DECK Stock Analysis

7/31/2019 DECK Stock Analysis

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UNIVERSITY OF OREGON

INVESTMENT GROUP

Covering Analyst: Owen HydeEmail: [email protected]

The University of Oregon Investment Group (UOIG) is a student run organization whose purpose is strictly educational.Member students are not certified or licensed to give investment advice or analyze securities, nor do they purport to be.Members of UOIG may have clerked, interned or held various employment positions with firms held in UOIGs portfolio. Inaddition, members of UOIG may attempt to obtain employment positions with firms held in UOIGs portfolio.

1/28/2010

Consumer Discretionary

Deckers Outdoor Corp. (DECK)

RECOMMENDATION: BUY

BUSINESS OVERVIEW

Deckers Outdoor is a footwear and apparel company based near Goleta, California which is near Santa Barbra.

Deckers distributes a number of footwear brands such as UGG Australia, Teva, Simple, TSUBO, AHNU, and

Mozo. Deckers is mainly a wholesale distributor but they also operate an eCommerce segment and several retailstores in both Domestic and International markets.

Stock DataPrice (52 weeks) $31.11 - $87.88

Symbol/Exchange DECK / NASDAQ

Beta 1.59

Shares Outstanding 38,544,429

Average daily volume

Current market cap 2.8B

Current PriceDividend

Dividend Yield

$74.13

N/A

N/A

Valuation (per share)

DCF Analysis $85.76

Comparables AnalysisTarget PriceCurrent Price

$88.94

$87.35

$72.90

Undervalued 18%

Summary Financials

TTM (Thousands)Revenue

Net Income$918,854

$136,746

Operating Cash Flow $158,000


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D e c k e r s O u t d o o r C o r p o r a t i o n u n i v e r s i t y o f o r e g o n i n v e s t m e n t g r o u p

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h t t p : / / u o i g . u o r e g o n . e d u

The UGG Australia brand is the Deckers Outdoors largest segment. UGG Australia sells sheepskin boots and

other sheepskin products that are considered to be the highest quality available. The company believes that UGG

is a lifestyle brand that will continue to grow rapidly as the company expands both domestically and

internationally. The brand accounted for approximately 86% of wholesale, 88.5% of eCommerce and 98.7% of

retail store sales in 2009. Deckers Outdoor sold approximately 15.7 million pairs of UGGS in 2009 and analystsexpect this number to grow substantially. This business is very seasonal, with the majority of sales occurring in

the third and fourth quarters of every year. Major department store retailers of the UGG brand include Nordstrom,

Victoria Secret and Macys.

Teva is Deckers Outdoors second largest brand. Teva sells hiking and outdoor shoes, mainly sport sandals that

are designed for active outdoor lifestyles. Besides open and closed toe sport sandals, Teva also manufactures high

and low top hiking boots. The sport sandals were originally designed for use on rafting or river trips, but can also

be used for light hiking. This brand accounted for 11% of wholesale, 7% of eCommerce and .5% of retail store

sales in 2009. Of late, the brand has been doing very well. In the most recent quarter Deckers reported that Tevas

revenues grew 51.7% year over year. Much of this growth is due to the international segment, specifically in Asia

where management believes the brand is gaining momentum. Sales of Teva are also seasonal with the majority ofrevenues occurring in the 1st and 2nd quarters.

Simple brand is Deckers Outdoors next largest segment. They sell environmentally friendly footwear made from

materials such as recycled carpet padding, hemp, recycled car tired, recycled wool and certified organic cotton.

The brand strives to make their products in a fashion that could be considered socially responsible and

environmentally sustainable. Simple brand has set ethical guidelines that govern their supply chain. These rules

require that laborers be at least 16 years old and receive compensation at a premium to regularly hourly wages

when working overtime. Simple brands made up 1.7% of wholesale, 4% of eCommerce and less than 1% of retail

store sales in 2009.

