Deckers Gets Upgrade As UGG Deal With Macy's Less Harmful Than Anticipated

Deckers Outdoor Corporation DECK is reaping the benefits of improved management at UGG brand, according to a new analyst report.

The Analyst

Susquehanna’s Sam Poser upgraded Deckers from Negative to Neutral and raised his price target from $89 to $104.

The Thesis

Recent industry checks indicate UGG brand management is beginning to achieve effective product segmentation, according to Poser. The analyst was previously negative on UGG, believing the decision to open up distribution to Macy’s Inc M and Amazon.com, Inc. AMZN would hurt the brand. That doesn't appear to be the case.

“We still believe that opening up UGG distribution to Macy’s & Amazon was not a good decision, but it’s appearing to be less harmful than we anticipated,” Poser said in the note.

Poser said improved management of the UGG brand along with strength from HOKA and Teva, reduces the downside risk of Decker’s stock to less than 15 percent.

Although Poser is more encouraged on Deckers, he said the company will need to materially beat and raise FY2019 guidance.

“While there are opportunities for a beat & raise, as inventory in the marketplace is clean and HOKA is trending well, we believe the current share price reflects such good news, and inventory levels remain a concern of ours,” he said. As a result, the analyst continues to see downside pressure on the stock price.

Price Action

Deckers shares were up about 2 percent Thursday at $121.40 per share.

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