Shares of Deckers Outdoor (DECK) are tumbling today after the Uggs maker got cut to Negative from Neutral by Susquehanna analyst Sam Poser and team. They explain why:
We would sell Deckers as the health of the UGG brand is clearly at risk, as promotional activity has already begun. Ugg.com has introduced $20 rewards certificates that are good in ugg australia outlet store or online. We don’t believe Deckers thinks the rewards certificates are a promotional action, but, based on our checks, it appears as if UGG’s wholesale partners view this as the commencement of a promotional fall season. Hence, we believe the UGG rewards will result in retailers offering $20 discounts on UGG items. Retailers such as Nordstrom (JWN), Journeys, and others are likely disturbed by the promotional kickoff to the fall season, and will ask Deckers to pay for the markdowns needed to match the ugg.com reward certificate discounts. Deckers also recently decided to open up distribution of UGGs to Macy’s (M), as well as selling UGG directly to Amazon.com (AMZN), which both disturbed UGG’s longstanding loyal wholesale partners.
Shares of Deckers Outdoor have tumbled 6% to $57.32 at 11:35 a.m. today, while Amazon.com has fallen 1.1% to $824.97, Macy’s has dropped 1.9% to $36.81, and ugg australia boots nordstrom has declined 1% to $53.98.