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Deckers Idea Proposal (DECK)

Deckers Idea Proposal (DECK)
 

Did Deckers’ new UGG Slim and Classic II boots drive holiday sales and reinvigorate the brand?

 

Report Available: January 26, 2017

 

Blueshift’s initial research shows DECK struggling to energize the UGG brand. Warm weather led to inventory surpluses last year, and a shift in consumer preference has hampered sales. The introduction of the Classic II and Slim line with better outsoles, water resistance, and more fashionable styles, is an effort to bring the brand back to the fashion forefront and drive sales.

 

Observations

  1. DECK’s Q2 results showed earnings ahead of expectations while revenue fell short. In what management described as a challenging consumer environment, sales of the UGG brand declined 2.1% compared to the previous year. Lower European sales due to shipment delays and a decrease in direct-to-consumer sales were cited as reasons for the sales shortfall. Q3 and full-year guidance was also lowered. Management indicated that retailers were being very cautious with reorders. On the positive side, most excess inventory had been cleaned out.
  2. Blueshift’s ongoing coverage of DECK has showed consistent weakness for the UGGs brand for more than a year. Blueshift’s Oct. 13, 2016, report found that the new UGG Classic II and Slim product line would not produce a significant sales increase for the company. Retail sources in our Oct. 9, 2015, report said non-shearling UGG boot sales were underwhelming and would not come close to covering lower sales for shearling styles. Our Dec. 16, 2015, update found continued weakness and further confirmation of a shift in consumer preference resulting in lower sales for UGGs that was not exclusively driven by weather-related sales weakness.
  3. Still, UGG has its fans and received support as a strong holiday gift this season with a possible revitalization in 2017. One fashion blogger wonders if UGGs will be trendy again in 2017 with their casual look and superior comfort, but only when worn with the right outfit. Another fashion post said UGGs will be popular again in 2017 despite their lack of stylish appeal, calling it the winter flip flop. A third fashion blogger said UGGs make the perfect gift and recommends them as an ideal holiday present.
  4. A Wall Street Journal article said U.S. retailers were on pace for their best holiday season in years after a jump in online orders and last minute shopping. Customer Growth Partners raised its holiday-sales growth forecast to 4.9% from 4.1% and Mastercard’s SpendingPulse survey showed total retail sales outside of autos and gas rose 4% from Nov. 1 to Dec. 24. However, department stores, popular destinations for UGG purchases, are feeling the pinch as online shopping continued to grow. Macy’s posted disappointing holiday sales and announced store closures, while Kohl’s lowered its forecast amid slow holiday sales.

 

How were holiday sales of the Classic II and Slim UGG boots? Did they reignite the brand this holiday season? Is the UGG product line back on trend for 2017? How is UGG faring against competitors? How is UGGs popularity? To gain insight into DECK, Blueshift will gather data and issue a market research report from independent sources in the following areas: UGG distributors and Retail personnel.

 

Companies: Deckers Outdoor (DECK), Wolverine World Wide (WWW), V.F. Corporation (VFC), Columbia Sportswear (COLM), Macy’s (M), Nordstrom (JWN)

 

Research Begins: Jan. 9, 2017