Analysts are mixed about the health of the Uggs On Sale brand even after Deckers Outdoor Corp. reported a disappointing first quarter and also lowered full-year guidance last Thursday.
“While things look their darkest, a few bright spots include better than expected domestic Ugg orders for fall, strong sales of Ugg spring product, positive comps in the U.S., and abating sheepskin prices,” said Christopher Svezia, analyst at Susquehanna Financial. “Overall external factors are creating a perfect storm and not the Ugg Boots On Sale brand.”
Scott Krasik, analyst at BB&T Capital Markets, agreed, saying, “Demand for Ugg classics at new, higher price points will not be answered until the weather gets colder in September or October. [Channel checks] and management confirmed on the call that there has been no pushback from retail partners on price increases already taken on classic Ugg Boots product.”
But Sam Poser, analyst at Sterne Agee, is in another camp.
“Back in 2008 and 2009 during the large downturn in the U.S., promotions had women eating ketchup for a month to get a pair of Ugg Outlet boots,” Poser said. “The commentary that distributors are pulling back and weather is negatively impacting the Asian retail business makes us very concerned about the long-term health of the brand.”
Angel Martinez, the firm’s chairman, president and CEO, told analysts on a call that “the biggest negative is weather, obviously. No one expected that we would take such a swing from 2010 winter to 2011 winter. The positive has been the way the brand has held its own. Particularly as you look at the sell through of our spring line, the spring product has been checking extremely well. The men’s business has been performing well. The kids’ business has been performing well. So, the only places that we’ve struggled are really where there’s a real seasonal impact to the weather.”
Speaking specifically about the domestic wholesale channel, Martinez said slippers, classics, fashion, casual boots, sneakers, and casuals all booked well for the fall.
“http://www.cheapuggsbootsonsale.in.net percentage of the total open-to-buy dollar pool has not diminished at the brand, especially in the back half of the year, remains as important if not more important to the retailers with whom we do business,” Martinez said.
Outside the U.S., the U.K. remained challenged while Benelux had a very good first quarter.
“The bottom line is the Ugg brand is more evolved in Benelux thanks to a much wider selection of product, including a broader offering of spring styles,” said Martinez. “We still view Europe, particularly northern Europe, as having an ideal year-round climate for Ugg brand products, and believe the current softness is more macro related and not indicative of the brand’s appeal and long-term growth prospects.”
Asia grew at a fairly rapid clip, Ugg Sale with wholesale performance in Japan has continuing its rebound from last year’s tsunami and earthquake.
Meanwhile, Teva brand sales decreased 1.1 percent to $49.8 million. Sanuk, the newest brand to Deckers’ portfolio, performed better than expected, and brand sales are still expected to be approximately $90 million for the full year.
For the period ended March 31, the Goleta, Calif.-based firm earned a net income of $7.9 million, or 20 cents a share, down from $19.2 million, or 49 cents, a year ago.
Revenue advanced 20.2 percent to $246.3 million.
Deckers now expects 2012 sales to increase about 14 percent over 2011, compared to previous guidance of about 15 percent. However, it expects EPS to decrease 9 or 10 percent from 2011 levels, compared to flat previously.
The firm ended the period with cash and cash equivalents of $228.6 million.