When combined the bands including TSUBO, AHNU, and Mozo accounted for 1.3% of wholesale, less than 1%of eCommerce and less than 1% of retail store sales in 2009. ANHU is an outdoor footwear brand that mainly

sells hiking boots and womens clogs. Mozo sells shoes that are designed for working people that tend to be on

their feet all day and need a black shoe with excellent arch support. TSUBU is primarily casual footwear styled to

be a more European look. These brands are a very small part of the company but have been growing at a double

digit rate for a number of quarters.

BUSINESS AND GROWTH STRATEGIES

UGG AustraliaDomestic

In the third quarter revenues from the domestic UGG wholesale segment were up 10% compared to lastyears 3rd quarter

Domestic UGG sales will be driven by new product styles as well as the new mens line. Two very successful new products in the womens line are the baily button and baily button triplet boots. New mens line will include boots, casual sneakers (non-athletic) and accessories like hats and gloves. Joint ventures with high end designers such as Jimmy Choo


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International

Deckers management sees significant growth opportunities in Asian markets such as Japan, Hong Kongand China. These International markets are clearly the focus going in to 2011 and beyond.

International sales have exhibited extremely strong growth recently. In their most recent 3rd quarter filingDeckers reported a 44% increase in sales year over year.

Despite already rapid growth, management feels they havent even started to penetrate many large Asianmarkets.

E-Commerce

Opening up eCommerce in the Chinese market Domestic E-Commerce sales of Uggs were up 16.5% in the third quarter compared to a 10% increase for

the domestic Uggs wholesale segment.

Teva

Additional growth is expected from Teva, particularly in the international segment. Management believes that Tevas revenue will double by 2014 Tevas growth in Asia should help the company diversify their revenue streams Tevas sales make the company less seasonal

Retail Stores

Nine new retail stores will be up and running by the end of 2011. Opening retail stores will help penetrate new Asian markets China stores are a joint venture with Stella International Holdings Limited Higher gross margins Opening retail stores in major Asian markets such as Shanghai and Hong Kong

Other Bands

These four brands are projected to grow at a solid rate as marketing increases

Deckers actively searches for new brands to acquire and build.Stock Buyback Program

Management has 20 million left in the stock buyback program and plans to contribute more at a later date.

MANAGEMENT AND EMPLOYEE RELATIONS

Anegl Marteniez is the Chairman, President andCEO at Deckers. He has been with the company since2005, before that he was the Chief Marketing Officer &Executive Vice President at Reebok International. Priorto that, Martinez worked as the President & ChiefExecutive Officer at Rockport.

Marteniez is currently on the board of directors atTupperware Brands. He received 2.5 million incompensation in 2009 from Deckers Outdoor.


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Constance Rishwain has been the President of UGG Australia since 2002 but has been with DeckersOutdoor since 1995. She received 1.25 million in compensation in 2009.

Zohar Ziv is the Chief Operating & Accounting Officer at Deckers. He has been with the company since2006, prior to that he was the Chief Financial Officers at several companies including EMAK Worldwide,Stravina and Joico Laboratories.

Thomas George is the Chief Financial & Accounting Officer. He has been with Deckers since 2009, priorto which he worked as the Chief Financial Officer at Oakley.

Colin Clark is the Senior Vice President of the International Division. He began working at Deckers in2005, prior to which he worked as the Vice President & General Manager of the International Division atRockport.

Directors

Maureen Conners is the President & Founder of Conners Consulting. She received her MBA from theUniversity of Pennsylvania and has been on the Board of Directors at Deckers since 2006.

Ruth Owades is the President at Owades Enterprises LLC, Founder of Calyx & Corolla, and the Founderof Gardeners Eden. She is also on the Board of Directors at Gerald Stevens and has been on the Deckers

Board since 2008.

PORTFOLIOS

TALL FIRS-SLIGHTLYUNDERWEIGHT CONSUMERGOODS

SVIGALS-UNKNOWN

DADCO-UNDERWEIGHT CONSUMERGOODS

RECENT NEWS

GOLETA, Calif., Jan 10, 2011 (BUSINESS WIRE)o -Customs Seizures and Raids Net More Than 400,000 Pairs of Fake Boots and Shoes

Chinese Public Security Bureau authorities seized 244,648 pairs of counterfeit UGG Australiaproduct, surpassing the total number of pairs seized in the previous 118 raids in 2010. Significantgrowth in all areas of enforcement, from Customs seizures to website takedowns, illustrates boththe pernicious nature of organized counterfeit operations, and the company's commitment tofighting counterfeiting globally.

