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Published
Oct 29, 2012
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Deckers sales miss as price hike bites

By
Reuters
Published
Oct 29, 2012

BANGALORE - Deckers Outdoor Corp (DECK.O) reported third-quarter sales way below analysts' estimates as higher raw material costs forced the shoe maker to raise prices on its UGG sheepskin boots, putting off potential customers.

Deckers shares fell as much as 17 percent after the bell to $29.30.

Ugg Australia (photo: Decker)

The company also revised downwards its sales forecast for UGG brand, which accounts for nearly 90 percent of its total revenue. It expects UGG sales to remain flat in 2012, compared with a 10 percent growth it had projected previously.

Deckers said it had raised prices on its products to help cushion the impact of rising sheepskin and raw material costs.

"We believe that these selective price increases, particularly during a period of one of the warmest years on record, has pushed us above the consumer's price-value expectations for the UGG brand," Chief Executive Angel Martinez said in a statement.

Deckers cut its full-year revenue growth forecast to 5 percent from 14 percent, and said it now sees a 33 percent drop in per-share earnings, compared with a fall of 9 to 10 percent it had estimated previously.

Inventories rose 36 percent to $486.2 million as of September 30 from a year ago.

Third-quarter profit was $43.1 million, or $1.18 per share, compared with $62.3 million, or $1.59 per share, a year ago.

The company, which competes with Skechers USA Inc (SKX.N) and VF Corp's (VFC.N) Timberland, said net sales fell 9 percent to $376.4 million.

Analysts on average had forecast a profit of $1.04 per share on revenue of $413.5 million, according to Thomson Reuters I/B/E/S.

UGG brand net sales fell 12 percent to $332.8 million.

Gross margin narrowed to 42.3 percent from 49 percent last year.

Shares of the Goleta, California-based company, which have fallen more than 50 percent this year, were trading at $30.44 after the bell. They closed at $35.49 on Thursday on the Nasdaq.

Reporting by Chris Jonathan Peters

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