Why Deckers Outdoor Corp (DECK) Shares Are Rise-and-Fall: The Jefferies Group, Inc. (JEF) Effect

The value of being trendy
All of these issues are compounded by the fact that Deckers is a one-trick pony right now. For the first nine months of 2012, the company made 84% of all its sales in its Ugg line. The second-closest performer was the company’s Teva brand, which made up a mere 9% of sales. This is the same sort of problem that competitors like Crocs, Inc. (NASDAQ:CROX) and Skechers USA Inc (NYSE:SKX) have been facing.

Crocs watched its shares tumble over the last year, though not as far down as Deckers. In response to its trend-driven sales, Crocs has introduced new lines and looks that it hopes will expand the brand’s appeal. Investors will see if this worked later in the year when 2013 spring sales figures are released.

On the other end of the success spectrum, Skechers used 2012 to break out of its trendy, one-kind-of-shoe dependence. It helped that the shoe it was trying to distance itself from was the “make you fit while you walk” Shape-ups line, which turned out to violate some consumer protection laws. But it managed to free itself of that past, and 2012 was a banner year for the company. It should certainly help inspire Deckers as it moves into 2013.

The bottom line
Deckers still has a lot of work to do before it’s going to be an excellent company. While its cost issue may no longer be a problem, the company still needs to expand beyond its current brand single-mindedness if it’s going to be able to weather the next storm. Jefferies may be upbeat on the stock, but that’s no reason for investors to jump on board just yet.

To finish on a fun note, here are quotes from two of Deckers’ 2012 earnings calls. Guess which one came after the good earnings release.

“[Uggs] is a not a cold weather brand, it is a comfort brand as I said on many occasions.”

vs.

“Like the U.S. and Europe, we believe that our stores in Asia were affected by warm weather in the third quarter.”

The article Why Deckers Shares Are Rise-and-Fall: The Jefferies Effect originally appeared on Fool.com and is written by Andrew Marder.

Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool owns shares of Crocs and Skechers.

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