GOLETA, Calif., Dec 07, 2010 (BUSINESS WIRE)o Deckers Outdoor Corporation filed a trademark infringement suit today in United States

District Court in the Central District of California against Emu Australia, Inc. and Emu

(Australia) Pty Ltd. Deckers is seeking a Court order to stop Emu from using its trademarks.o "The success of UGG Australia has created an entire industry of companies that market their

wares by deliberately confusing consumers. Emu's trademark infringement is intentionallymisleading consumers into believing they are buying a genuine UGG Australia product when infact, they are not." -Angel Martinez, Deckers Chairman and CEO

NEW YORK, Nov 30, 2010 (BUSINESS WIRE)o UGG Australia announced today that it is partnering with NFL superstar Tom Brady of the

New England Patriots to launch its first men's marketing initiative. The multi-year


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collaboration between the three-time Super Bowl champion and the brand will include Brady'scasual footwear as well as select outerwear and accessories. UGG Australia will feature Brady inits global multimedia marketing initiative beginning with the fall 2011 collection.

Oct 28, 2010 (Trading Markets)o Deckers Outdoor raised their 2010 earnings to approximately $3.65 per share. The

company's previous guidance was earnings of approximately $3.46 per share and the currentconsensus earnings estimate is $3.52 per share for the year ending December 31, 2010 .

INDUSTRY

The footwear industry is a mature industry that is not controlled by any one firm there are a few large firms that

have significant power because of their brand names. Nike and Adidas are the two largest footwear companies

and the competition between them is very strong. Adidas acquired another large competitor, Reebok International,

several years ago and has since been the larger of the two companies. Neither company has enough pricing power

to control the market despite their dominate brand names and economies of scale.

The industry has traditionally cut costs by outsourcing the manufacturing of their products to areas where labor

costs are very low. Manufactures choose to have their products made in Eastern Asia in many cases, but in recent

years there have been concerns that labor costs there may rise. Pricing pressures from increasing labor costs

could force the companies in this industry to change how they operate their respective supply chains if t margins

come under pressure.

There are several niche markets within the footwear industry that are dominated by a particular brand. These

niche markets and subcategories of footwear are not separated from the industry as a whole in any research I

found. This makes it difficult to project how much market share the leaders in these segments have, however I

suspect that some brands may have around 70% market share in some specialized types of footwear. Examples of

brands that control their respective niche markets within the footwear industry are Crocs and UGG Australia.

The footwear industry is not growing very fast, and most companies serving this market are looking for ways to

take market share from competing firms. Important competitive factors within the industry include controlling the

supply chain, staying nimble with product offerings, and providing a wide array of products that meet ever

changing consumer demands. The industry as a whole may not be growing rapidly but there are specific niche

markets that are a clear exception to this trend.

Leading indicators for this industry are consumer sentiment, disposable income, and job growth. These indicators

are all climbing off of some of their worst levels ever, leading me to believe that this industry should be well on

the way to rebounding. The charts below show that the leading indicators for this industry are picking up, despite

taking longer than usual to do so.


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I believe that as the job market slowly improves in the US we should see rising consumer sentiment and levels of

disposable income. This would create higher demand for footwear, particularly higher end luxury brands that sell

to affluent consumers. Other factors such as emerging market disposable income and emerging market consumer

sentiment would be useful indicators as well because of the increasing demand from these countries.


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This chart shows that consumer sentiment is rebounding after what was a steep decline from 2007 to 2009. If this

trend holds then consumer spending should return to more normalized levels, which would be very positive for

the footwear industry as a whole. When consumer sentiment picks up, there is a rapid increase in discretionary

spending which leads to higher revenues in this industry.

