Please ensure Javascript is enabled for purposes of website accessibility

Instant Analysis: Activist Investor Calls for Deckers Outdoor Corp to Explore a Sale

By Eric Volkman - Apr 3, 2017 at 10:39AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Red Mountain Capital Partners believes the footwear maker's "unique assets" could attract a buyer.

What happened?

An activist shareholder is insisting that Deckers Outdoor (DECK -4.18%) hang out a "for sale" sign. Red Mountain Capital Partners, which owns just over 3% of the company, formally made the request in a letter sent to chairman Angel Martinez and lead independent director John Gibbons late last month.

In the letter, Red Mountain "urge[s] the board to publicly announce its intention to explore a sale of Deckers." 

Hoka One One shoes from Deckers

Image source: Hoka One One (Deckers Outdoor) 

The investment management firm opined that "[a] public announcement and a formal sale process will address the full universe of potential buyers for the unique assets of the company and will restore shareholders' confidence that the board is acting in their best interests."

Deckers owns the popular Ugg line of footwear among other brands, but it has struggled with declining sales and profitability lately, in no small part due to Ugg's underperformance. 

Does it matter?

Deckers has not one but two notable activist investors on its shareholder list, Red Mountain Capital and Marcato Capital Management. Following the shoemaker's most recently quarterly earnings report -- an uncomfortable one that revealed a nearly 5% year-over-year drop in revenue, a 14% decline in adjusted per-share earnings, and disappointing guidance -- it was perhaps inevitable that one of them would step in to put pressure on the management team.

Although Red Mountain isn't always a winner -- its attempt last year to win a pair of board seats at iRobot was unsuccessful -- Decker is indeed an attractive takeover candidate.

Ugg footwear is well-known among consumers, even if Deckers' other brands don't have that kind of visibility. Plus, the stock trades at a price-to-book value below 2.0, which is low for the shoe-related apparel segment. Vans owner VF Corporation trades at 4.6, for example, while Foot Locker trades at 3.6.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Deckers Outdoor Corporation Stock Quote
Deckers Outdoor Corporation
DECK
$244.67 (-4.18%) $-10.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.