Activist Investor Ups the Pressure on Ugg Parent, Nominates New Board

UGG Classic Boot
UGG Classic Boot
Courtesy of Nordstrom

Update (Wednesday, 7 p.m.): Deckers issued the following statement on Wednesday afternoon: “The board will carefully review and consider Marcato’s candidates as it would any other potential directors to assess their ability to add value on the board the benefit of all stockholders.” Deckers said it welcomes open communications with its shareholders, but it is the company’s policy not to comment on individual stockholder discussions. The company went on to say: “It is important to note that members of the board and senior management team have held a number of discussions with Marcato during the past eight months and those discussions remain ongoing.” Deckers also added that it continues to review strategic alternatives.

Earlier we reported:

Marcato Capital Management LP, an activist investor with a 6.1 percent stake in Deckers Brands’ shares, has made good on its promise to nominate a full slate of new directors to replace the Ugg parent’s existing board.

The hedge fund today nominated 10 new members — including L.L. Bean SVP and chief marketing officer Steve Fuller, David’s Bridal president and CEO Robert Huth, Ralph Lauren head of global human resources Mitchell Kosh and former Michael Kors executive Anne Waterman — to replace Deckers’ current board at the company’s annual shareholder meeting on Dec. 14.

In connection with the nominations, Marcato sent a letter to Deckers’ board — echoing similar sentiments of a letter the activist investor sent to the company in June — criticizing the company’s “ongoing underperformance and failure to take corrective actions to improve profitability and shareholder value.”

Deckers has enjoyed a strong, profitable brand with Ugg for many years, yet has failed to translate this enviable position into growth in earnings and shareholder value,” Marcato managing partner Mick McGuire said in a release today. “Given the company’s significant underperformance compared to peers, coupled with the board’s failure to take the necessary corrective strategic action, we believe change is required.”

McGuire had said in June that he would attempt to overhaul Deckers’ board if the company’s strategic review process — announced in April — didn’t result in a sale.

Marcato took its first bet on Deckers in February — snapping up 1.9 million shares on the heels of significant third-quarter earnings miss that had sent Deckers’ stock tumbling.

The activist investor said today that since then, its attempts to engage constructively with the company’s board to add new directors and “develop a strategy focused on profitable growth while improving margins and returns on invested capital” have been “met with significant resistance.”

While we appreciate that the company is undergoing a strategic review and we are eagerly awaiting the results of that process, we continue to believe that Deckers lacks proper oversight,” McGuire said today, doubling down on his intentions to push for a full board replacement “should the company’s process not culminate in a desirable outcome.”

Other members of Marcato’s proposed board include Horizon Group USA president Deborah Derby; former Morgan Stanley managing director Kirsten Feldman; Marcato partner Matthew Hepler; CEO of J. Rogers Kniffen Worldwide Enterprises LLC Jan Kniffen; former Affinion president and CEO Nathaniel Lipman; and former chairman, president and CEO of Tween Brands Michael Rayden.

Former Deckers CEO Angel Martinez serves as chairman of its current board. Other board members include: Deckers president and CEO Dave Powers, Google executive Bonita Stewart, former Coach CFO Michael F. Devine III and former Tiffany & Co. president James Quinn.

Deckers hero brand Ugg has experienced uneven sales for much of the past two years; however, the firm’s most recent earnings release showed signs of improvement. Still, management attributed at least some of the gains to shift in fall order shipments and not necessarily heightened demand.

As of 2:45 p.m. ET, Deckers shares had edged up more than 1 percent to $64.35.

Deckers did not immediately respond to Footwear News‘ request for comment.