Weak demand for Uggs weighs on Deckers

[October 27, 2012]  NEW YORK (AP) -- No love for Uggs: Shares of the sheepskin boots maker, Deckers Outdoor Corp., tumbled 16 percent Friday to a three-year low because consumers have turned away just before the start of the holiday shopping season.

The company on Thursday slashed its outlook for the rest of the year after its third-quarter profit dropped 31 percent. It blamed two years of price increases for turning shoppers off Uggs, which have been perennial holiday best-sellers, as well as the mild weather this year.

In an effort to lure back shoppers, Deckers said it's going to roll back prices on some Uggs styles in the U.S.

The company now expects profit to drop 14 percent in the October-December quarter, when shoppers come out in droves to make holiday purchases. The Goleta, Calif., company had previously predicted that profit would jump 22 percent in those months.

Some analysts are even more pessimistic than the company, and don't think colder weather this winter will drive up sales.

Sam Poser, an analyst at Sterne Agee, said that "the worst is yet to come." Weaker Uggs sales might not just be due to weather, but may indicate that the boots have fallen out of fashion, he said. Poser expects Deckers to miss its already-lowered guidance for the fourth quarter, and that order cancellations will put "severe pressure" on the company next year.

Stifel Nicolaus analyst Jim Duffy said that Uggs sales may decline even more. Revenue from the brand, Deckers' largest, fell 12 percent in the third quarter. He cut Deckers to "Hold" from "Buy."

Shares of Deckers, which also owns the Teva sport sandal brand, fell $5.82 to $29.67 in morning trading Friday. Shares earlier touched as low as $28.85, the stock's lowest point since November 2009. Even before Friday, shares had already lost more than half their value this year.

[Associated Press]

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