Susquehanna Cuts Deckers Outdoor (DECK) to 'Negative'; UGG at Risk From Promotions, Says Analyst
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(Updated - October 13, 2016 10:39 AM EDT)
Susquehanna downgraded Deckers Outdoor (NYSE: DECK) from Neutral to Negative with a price target of $49.00 (from $59.00). Analyst Sam Poser said its UGG brand is at risk from promotional activity. In his view, the company is in the position of either becoming promotional and sacrificing margins in order to reduce inventory levels, or having elevated inventory and possibly missing the sales guidance, but getting the margin improvement.
"Ugg.com has introduced $20 rewards certificates that are good in store or online. We don't believe DECK thinks the rewards certificates are a promotional action, but, based on our checks, it appears as if UGG's wholesale partners view this as the commencement of a promotional fall season," said Poser.
The analyst continued, "Hence, we believe the UGG rewards will result in retailers offering $20 discounts on UGG items. Retailers such as Nordstrom, Journeys, and others are likely disturbed by the promotional kickoff to the fall season, and will ask DECK to pay for the markdowns needed to match the ugg.com reward certificate discounts. DECK also recently decided to open up distribution of UGGs to Macy's, as well as selling UGG directly to Amazon, which both disturbed UGG's longstanding loyal wholesale partners."
DECK appears to be in the position of either becoming promotional and sacrificing margins in order to reduce inventory levels, or having elevated inventory and possibly missing the sales guidance, but getting the margin improvement.
Shares of Deckers Outdoor closed at $60.98 yesterday.
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Related EntitiesSusquehanna International Group of Companies, Sam Poser
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