we still think Ugg’s is a fantastic brand with some staying power.
But however great the boots may be for winter weather, a great deal of America, where Decker’s does about 70% of its business, hardly experienced any harsh winter weather at all. In fact, February, often the most dreaded and miserable of the winter months, was by all accounts mild and bearable. Though this makes for happy citizens across traditionally cold markets, one can clearly see that this isn’t good for a brand predicated on miserable winters. And we wonder if this will threaten the firm’s ability to hit its 19% revenue growth target for the first quarter of this year.Deckers Outdoor Corp. (NASDAQ:DECK) has an amazing business.Uggs äkta päls Since 2001, it’s grown revenue at a CAGR of 33.5% and it continues to grow in 2008. More importantly, it’s grown EPS at a CAGR of 55.6%. But what’s probably the most amazing thing about this business is that it’s grown with minimal reinvestment. A significant portion of FCF has been put in the bank each year, growing cash & investments from $3.9 million in 2002 to $175 million LTM. This compares to total CFO over the same time period of $212.6 million. Of course, past performance is no guarantee of future success, but it doesn’t matter because you’re not paying for it. The stock trades today at 10x earnings. On an EV basis, it’s about 20% cheaper.
Though we think the unseasonal winter weather is an anomaly, retailers like Nordstrom (NYSE:JWN) may hold greater power in the supply chain, as in our opinion, Uggs aren’t viewed as „must-haves“ anymore. Further, Nordstrom took steep discounts and was forced to sell several popular styles through its discount arm rather than at full prices. We think this could hurt Decker’s margins in the near-term, but we think the relationship will balance out in the long run.Uggs äkta päls DECK manages a portfolio of footwear brand names including UGG, famous for their women’s sheepskin winter boots that are so comfortable half the buyers refuse to wear them with socks. For obvious reasons, fashion aside, UGG lovers have to buy a new pair every season. DECK also manages the Teva brand name, which provides some counter-seasonality to the UGG brand, and three other smaller brands, Simple, TSUBO, and Ahnu which specialize in environmentally friendly footwear, high-end casual comfort shoes, and trail-running sneakers respectively.