Are large furry boots no longer in fashion? Seems that way for investors at least.
Shares of Deckers Outdoors Corp. (DECK), the maker of the UGG line of footwear, have been trampled underfoot (of all the Led Zeppelin songs to use in the opening ceremonies for the London Olympics, Danny Boyle chose that one?) the past few days. The stock was down 8% Wednesday afternoon and has fallen more than 17% this week.
It appears that investors are nervous about a bearish analyst report from Monday. Sterne Agee's Sam Poser expressed concerns that sales of the company's boots may be slowing ahead of the holiday shopping season and that prices may be discounted.
In a follow-up note Wednesday, Poser wrote that "UGG Classics should no longer give investors a warm and fuzzy feeling. Price reductions will pressure margins for the balance of 2012, and limit the opportunities for margin growth in 2013. Inventory levels still remain a big concern."
Deckers, long a momentum darling (I wrote about how well it was doing back in November 2010), has seen better days. Some investors had already been nervous about its valuation and the possibility that UGGs were a fad that had peaked before this week's drubbing. Shares are down 47% this year and are 66% off their 52-week high.
Still, several traders on StockTwits seem to think that the sell-off is overdone.
To quote Spike Lee alter-ego Mars Blackmon from back in the proverbial day: It's gotta be the shoes. Of course, he was talking about Michael Jordan slam dunking in Nike (NKE) sneakers and not sashaying down the runway in sheepskin and rhinestone-studded boots. But point well taken.
One analyst's report about a possible slowdown should not be considered gospel. After all, consensus estimates are for double-digit sales growth this year and in 2013. That's impressive in what remains a tepid economic recovery. It seems that consumers have not fallen out of love with UGGs just yet.
A little harsh but somewhat accurate. Analysts do have a tendency to downgrade a stock as it's falling -- which isn't of great value for investors who have already had to endure a huge decline in price. Still, at least one trader seemed to think that Deckers may have peaked. And he even calls (although I believe in jest) the precise moment when it started to go south for UGG.
Ha! Tom Brady clearly is comfortable enough in his masculinity to pull that look off. Then again, who wouldn't be if they were married to Gisele Bundchen?
However, I'm wondering if the Brady curse isn't just for Deckers' stock. That Brady press release was put out on September 4. And just this past Sunday, Brady's New England Patriots suffered a surprise loss at home to the Arizona Cardinals. It's gotta be the shoes indeed.
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