Deckers Outdoor's UGG Brand Is 'Under-Penetrated'

Deckers Outdoor Corp (NYSE: DECK)'s market for its renowned UGG boots is under-penetrated worldwide and the brand has "years of solid growth ahead," an analyst said Thursday.Deckers, which gets the lion's share of its sales from the brand, is down about 20 percent since it missed expectations and cut its outlook in late January. Shares changed hands Thursday at $74.09, up $0.45.Bank of America's Rafe Jadrosich launched coverage on Deckers with a Buy rating and $85 target. The company's mean rating among 21 analysts is Overweight, with a target of $85.44, according to FactSet.Jadrosich expects the company will post 7.4 percent annual compounded revenue growth between now and 2018.Decker sales grew 6.6 percent in the fourth quarter ended December 31. The UGG brand accounts for 82 percent of Deckers' revenue and the company has so far avoided much discounting, according to Jadrosich. Other brands include Teva and Sanuk.Deckers' largest account is Nordstrom Inc. (NYSE: JWN). Other accounts include Neiman Marcus and Bloomingdale's, as well as independent specialty retailers and online retailers.But most of Deckers' growth prospects now stem from direct-to-consumer and international sales, Jadrosich said.While spending as a percent of earnings has been rising in each of the past six years, Jadrosich said that ratio will soon fall.The company's operating margin will rise to 14 percent, from a current 12.5 percent, Jadrosich forecast.