Market Overview

The Lazy Investor: Here is What Decker's Epic Stock Slide Says


I can sit here and go through an intense rundown of Decker's Outdoor valuation being supremely opportunistic relatively and going back to the glory years for the company. After all, the company has an “iconic” brand in Uggs that has managed to transcend seasons (think teens rocking Uggs in the summer). However, this exercise would be a complete waste of your time and mine. Based on my experience in valuing brands reliant on one product line for years to drive sales and earnings, the reality is that no valuation is opportunistic until: (1) the market hints it's opportunistic; and (2) a kitchen sink quarter is revealed and there are actions in place that could improve the fundamentals in the medium-term.

Here are the blunt truths on Decker's Outdoor that the market is screaming, and when combined, lead me to reiterating a sell rating on the stock (original call September 12, 2012).

•Price increases for holiday 2012 to offset rising costs will be met with resistance by consumers finding more interesting footwear choices (and other choices such as the iPhone 5) and in light of the Ugg product itself not reinventing itself enough to justify the purchase.

•The risk of slow moving holiday inventory globally raises concern on the first half 2013 outlook for sales and earnings.

•The company's other brands are not relevant enough to pick up the slack in a world where Uggs are failing to fly off the shelves.

•If the stock's decline persists into year end, one could make the case the long held view of the slow demise of Ugg mania is at hand (and then worry on holiday 2013 comes into focus).

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Markets Trading Ideas


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