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Deckers: Ugg-ly Shoes, Uglier Cash Management

Amy Merrick

Deckers Outdoor Corp. (DECK) is trading near its 52-week high, even though its latest earnings show the maker of Uggs still hasn’t worked out the sales and inventory problems that have plagued it since last fall.

The company’s stock price is looking healthy, and its PE ratio of 18.5 is well below its levels two years ago, as this chart shows:

DECK PE Ratio TTM Chart

From an operational perspective, though, Deckers looks unsteady. Its executives offer these four tips for poorly managing cash flow:

1. Stock a bunch of extra merchandise in your warehouses because you don't trust your supply chain to get products to stores in time. Do this even though retailers are buying later and are likely to be cautious about placing orders:

DECK Inventories Chart

2. Increase your retail square footage by 70% in a single year, even though demand for your most important brand seems to be waning:

DECK SG&A Expense Quarterly Chart

3. Build an expensive new headquarters, then try to refinance it as interest rates are expected to rise:

DECK Return on Invested Capital Chart

4. While you're doing all of these things, borrow to buy back shares:

DECK Stock Buybacks Chart

All of which explains why Deckers had only $49.1 million cash on hand as of June 30, compared to $114.4 million a year earlier: While analysts are focusing on the company’s predictions for the holiday shopping season, Deckers is quietly giving a master class on how to spend like it’s going out of style—just like a pair of Uggs.

Amy Merrick, a contributing editor at YCharts, is a former staff reporter for the Wall Street Journal, where she spent 11 years writing about the Midwest economy, state and municipal finances, and the retail and banking industries. Her work has been published in the Poynter Institute’s Best Newspaper Writing series. She can be reached at editor@ycharts.com. You can also request a demonstration of YCharts Platinum.

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