Is It a Good Idea to Buy UGGs This Winter?

Many investment firms thought it would be a good idea to buy Deckers Outdoor Corp (NASDAQ:DECK), distributor of the UGG brand boots, going into the fall season. Now that we are several months closer to winter is it an even better idea to follow these funds into Deckers?

UGG is Deckers’ mid to upper-priced comfort brand of luxury sheepskin footwear. The company’s other types of footwear include sports and performance brands. Given the usually warm winter of 2011, the sale of UGGs and Teva boots have not met expectations, putting pressure on the stock; the stock is down over 50% year to date. The UGG brand accounted for 87% of Deckers’ 2011 sales.

Christian Leone

Deckers reported 2Q revenue of $174 million and EPS of negative $0.53, versus EPS estimates of negative $0.60; retail comps were up 6% and e-commerce sales were up 40% year over year. 3Q revenue growth is only expected to grow 1%

Deckers was down as much as 16% after its 2Q earnings announcement on poor guidance, then rebounding to over $50 before toppling to below $40 earlier this week on a report from Sterne Agee’s analyst Sam Poser that UGG sales were off to a slow start for the holiday and winter season.

Deckers’ trailing P/E ratio is 9. Analyst estimates put the company’s earnings at $5.27 per share for 2013, a 19% increase over estimated full-year 2012 figures. This gives investors some confidence in a strong UGG rebound and puts Deckers’ forward P/E at 7, and the PEG ratio based on a five-year growth rate at 0.85.

Deckers did attract some notable interest from funds, including a 400% increase from Christian Leone’s firm, Luxor Capital Group, who now owns 2.9 million and is Deckers’ top owner (per their 2Q 13F) of the funds we track. Also, Owl Creek Asset Management and Nantahala Capital Management took new positions in the company, with Owl Creek buying 1.6 million shares and Nantahala purchasing around 350,000. See all the funds owing Deckers here. Insider sentiment has also been on the positive side, with the latest transactions being insider purchases.

One of Deckers’ key competitors is Crocs, Inc. (NASDAQ:CROX). Crocs, much like Deckers, is a specialized footwear company, focusing on molded products and footwear. Crocs is expected to increase 2013 revenues by 14%, versus Deckers’ 11%, but Crocs also has a higher earnings multiple. Crocs’ trailing P/E of 13 and forward P/E of 10 suggest the company’s products should fare well going forward.

Other Deckers competitors include Steven Madden, Ltd. (NASDAQ:SHOO), Skechers USA Inc (NYSE:SKX) and Wolverine World Wide, Inc. (NYSE:WWW). When comparing Deckers to the other key footwear companies it appears cheap on a multiples basis. Steven Madden trades at a trailing P/E of 18 and a forward P/E of 14, and is expected to post current-quarter earnings growth of 20%, and sales growth of 13%.

On the other hand, Skechers posted most recent quarterly earnings that were negative, but beat EPS estimates of negative $0.12 by posting actual earnings of negative $0.04. The company appears to be in a period of transition with estimated earnings growth for next quarter at 88%, while trading at a forward P/E of 25.

Wolverine World Wide beat its most recent quarterly estimates, posting EPS of $0.48, versus consensus of $0.44. Much like the other competitors, Wolverine’s forward P/E indicates strong upcoming performance. Wolverine has earnings estimates that imply a forward P/E of 14, compared to its trailing P/E of 19.

For those investors interested in gaining exposure to the footwear industry, Wolverine might well be a better investment than Deckers for now. Deckers is on our list of “the terrible 20″, and the company faces headwinds in the upcoming holiday and winter season, as many retailers and wholesalers still have surplus inventory from last year, and will likely be cautious with new orders as the season progresses.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!