Ahead of the Bell: Deckers predicts Ugg rebound

Deckers shares rise in premarket trading after rebound in demand for Ugg boots predicted

Associated Press

NEW YORK (AP) -- Looks like Ugg maker Deckers expects shoppers to pull the sheepskin boots back on. The company's shares climbed in premarket trading Friday after it predicted better Ugg sales this year.

The company's profit tumbled 35 percent in 2012, and dropped 23 percent in the October-December quarter, which contains the critical holiday shopping period. Still, the period beat analysts' pessimistic expectations, and Deckers said late on Thursday that sales trends have improved. It projected a 4 percent increase in Ugg sales this year after the 1.5 percent decline in 2012.

Deckers Outdoor Corp. had been raising prices on Ugg boots to offset big increases in the cost of sheepskin and other raw materials. Those price increases hurt sales, and last fall the company decided to cut prices. Analysts and investors worried that consumers had finally gotten tired of the boots, and shares lost about half their value over the last 12 months.

Deckers' profit prediction for this year was lower than analysts expected, but several said they believed the company was being conservative with its forecasts. Jefferies analyst Randal Konik said the guidance would likely be raised later in the year, as Deckers benefits from lower sheepskin costs, better sales trends and leaner inventories.

"The brand is far from dead," Konik said in a client note Friday. The analyst, who has a "Buy" rating on the shares, lifted his price target by $5 to $65.

Deckers shares rose $2.64, or 6.5 percent, to $43.05 in premarket trading.

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