One of the great things about writing online is that I'm accountable -- for both my good picks, and my not-so-good picks.

Today, I'm going to be revisiting a company I first wrote about back in December, Deckers Outdoor (Nasdaq: DECK), a company that -- by mid-April -- was up 24% since I wrote about it, but which fell more than 10% following its first-quarter earnings. Given this news, I think it's time for a checkup.

The staying power of Ugg and Teva
Deckers is better known as the company that makes Ugg boots and Teva sandals. A common misconception about the company is that it is subject to whimsical shifts in consumer fashion, similar to high-end shoe providers Steve Madden (Nasdaq: SHOO) or LaCrosse. This fashion element makes them less appealing to risk-averse investors as compared to "sturdier" brands like Nike (NYSE: NKE), Adidas (OTC BB: ADDYY.PK), or even perennial boot-specialist Timberland (NYSE: TBL).

Now, I'm no fashion expert, but the facts just don't seem to indicate that Deckers' products are just a fad. Initially designed as a boot for surfers, Uggs have been around in America since 1978. Tevas, the brainchild of a rafting instructor looking for better working shoes, have been on the shelves for more than 25 years. And looking at their sales numbers, they've been growing in popularity.

Opportunity galore
While domestic sales for Deckers have been impressive, it's the international business that's been booming. Take a look at the numbers for the most recent quarter.


Q1 2010

Q1 2011


Domestic Sales $117.0 $148.1 26.6%
International Sales $38.9 $56.7 45.8%
Total $155.9 $204.8 31.4%

Source: Deckers earnings release, numbers in millions.

As if that weren't enough, the company has been opening up its own retail stores and pushing e-commerce sales, both of which sport much better margins than selling through middlemen (read: department stores). A quick glance will show you that these retail channels are accounting for more of Deckers' sales now than they were a year ago.


Percent of total Revenue Q1 2010

Percent of total Revenue Q1 2011

Retail Stores 14.8% 17.3%
e-commerce 11.8% 11.5%
Total 26.6% 28.8%

So what's the catch?
You would think that with numbers like these, Deckers would be trading for far more than its current 16.7 times 2012 earnings. The answer is twofold. First, Deckers realizes that one if its strengths is the fact that Uggs are made from sheepskin. Management has gone on the record saying that they won't consider using a cheaper alternative. While that strengthens the brand, it can get expensive for the company when sheepskin prices rise.

The fact that the company recently projected weaker-than-anticipated second-quarter results, however, is a far more pressing concerning for some investors.

I'm not as concerned, though.

The company claims that the reason for lowered results is because it is transitioning to more wholesale locations internationally. This move is essential because Deckers' footprint abroad is growing, as are their retail locations. Previously, items had just been shipped factory-direct. In the short term, the change in distribution channels will cause a blip in revenues -- and that's to be expected.

But we're long-term investors here at the Fool, which is why, following last week's drop, I added to my Deckers position. After completing your own due diligence, it might not be a bad idea for you to do the same.

Want help starting your research? Add Deckers to your watchlist.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.