Whisper of the Week: Decker's Outdoors
Trying to buy a pair of Ugg boots last winter was harder than trying to score a date with Angeline Jolie. If you're not familiar with the sheepskin footwear, head down to Fifth Avenue this December--these kneehigh Austrailian premium products sell for $100-250 dollars a pop, but move faster than Marion Jones. In 2003, Deckers--the Southern California-based company which manufactures these once strictly-for-surfers accouterments--got more press than Nike and Timberland. The question is whether Ugg boots are part of a brand or a fad--we really don't know yet.There's two sides to the coin, really. On the one hand, retail products are man-headed beast, subject to the vagaries of the consumer. Anyone remember Pet Rocks? Let's not forget that as the number of knockoffs proliferate, a company's bottom line will inevitably take a beating. No wonder then that to beef up their competitive advantage, Decker's recently introduced an accesory line to complement theie boots. Hats, gloves, scarves, you name it. Ugg(h).
On the other hand, if fiscal results mean anything, these boots were meant for stomping and that's just what they'll do. Deckers (NASDAQ: DECK)--reported table-pounding results for the first quarter of 2004; sales for all of 2003 sang to the tune of $37 million. But here's the kicker: Third quarter income was $5.8 million in 2004, compared to $480,000 for the same quater in 2003. Since that hair-raising October report, the stock price has gravitated back towards its 52 week high. We're excited because the stock market always look forward at least six months--leading us to believe that investors are expecting another strong holiday for the company. C'mon, even Oprah Winfrey wears these things.
As Salim Haji noted a while back in a Motely Fool article, the predicament at Deckers is akin to what Buffet called the "Monopoly/Hula Hoop" conundrum--Are we investing in a company who's selling the short term sizzle or a company with proven and sustained long term growth? Deckers' other product lines include Teva sandals and Simple shoes--which today are clearly not the shelf-clearing items they were during the mid-90s. In ten, twenty years, will your Ugg boots be in the same bin as your Cabbage Patch Kids? Who knows. This holiday, short the skin, buy up the stock. Just make sure to blow out the position when the first lilacs appear.
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