BANGALORE, April 25 (Reuters) - Shares of shoe maker Deckers Outdoor Corp (DECK.O) rose 20 percent Friday, a day after the company’s distribution model fueled strong quarterly sales of its premium UGG brand even as other footwear makers struggle to woo cash-strapped consumers.
The company’s distribution model encourages scarcity to grow demand for its premium label of sheepskin footwear, while rival Crocs Inc’s (CROX.O) footwear is easily available “everywhere,” Susquehanna analyst Christopher Svezia said from New York.
Deckers’ UGG line of shoes, boots and slippers are available mostly at upscale retailers such as Nordstrom Inc (JWN.N) and Neiman Marcus.
UGG sales rose 83.6 percent to $54.8 million in the first quarter, while total sales, which include sales from the Simple and Teva brands, rose 34 percent to $97.5 million.
Before Friday’s gains, shares of Deckers had fallen about 24 percent as retailers have wrestled with slowing consumer spending in the face of rising fuel and food prices, a beaten down housing market and tighter lending conditions.
But analysts had earlier said the share slide was unwarranted as the strong performance of the UGG brand would help it weather the weak retail market.
Amidst the current turmoil in the industry, retailers are sticking with proven winners when it comes to placing orders and reorders and this will sustain UGG’s momentum even during non-season periods.
Wedbush Morgan’s Jeff Mintz said given UGG’s momentum in the first quarter, the company’s expectation of a 37 percent increase in UGG revenues in 2008 was “extremely conservative.”
The Goleta, California-based company, whose rivals include Skechers USA Inc (SKX.N) and Timberland TBL.N, expects 2008 revenue to rise about 31 percent, up from its prior forecast of a 25 percent rise.
“We believe that over the next several years, international growth for the UGG brand will follow the U.S. providing an entire new leg of growth for the company,” Mintz added.
The company plans to open one or two stores in London in 2008, and two stores and three shop-in-shops in China in either 2008 or 2009, he said.
Susquehanna’s Svezia said Deckers expects international revenue to contribute to about 30 percent of total revenue by 2010-2012, compared with just 14 percent last year.
Wedbush’s Mintz, who has a “buy” rating on the stock, raised his price target to $157 from $146. Svezia has a “positive” rating and a price target of $155 on the stock.
Shares of the company rose to a high of $141.58, before falling back to trade up $22.92 at $140.37 in Friday afternoon on Nasdaq. (Editing by Pratish Narayanan)