Just days after Deckers Brands’ stock took a tumble on a significant third-quarter earnings miss, news that Marcato Capital Management purchased a 6 percent stake in the firm sent shares jumping in after market trading on Wednesday.
The activist hedge fund disclosed in a filing with the U.S. Securities and Exchange Commission on Wednesday that it had snapped up 1.9 million shares in Deckers Brands and that it plans to have discussions with the firm’s management, board and other shareholders around enhancing shareholder value.
Specifically, the filing says that Marcato intends to engage with the firm’s leadership on “various operational initiatives or broader strategic initiatives including, but not limited to, potential acquisitions or sales of/or involving [Deckers] or certain of [its] businesses or assets.”
There has been chatter for some time that Deckers or, at least, several of the brands in its portfolio — comprised of Teva, Sanuk, Ahnu, Hoka One One, Koolaburra and breadwinner Ugg — were on the selling block. While Marcato’s move has further fueled speculation in this regard, Susquehanna Financial Group LLLP analyst Sam Poser sees the move as an avenue to create managerial changes and doesn’t anticipate a full on takeout.
“While a takeout may appear possible on paper, we believe a sale to a strategic buyer is unlikely,” Poser wrote Wednesday. “In our view, strategic acquirers want to buy a company with a seasoned merchant and product team. The Ugg brand, which makes up 83 percent of Deckers’ revenue, needs to be tuned up a great deal, in our view, before a strategic suitor is found.”
Poser added, “That said, a financial sponsor could take Deckers private and attempt to engineer a suitable return by selling tertiary brands and fixing Ugg. However, the UGG brand would likely meet its end under the stewardship of private equity as a fix requires the intervention of exceptionally talented, brand-focused management.”
Analysts have been down on Deckers in recent months and lackluster reads on the firm were exacerbated last week when the company delivered a third-quarter sales and earnings miss.
The firm reported Q3 net income of $4.11 per share, missing Wall Street’s bet for net income of $4.22 per share. Revenues also declined 4.5 percent year-over-year, to $760 million, below analysts’ bets for revenues of $789 million.
Today, the company’s stock remains in the green following Marcato’s move. As of 12:30 p.m ET, Deckers’ shares were up more than 7 percent, to $52.55.