Ahead of the Bell: Deckers Outdoor

Analyst raises Deckers price target on better inventory level, improvement overseas

Associated Press

NEW YORK (AP) -- An analyst increased his price target for Deckers Outdoor on Friday, saying the Ugg maker could see healthy sales leading into the holiday season thanks to a manageable inventory level, a new wool substitute and improving international business.

Eric Tracy of Janney Capital Markets said in a client note that Deckers inventory level appears balanced, which should help lower its risk of having to take markdowns. The analyst also says that if winter weather is closer to normal this season, Deckers could see a rise in its profit and revenue as shoppers would be more likely to buy boots at full price.

The Ugg Pure, a wool substitute being used by Deckers in liners that is cheaper than sheepskin, should also help to cut costs and improve margins, he added.

Tracy said that business overseas is getting better as well, specifically in the U.K., which could give a boost to revenue. The analyst feels that Asia is the company's biggest growth opportunity long-term and views weakness in Europe as likely temporary.

Tracy lifted Deckers' price target to $75 from $66 and maintained a "Buy" rating.

The analyst's comments come three days after Camilo Lyon of Canaccord Genuity raised Deckers' rating and price target, citing improving demand. His upgrade came less than a week after Wedbush's Corrina Freedman also boosted Deckers' rating and price target.

Shares of Deckers reached a new 52-week high of $68.84 on Thursday and finished at $66.20.

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