Market rumors suggesting the Ugg Australia brand could be in play are unfounded, analysts told Footwear News Tuesday after shares of its parent, Deckers Outdoor Corp., closed 3 percent higher at $36.27.
“I don’t know what’s driving the stock other than it’s cold and wet outside,” said Camilo Lyon, analyst at Canaccord Genuity. “I think [a possible sale] is ridiculous. It’s not an imminent possibility.”
Sam Poser, analyst at Sterne Agee, quipped, “It’s all conjecture.”
Bloomberg news service suggested in a report Monday that Deckers is undervalued, based on data showing that the Goleta, Calif.-based company closed the market last week at 8.2 times profit. That makes it the most cheaply valued billion-dollar footwear company drawing interest from private-equity firms and strategics such as VF Corp.
But while Deckers has indeed lost nearly 70 percent of its market capitalization compared with a year ago, analysts said it is too early to tell if Deckers is indeed undervalued because its actual value can’t be determined yet by any potential acquirers.
“If it’s going to happen, it’s not going to happen until people know exactly how healthy the brand is,” said Poser.
Lyon agreed: “The brand is in a transitional phase right now, so there’s difficulty pinpointing what the forward run rate of the business will be. The critical moment is between right now and Christmas.”
Mitch Kummetz, analyst at Baird Investment Research, said after meeting with Deckers COO Zohar Ziv and CFO Tom George earlier this month that he still believes Ugg performance should improve with better weather because the brand has a loyal consumer base.
“Sheepskin boots may be synonymous with Ugg, but in recent years, Deckers has transitioned Ugg into a broad-based comfort footwear brand, albeit recent unfavorable weather and a tough European macro is having an adverse impact on performance,” he said.
For his part, Scott Krasik, analyst at BB&T Capital Markets, said channel checks in the tri-state area over Black Friday demonstrated “Ugg remains the No. 1 footwear brand for holiday purchases.”