Doing due diligence on Sam's recent reports on DECK yielded some surprising findings. To summarize, he misinterpreted critical NPD data, miscalculated crucial expenses and erroneously reported that UGG was in a “new and schlocky” retailer. Basically, he’s issuing highly incorrect analysis that investors are mistakenly taking as fact.
1. Sam’s claim #1: “Distribution is getting ugly: UGG was found at City Streets, which is a retailer that in the past would have been, in our view, an unacceptable point of distribution for the brand. We are at a loss to explain why UGG is selling to such schlocky retailers as City Streets.” Finding: FALSE. I talked with UGG investor relations head Brendon Frey and he informed me that City Streets is not a new point of distribution. In fact, UGG has been selling to City Streets for over three years.
2. Sam’s claim #2: “NPD numbers illustrate UGG sales down over 30% in July and August. NPD data also indicate UGG increasingly selling into low-quality retailers.” Finding: FALSE
I reached out to NPD to see if there was such a report and if so, if it corroborated Sam’s claim. During a call with an NPD analyst, I learned that NPD’s monthly report on Department Store branded footwear sales exludes sales from any retailer that contribute in an outsize way to the monthly total, regardless if the impact is for one day, week, or the entire month. For example, for two-weeks in July, Nordstrom conducts their annual Anniversary Sale and thus contributes in an outsize way to department store sales of UGG in the month of July. As such, sales of UGG at Nordstrom are excluded from July Department Store data and moved into an “All Other” bucket. However, whereas Nordstrom’s Anniversary Sale took place entirely in July last year, it was moved to span one week in August this year. Consequently, Nordstrom is excluded from UGG Department Store sales for the month of August this year, and was included in August last year. This would explain why there was a big drop yoy in UGG sales in July and August. Furthermore, it would also explain why Sam thinks there are increasing sales of UGG in lower quality retailers, as there is more Nordstrom data moved into the “All Other” bucket.
3. Sam claim #3. DECK will earn $3.62 in EPS next year. FALSE I looked into Sam’s model and found that he is estimating $2.00/share in depreciation expenses. This is incredibly high – double what myself and all other analysts are predicting. Of course, this is a non-cash expense so even if true, would not be indicative of less profitibility (cash flow would stay the same since depreciation is added back to the cash flow statement) but it would chop EPS by $1.00. So Sam is basically using a highly incorrect assumption about a non-cash expense to get to his street-shocking estimates of $3.62. When I spoke with Sam on the phone and asked him about why he was expecting such a high deprecation expense he said “Um, I don’t know. That’s a mistake, it shouldn’t be on there. I don’t do the modeling, my junior analyst does.” So he dropped his EPS estimate drastically but wasn’t aware of how he got to the estimate of $3.62 (by using $72 million in depreciation charges instead of the appropriate $40 million, he cuts $1.00 from EPS).
BOTTOM LINE: With the lone “Sell” rating on a stock shorted by 37% of the float, Sam is making a killing for his firm Sterne Agee. He is issuing completely false reports, and his credibility is highly dubious.
This was taken from the July 26th Conference call:
During the quarter, we shipped initial fall deliveries to several domestic accounts, including Nordstrom, ahead of their anniversary sale. While it is obviously very early, well ahead of our main selling season, we believe that the sell-through data over the past few weeks have been positive. With regard to Nordstrom, the women's fashion styles included in this year's sale are performing well, underscoring our belief that the brand is continuing to expand successfully beyond its traditional roots and is attracting new consumers.
If you take this information with the NPD data adjustments I have to question what type of channel check information Mr. Poser is using. Considering this was on July 26th, Angel would have to be lying if Mr. Poser's July mid-digit July sales decrease prediction is accurate.
Almost every piece of news I can find sheds more light on Poser's lack of transparency.
I am surprised someone actually spoke with Poser. That would really take guts at this point. I have no doubt that Mr. Poser will be investigated if what is alleged is true. Analysts manipulate the market in the same way the rating agencies made the Mortgage Backed Securities look A+, except This is what some refer to as a reverse Pump and Dump, a Short and Distort scheme.
Wow, funny how a "knowledgeable voice" can say the same thing that many of us longs have been "shouting" amongst each other, yet we have heard no "official refutation" of these false claims by Poser (even his name invites 'pun-intended' remarks, i.e., he's posing!)
But good work and research! Such buffets my belief that shorts are falsely dictating the PPS here, and that the SEC needs to do something against "fraudulent research" and possible Stern Agee, short-selling scheming!
Only the earning will tell the truth. If the earning is bad, then the analyst is right. He saw something that most of us didn't want to believe. If the earning is good, then SEC should investigate Poser because he is either a lousy analyst or crook.