Last week, Sports Executive Weekly reported that Deckers stock outperformed every other publicly traded sporting goods company on the market with a 520% increase in trading value. Other companies on the list like LaCrosse and Rocky Shoes & Boots were awarded Military contracts which spurred investor’s interests, but Deckers has something entirely different behind its stock – fashion.

The Ugg brand, while still relatively small in comparison to other Deckers brands like Teva, has taken off. Thanks to strong exposure from TV and movie stars sporting the boots around town, the brand has experienced tremendous sales growth – albeit off of a low base.

Deckers sold out of the sheepskin boots made in Australia and New Zealand, and shortly thereafter they were selling on eBay for 2-3 times their normal retail price.

Deckers has sold around $32 million worth of Ugg branded product in 2003, up 36% from $23.5 million in 2002 and up 68% from $19 million in 2001.

But some analysts aren’t so sure of the brand’s impact on overall DECK results.

“The Ugg phenomenon has all the hallmarks of a fad,” said Harris Hall, an analyst at Wedbush Morgan Securities, in a local paper. “The fundamentals are great, but the stock has gotten ahead of itself… It's still a shoe company, and the underlying business isn't growing at 400%,” said Hall.

Currently, Deckers stock is valued at 21 times the predicted earnings for next year, and while analysts think that the stock is tapped out, Deckers CEO, Douglass Otto begs to differ. “We've barely scratched the surface in our distribution,” he said in a published report.

Otto went on to say that the company plans on an East Coast push to gain the same acceptance in Manhattan that the brand has seen in Hollywood.

Amid all of the hype for the Ugg brand, rumors have been circulating about a potential buyout of the company.
Otto would not comment on the possibility, but Deckers has acquired the services of the RBC Capital in response to an apparent unsolicited bid for the company.

DECK shares fell 14.3% last week to close at $17.70 on Friday.


>>> What appears to be lost on many is the real increase in value for the company since its acquisition of the Teva brand. The kid gloves are now off and Deckers can explore – and exploit – more product categories and distribution channels than ever before