Wednesday, January 13, 2010

Deckers has ambitious growth plans for UGG (DECK)

Deckers Outdoor (DECK) shares are up 2.7% today, as the company gave a presentation at the  ICR XChange Conference in Dana Point, California. 

In their presentation, they outlined sales targets for 2012.  They expect $1.1billion in revenue, a 40% increase from 2009's $782million:

Their guidance for UGG of $900million would take that brand's contribution to top line sales down from 87% of the total to about 82%.

With the premium-priced UGG representing a smaller portion of the company's revenue mix, I would expect gross margins to fall slightly, but this could be offset through SG&A leverage.  If they maintain 22% operating margins, the company could earn over $12 per share in 2012 and $140million in Free Cash Flow.  

A 12 PE on 2012 earnings of $12 per share would be a stock price of $148, and a 17 PE would get the shares to $210.  However a generous 8% Free Cash Flow Yield would suggest a share price of $128.  

Certainly a well run company with some big earnings ahead of it.  I'll look into it further before recommending shares.
Copyright 2010 AlphaNinja

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