Will Winter Be the Only Reason for This Company's Rise?
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Deckers Outdoor Corporation (NASDAQ: DECK) is a trusted brand of quality footwear, apparel, and accessories that has been powerfully steering the market since 1975. This California-based company is more popularly known by the six famous brands it carries: UGG Australia, Sanuk, Teva, Ahnu, Tsubo, and Mozo. Unlike other shoe companies, Deckers is favored for having a well-rounded portfolio that ranges from durable boots, casual sandals, fun flip-flops, trendy sports shoes, outdoor action partners, functional footwear, and stylish metropolitan pairs. This is the area where one of its greatest competitors, Nike Incorporated (NYSE: NKE), fails miserably.
How Decker’s Diversity Overshadows Nike
Though Nike is undoubtedly one of the biggest players in the shoe industry, which is evidenced by the $5.99 billion revenue it gained in the last fiscal quarter, market analysts have continually criticized the collection of sub brands under the flagship company for not being diversified enough. Nike currently has the following brands under its wing: Nike, Converse, Hurley, and Jordan. It has only recently sold the Umbro and Cole Haan brands to different companies, directing the profit into strengthening the production and marketing channels of its biggest sellers. Though primarily a sports shoe company, Nike’s longstanding position in the industry has yet to see strong efforts in penetrating other kinds of footwear, thereby allowing brands like Deckers to bask in the spotlight of its multiple shoe market categories.
How Other Brands Are Faring
Other big brand competitors to the Deckers shoe line are Crocs (NASDAQ: CROX), Wolverine World Wide (NYSE: WWW), and Steven Madden (NASDAQ: SHOO). The closing of the second fiscal quarter of 2013 revealed rather interesting figures referencing how well the following stocks fared in terms of return on invested capital. Deckers’ ROIC was 20.79%, Nike’s 19.17%, and Crocs’ 12.75%. Steven Madden, in spite of a rocky ride in the past year, reported a net increase in revenues and even expects stock EPS (Earnings Per Share) to reach up to 12% in 2013. Wolverine’s movement, however, has been experiencing a constant decline since September of 2012. Nevertheless, the company has taken certain measures to compensate for its loss. One of which is through the acquisition of Collective Brands.
How UGG Bested the Kindle and iPad
Decker’s UGG Australia line has been experiencing a disappointing response from the market as current trends have appeared to shun the sheepskin shoes in exchange for leather ones. Stockholders have been generating noise with the worry that their investments might be facing a steep drop. Luckily, analysts at both Sterne Agee and Janney Montgomery Scott have reiterated the BUY rating on Deckers in full faith that the movement will surely and eventually trek upward. Experian, a New York-based Internet tracking firm, strengthens this forecast by announcing that UGG was the most searched brand online during the holiday season, followed by other notable brands like Kindle by Amazon and iPad by Apple.
How Counterfeiting Is a Disadvantageous Compliment
Being such a highly sought-after brand, Deckers Outdoor is constantly being plagued with the burden of counterfeits of its products that are widely circulated in the global marketplace. This attributes to the decline in expected revenues as consumers are either purposefully or unknowingly buying the unauthentic kinds. Angela Martinez, President, CEO, and Chairman of the Board of Deckers Outdoor, publicized the company’s dedication to raise the awareness of the masses through marketing campaigns that seek to educate and encourage vigilance among shoppers who want to get their money’s worth.
Final Take on Decker’s Performance
Though the dip in sales of the UGG brand did affect total revenues generated by Deckers in 2012, the big investment firm called Janus Capital Group, through its arm, Janus Capital Management, has just increased its investment in the shoe company by 80% and now controls 10% of the total common stock. This big move by a company that provides investment strategies for financial security screams in broad daylight how Deckers’ performance is expected to rise above the rest. The warmer climate was also cited as a reason for sales to temporarily decline. On a cheerier note, analysts are positive that the coming winter storms will create a positive impact in lessening the inventories left over from the previous quarter. This, of course, does not mean that Deckers is primarily dependent on the seasons for brighter financial prospects. The fact remains that its well diversified product portfolio transcends seasonal changes and fits perfectly in every day to day condition, occasion, and situation.
RhodoraDagatan has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Crocs and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!