Uggs ugh: Analyst lowers rating on Deckers Outdoor

Analyst cuts Deckers Outdoor rating as warmer weather hurt cold-weather boot sales

Associated Press

NEW YORK (AP) -- Unseasonably warm weather has led to soft sales of cold-weather boots so far this winter. The sales weakness prompted an analyst to lower his rating for Ugg brand owner Deckers Outdoor on Tuesday.

THE SPARK: Baird's Mitch Kummetz cut Deckers to "Neutral" from "Outperform."

THE ANALYSIS: "The weather failed to cooperate for the second straight year in the U.S.," Kummetz wrote in a client note.

Still, the warmer-than-expected weather has not been as much of a drag on orders as a year ago. Kummetz explained that since the winter of 2011 into early 2012 was also warm, retailers like Deckers were more cautious on their inventory orders heading into 2012's fourth quarter.

Kummetz said that Deckers may have some opportunities in the fourth quarter if the weather gets colder.

"We believe that Ugg remains a relevant brand and a must-have item within (the cold-weather boots) segment, but we can't ignore that continued weakness in this segment will likely prompt retailers to be very conservative with their fall 2013 orders," he said.

THE BACKGROUND: Deckers Outdoor is best known for its Ugg sheepskin boots. Retailers continually try to assess every winter whether Ugg boots will remain popular with shoppers.

While Kummetz is downgrading Deckers Tuesday, last week Jefferies analyst Randal Konik said that he was keeping Deckers as one of his top picks in part because of the solid positioning of the Ugg brand.

SHARE ACTION: Shares of Deckers Outdoor Corp. fell $1.40, or 3.6 percent, to $37.58 in afternoon trading. Over the last year, the stock has traded between $28.53 and $92.27.

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