Deckers (DECK) Continues to Look UGG-ly, But Are Fears Overblown?
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Deckers Outdoor Corp. (Nasdaq: DECK) is continuing lower Friday, following an 8 percent drop Thursday. Yesterday, a smaller boutique firm issued some negative comments to start the move, but later in the session an RBC analyst tried to stave-off the move, to little avail.
Reason? UGG-brand boots (and shoes).
The primary revenue driver for Deckers, UGG, was said to have seen waning demand in the market as the 'fad' wears off.
About two-weeks ago, one Sterne Agee analyst made a case following channel checks with retailers, saying "the mania appears to be gone." Click the link for more color on that call. Shares dropped almost 8 percent the next session.
Investors might ask: Will the stock continuing lower, now down 19 percent since the call, is the magic over at Deckers? From a technical standpoint, the stock is trading well below 50- and 100-day moving averages, as well as below a 50-day oscillator with 2 deviations. Generally, the last part means a stock is oversold, and a rebound might be in store over the next one or two sessions. Deckers performed the same move when it hit $75 in August, though circumstances were pegged solely on the firm.
Looking at some filings, it's hard to imagine UGG sales slowing. Sales of UGG to external customers hit $334.3 million last quarter, up 46 percent from the prior year, while operating income moved 49.1 percent higher. The number accelerated from just 17 percent of growth in the same period last year.
However, early summer sales (for the quarter ended June 30, 2011) were flat from the prior year, compared to a 32 percent jump in the preceding year.
With input costs like cotton prices, fuel, and slow economic rebound all playing as factors for Deckers and its arguably middle- to upper-tier UGG brand, do your homework and decide whether UGG is still strong, or if it's getting the boot from consumers.
Today, Deckers is trading 0.8 percent or so lower, but the volume is there.
PS - Deckers isn't the only "specialty" brand hurting out there. Peer CROCS (Nasdaq: CROX) has also seen a dramatic dip in its share price since October, down about 44 percent from a close of $26.64 on October 17th.
Reason? UGG-brand boots (and shoes).
The primary revenue driver for Deckers, UGG, was said to have seen waning demand in the market as the 'fad' wears off.
About two-weeks ago, one Sterne Agee analyst made a case following channel checks with retailers, saying "the mania appears to be gone." Click the link for more color on that call. Shares dropped almost 8 percent the next session.
Investors might ask: Will the stock continuing lower, now down 19 percent since the call, is the magic over at Deckers? From a technical standpoint, the stock is trading well below 50- and 100-day moving averages, as well as below a 50-day oscillator with 2 deviations. Generally, the last part means a stock is oversold, and a rebound might be in store over the next one or two sessions. Deckers performed the same move when it hit $75 in August, though circumstances were pegged solely on the firm.
Looking at some filings, it's hard to imagine UGG sales slowing. Sales of UGG to external customers hit $334.3 million last quarter, up 46 percent from the prior year, while operating income moved 49.1 percent higher. The number accelerated from just 17 percent of growth in the same period last year.
However, early summer sales (for the quarter ended June 30, 2011) were flat from the prior year, compared to a 32 percent jump in the preceding year.
With input costs like cotton prices, fuel, and slow economic rebound all playing as factors for Deckers and its arguably middle- to upper-tier UGG brand, do your homework and decide whether UGG is still strong, or if it's getting the boot from consumers.
Today, Deckers is trading 0.8 percent or so lower, but the volume is there.
PS - Deckers isn't the only "specialty" brand hurting out there. Peer CROCS (Nasdaq: CROX) has also seen a dramatic dip in its share price since October, down about 44 percent from a close of $26.64 on October 17th.
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