Deckers Outdoor Corp.'s shares fell Tuesday after a Sterne Agree analyst lowered his earnings estimates and price target on the shoe and clothing company.
THE SPARK: Analyst Sam Poser said that the company's Ugg brand is at risk. Recent industry data shows that sales of the iconic boot brand fell sharply in July and August as compared with last year. He also noted that the company has started selling its products at lower-end stores than it traditionally used and said that does not bode well for the brand.
THE BIG PICTURE: The Ugg brand has been an area of concern for some time. Its boots were once the must-have item but some analysts and investors worry that the brand is losing its cache.
Poser said the company's sales at high-end retailers such as Nordstrom's is down, possibly at lower levels than a recent industry report would indicate. Additionally, he said that the company has been selling its once coveted product at "schlocky retailers" such as The City Streets chain in New York.
This is not the first time Poser has voiced concerns about the Ugg brand. Earlier this month, he said in a note to investors that the company is discounting its Ugg brand and that he saw this is a troubling sign. The company told retailers that the move was due to changes in sheepskin prices. But it sounded alarms with Poser as the brand's products are rarely discounted or go on sale.
THE ANALYSIS: Poser lowered his 2012 earnings estimates for Deckers to $3.49 per share from $3.97. He also lowered his 2013 estimate to $3.62 from $4.37 per share. Analysts polled by FactSet, on average, are expecting Deckers to earn $4.27 per share for 2012 and $5.09 per share for 2013.
The analyst also lowered his price target on the stock to $32 from $38.
SHARE ACTION: The company's stock price has fallen steadily since 2011. As of Monday's closing price, the company's shares are down 68 percent since October of 2011 when it had a multi-year high of $117.66. Its shares fell another $2.02, or 5.4 percent, to $35.49 in afternoon trading Tuesday.