What doesDollar Tree have to do with Deckers you might be asking. Well, if one goes back to 2nd and 3rd quarter of 2007 when fuel prices went berserk(150/barrel), Dollar Tree which only sells things for $1 or less was facing some tough times as the fuel costs bit into what would have been more profit.
The stock sold off 40-50% through the 2nd and 3rd quarters. Management said that is beyond their control and all they can do is try and continue to deliver what customers need and want and fuel wll do what it does.
We have the same thing here. Deckers has products that customers want. In the last two years, Sheepskin has gone up 40% and 30% respectively, obviosuly biting into out profits/margins/sales. Stock has sold off 50% this past year, just like Dollar Tree's did.
Both companies have used sell-off's as great oppurtunities to buy back sahres at cheap prices. They both don't give dividends and if you look at both charts from 2006-2012, both have returned 400% or so to investors. Both have happened to have had an off year last year with Dollar Tree returning flat to slightly down and Deckers on sale 50% off.
My point though is that our management has been dealing with our problems the same way Dollar Tree has in the past. Angel and Co. understand the problem that sheepskin is costing us and are trying to innovate away from sheepskin(which has been working) as well as by readjusting the price points we are selling the products to better match consumer expectations.
Dollar Tree after that awful year of 2007 went on to return more 400% money of money to investors and if you would have excluded 2012, Dollar Tree actually returned more than 700%.
These are short term problems for companies. Companies by their nature must face these problems. But with both companies, management is top notch, they understand the problems, they are smartly using cash to buy back shares on the cheap, and the customer loyalty is as high as they come.
It is why they are both long ter winners and my top two picks for the next decade.