Deckers Channel Checkers Bring Good Tidings For Key Season

Deckers Outdoor Corp (NYSE: DECK) will deck the halls with cash this year, according to Stifel Nicolaus.

Limited product availability on Nordstromrack.com and Zappos.com suggests Deckers will start the holiday season in a better off-price inventory position than it did last year.

“Better aligned inventories in the U.S. market support a healthy supply/demand dynamic compared to last year, when we believe UGG off-price proliferation undermined full-price selling through DTC, and limited reorders with key wholesale accounts,” Stifel analyst Jim Duffy wrote in a Friday note.

Management’s progress in clearing low-quality platforms sets the stage for margin improvement, inspiring Stifel to raise its price target from $74 to $80 and reiterated a Buy rating on the stock.

What The Research Says

Stifel’s channel checks revealed a 20-percent year-over-year drop in off-price styles, with a 38-percent dip in the core boots subcategory offsetting a 12-percent increase in non-boot offerings. Deckers’ “Classic I” style sold out of off-price channels by August this year, while last year’s lingering clearance cache cut into full-price sales of other products.

The popular “Classic I” is now unavailable through wholesale distributors, whose off-price selection is largely composed of lower-demand styles.

“Cleaner inventory supports favorable supply/demand dynamics and potentially sets the stage for high margin in-season reorders,” Duffy wrote. “We view tighter distribution as emblematic of a stabilizing foundation.”

Pivotal Research shared similar sentiments. The research firm initiated coverage on Deckers with a Buy rating and $80 price target Thursday.

At the time of publication, Deckers was trading at $70.22.

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