Building a footwear empire on sheepskin boots? As a business plan, it sounds sketchy. But in the hands of Deckers Outdoor (DECK)
, selling high-quality UGG sheepskin boots is paying off handsomely. The company’s five-year sales growth rate is a stunning 33 percent. Being part of a strong and growing footwear category helps. Shearling boots posted a 7.5 percent sales rise in 2010, according to The NPD Group.
Avoiding the one-trick company death spiral is now the challenge. Deckers Outdoor is aggressively expanding its UGG brand, which accounted for 87 percent of net sales in 2010, to include sandals, clogs, and men’s footwear. The company recently bought Sanuk, which makes sandals and shoes. It’s also expanding its small but growing Teva line of outdoor performance footwear.
Not surprisingly, second-quarter sales beat analysts’ expectations. Deckers Outdoor net sales rose 12.5 percent to $154.2 million versus $137.1 million a year ago. Domestic sales grew 26.9 percent. In the third and fourth quarters, total company sales are slated to surge, notching 20-plus percent growth. The reason: UGG footwear is still largely seasonal. People wear them when it’s cold, naturally.
Other brands gaining speed
Given the impressive growth, Deckers Outdoor has lots of fans. Of the 13 analysts followed by Thomson/First Call, six have strong buy recommendations and four have buys, with only three holds.
S&P analysts agree. They have a buy rating on the footwear company, citing UGGs growing market share in North America, Europe, and Asia, along with growth possibilities in the Teva and Sanuk brands. The company reports next in late October.
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