Sterne Agee Maintains Underperform on Deckers Outdoor After Q2 Earnings

Sterne Agee has published a report on Deckers Outdoor

after Q2 earnings were released. Sterne Agee wrote, "The extraordinarily high inventory level, $346M (+65% YOY) on hand at the end of 2Q, combined with the tepid growth forecast (+1%) for 3Q, and then the sudden acceleration to 19% revenue growth in 4Q make us wonder if this guidance is anything more than looking to Tim Tebow for divine intervention. The $308M of UGG inventory (+72.9%) is made up of 85% fall product and 15% spring product. While the company did not break down the complete makeup of the fall inventory, it did say that $80M of the $105M YOY increase were Classics and Slippers. Management confirmed that a majority of the total fall inventory are Classics and slippers as well. It appears to us that DECK management does not foresee fashion risk on the Classic product. We would say please reference Crocs (CROX-$16.23-Buy) in late '07 and '08." Sterne Agee maintains its Underperform rating and $38 price target on Deckers Outdoor, which closed yesterday at $42.13.