For those who have not followed this stock as religiously as I myself have, I'll illustrate why both earnings(most important) and revenues will grow over the next 3-5 years pretty significantly.
1. UGG PURE- UGG Pure is pure(pun intended) innovation. After setting record earnings of 199m in 2011, sheepskins 2 year climb of 80% took its effect and put the company in a bind. It showed how painful reliance on one type of product with one type of material can really make a company's earnings vulnerable(no matter how popular a companies products). UGG PURE per CEO Angel Martinez's own word will provide significant savings to the bottom line the more it is integrated(10% for 2013, 25% next year or thereafter, and more than 50% long term). So sheepskins powers can be said to have been mitigated by 50% which provides instant relief/stability.
But not just that. UGG Pure per CEO's words also allows for better product to be made. Meaning better form fitting product and the great part of all this is that when tested on consumers, the vast majority could really not tell the difference.
2. Store growth- Most importantly this will allow the company to tell its own story to the consumer. It will enable us to grow in places we have not been showcased as well as places never been before(international). This will bring in more growth by growth itself.
3. New product- Moving away from the traditional UGG boot, the company is taking on steve madden and others and entering the leather boot market, thereby diversifying the UGG brand off just the popualr classic. Hnce, there WILL be growth there.
4. Stores that sell our product- CEO Angel Martine has stated that he has always wanted the stores that sell the classics to take on more of their product, and it has not been so easy. But now he has stated in one of the past 4 quarter earnings reports that the company will be driving a much harder line with those unwilling to take on more diversified product from UGG.
Forgot to add any potential aquisition over the coming years. Company has a 300M credit facility, and is virtually debt free and over the coming 3-5 years, should make some nice cash to the tune of 400-600M(high end) which coupled with the credit facilty could be used to buy another brand. Don;t see any thing worth buying but what do I know. I just invest...I leave the hard work to management.
These business's will not want to lose the winter moneymaker business that is the classic. The UGG store growth will show these business's that Deckers means business in that it is going to be increasingly telling its own story more and more...somewhat mitigating those stores that don;t want to play ball. I am not saying UGGS doesn't need or want its partners. It indeed does. But a partnership works two ways, we help you(give you great product), you help us(help us grow even more by taking on newer product). So that will also help Deckers/UGG revenue grow as these business's all want to make money and aren;t going to throw away the money.
One does need to understand though that this is a 3-5 year story. The market will only give so much of a premieum each year. I don;t believe there is a real enough premium built in yet to reflect any serious risk(which is why one does see insiders just sitting and waiting patiently). But for a world reknowned brand growing both its store count and its product, how it deserves a lowly 14 foward PE is just headscratching. But market is prone to do that all that time both in overvaluing business's with expensive premieums that one can logically see over time will not be lived up to and vice versa by undervaluing a business that one can logically conclude WILL grow over time and deserves a more expensive premium. But nobody said the market was logical.