I kept my nose out of getting involved in Decker’s – because I simply lacked the fundamental edge on the distribution model. But as I peel back the onion, I don’t like what I smell.
Let’s look at Ugg market share for a minute. In the latest holiday season, Ugg had a 38% market share of department store shoe sales. 38%!!! I don’t EVER recall seeing a brand with share of this magnitude.
Chart 2 below is vital. It shows how Ugg went from a 2 month winter season in ’06, to 3 months in ’07, and now 5-months in ’08. It seems to be expanding its seasonal growth given inability (or lack of desire) to push above 40% share.
Now the brand is selling at a 10%+ share as early as August. To expand this footprint much further, we need to see a much bigger push into warmer-weather footwear, which usually carries a lower price point.
The emotion over this stock is massive. On one hand, short interest is 28% of the float – but that’s down from 40% in late summer, and historical peak of 70%. Also, all but one sell side analysts has a buy rating, and the average price target calls for a 110% gain from here (the only Hold rating is calling for 40% price upside). Those targets are likely to come down.
I kept my nose out of getting involved in this name – because I simply did not have the fundamental edge on the business model and distribution. But as I peel back the onion, I don’t like what I smell.
Disclaimer: I am sitting here on my couch this fine Sunday afternoon wearing a pair of Uggs. The product is so dang comfortable, but once an aging hipster like myself embraces it, I’ve gotta question how cool it is.
Let’s look at Ugg market share for a minute. In the latest holiday season, Ugg had a 38% market share of department store shoe sales. 38%!!! I don’t EVER recall seeing a brand with share of this magnitude.
Chart 2 below is vital. It shows how Ugg went from a 2 month winter season in ’06, to 3 months in ’07, and now 5-months in ’08. It seems to be expanding its seasonal growth given inability (or lack of desire) to push above 40% share.
Now the brand is selling at a 10%+ share as early as August. To expand this footprint much further, we need to see a much bigger push into warmer-weather footwear, which usually carries a lower price point.
The emotion over this stock is massive. On one hand, short interest is 28% of the float – but that’s down from 40% in late summer, and historical peak of 70%. Also, all but one sell side analysts has a buy rating, and the average price target calls for a 110% gain from here (the only Hold rating is calling for 40% price upside). Those targets are likely to come down.
I kept my nose out of getting involved in this name – because I simply did not have the fundamental edge on the business model and distribution. But as I peel back the onion, I don’t like what I smell.
Disclaimer: I am sitting here on my couch this fine Sunday afternoon wearing a pair of Uggs. The product is so dang comfortable, but once an aging hipster like myself embraces it, I’ve gotta question how cool it is.
