Deckers Outdoor (DECK): Maker of the ubiquitous UGG boots

By Elyse Andrews, Editor of Cabot Wealth Advisory
From Cabot Wealth Advisory 12/4/10 Sign up for free Cabot Wealth Advisory

UGG maker Deckers Outdoor (DECK) announced earlier this week that it’s teaming up with Patriots Quarterback Tom Brady to market its famous winter boots.

Brady, who has helped the Patriots win three Super Bowls, will now help sell UGG men’s footwear, outerwear and accessories product lines.

Deckers touted the campaign as a return to its roots, since UGGs were originally popular among California male surfers. (Brady is in fact from California.)

Analysts who follow the company raised their share price targets and upped earnings estimates for next year. This boost comes on the heels of Deckers beating analyst views for the latest quarter, with earnings jumping 24% and sales up 22%.

Editor Michael Cintolo recently recommended DECK in Cabot Top Ten Weekly, writing this:

“Success in retail footwear sales is largely a matter of brands, and Deckers owns three, two of which have high visibility. The company's top brand is UGG, a line of fashion boots headlined by the tan sheepskin numbers that appear everywhere from ski resorts to urban malls. Next comes Teva, an outdoor footwear company whose history began with the creation of the world's first sports sandal back in 1984. And then there's Simple, a line of sustainable shoes in simply hip styles. UGG is the big dog of the group, bringing in 70% of 2009 revenue via wholesale, and 89% if you count the 10% of revenue from direct retail and 9% from e-commerce sales. Teva contributed less than 10% and Simple kicked in about 1% for the same period. UGGs have been a hot fashion item for an unusually long time, which is a tribute to the company's care and feeding of the brand. The company's strategy of moving toward what its CEO calls an international wholesale distribution model promises higher margins and continued growth. One strong recommendation for Deckers is an unbroken string of annual earnings growth that stretches back to 2002. The stock got a boost a couple of weeks ago when it picked up coverage from another analyst.”

Mike advised buying the stock on weakness, saying it was overextended after a great run up. The stock has only soared more this week after the Brady announcement, but could be a good buy again once it cools off a bit. So put it on your Watch List and monitor it closely.

Elyse Andrews
Editor of Cabot Wealth Advisory
 
Elyse Andrews edits Cabot Wealth Advisory, a free email newsletter that offers independent, no-nonsense investment advice on how to build long-lasting wealth written by Cabot's analysts and editors. Every Saturday, Elyse writes the Weekend Digest, which includes her column and a summary of Cabot Wealth Advisories that readers may have missed during the week. Elyse is also a regular contributor to The Iconoclast Investor, a blog for Cabot editors and readers to share their views and interact with each other.