S.W.O.T.ANALYSIS

Strengths

Strong demand from the Asian economies UGG dominates their niche market High Margins No Debt Brand awareness

Weaknesses

Rising Commodity Costs Fashion Risk UGG Australia makes up a large % of revenue

Opportunities

UGG Mens line Retail store expansion


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E-Commerce US job growth

Threats

Counterfeiting and imitation brands (EMU, Bearpaw)CATALYSTS

Upside

Endorsement deal signed with Tom Brady UGGs mens line begins in 2011 Less seasonality due to Tevas resurgence Opening new retail stores

Downside

UGGS become unfashionable Increasing commodity costs could cut into margins The mens line is unsuccessful Rising labor costs in China

COMPARABLESANALYSIS

When picking comparable companies for Deckers Outdoor I used a number of criteria to verify they facedsimilar market risks. The most useful criteria to look at when comparing Deckers Outdoor to otherapparel companies is a similar projected growth rate for both net income and revenue for 2011.Secondarily, I looked for similar beta, capital structure and margin. Having product offerings that are indirect competition with Deckers brands was also a very important factor. Fashion trends also had to betaken into consideration when assessing companies because valuations in this industry will often reflectwhat is currently popular.

I choose to use my own estimates for the Deckers Outdoor 2011 fiscal year when making thesecomparisons. I choose to use next years estimates because Deckers is growing very rapidly and it doesnot make sense to value it based on trailing twelve month figures. Additionally, many analysts are yet toupdate their projections for 2011. Based on recent news about a new mens product line enforced by TomBrady, I believe the estimates are too far too low and will be raised. The UGG brand has primarily been awomens line and this announcement will alter the fundamentals of the company to a great degree.

.

I used EV/Revenue, EV/EBITDA and EV/Net Income as comparable metrics to measure how effectivelythe company is managing its business for both the top and bottom line. Three of these metrics areprofitability comparisons, which I feel is the most important metric to look at besides the growth rate of


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net income. The EV/Revenue metric measures how the market values a companys sales compared to itssize and structure. EV/EBITDA is a very useful profitability metric that measures earnings beforedepreciation in relation to the size of the company. EV/Net Income is measures how profitable thecompany is in relation to the enterprise value of the firm. The comparable companies I choose operatebusiness segments that are subject to similar cyclical risks and therefore should be trading at similar

multiples on an enterprise value basis.

Steve Madden (SHOO) 30%

Steven Madden, Ltd., together with its subsidiaries, designs, sources, markets, and sells fashion -forward

footwear for women, men, and children. The company offers its footwear products under Steve Madden, Steve

Madden Kids, Madden Girl, Stevies, Steven, Madden Girl, Steve Madden Mens, Steve Madden Fix, Candies,

Elizabeth and James, Olsenboye, and l.e.i. brand names to major department stores, mid-tier department stores,

better specialty stores, value price retailers, and independently owned boutiques in the United States. It also offers

its products through company owned retail stores and an e-commerce Website. As of December 31, 2009, Steven

Madden operated 89 retail stores. In Addition, the company designs, sources, markets, and sells name brand andprivate label fashion handbags and accessories. Further, it licenses its Steve Madden and Steven by Steve Madden

trademarks for use in connection with the manufacturing, marketing, and sale of cold weather accessories,

sunglasses, eyewear, outerwear, bedding, hosiery, and womens fashion apparel and jewelry. Steven Madden also

distributes its products in Asia, Canada, Europe, Central and South America, Australia, and Africa through special

distribution arrangements. The company was founded in 1990 and is headquartered in Long Island City, New

York. Yahoo! Finance

Steve Madden is a direct competitor in the womens boot business. In addition, Steve Madden has similar margins

and a capital structure that closely resembles Deckers. Steven Madden operates a wholesale business as well as

distributing their products via their own retail stores and eCommerce segment. Their products are sold at many of

the same department stores and compete for the same shelf space. The company sells a lot of cold weatherproducts, which makes its revenues somewhat seasonal. This is similar to the seasonality that Deckers experiences

because of the UGG brands higher winter sales. Steve Madden has an international segment that has been doing

very well and is expanding into Asia, much like Deckers. I believe Steve Madden is the best comparable direct

competitor to Deckers Outdoor, however the slightly lower growth rates result in lower multiples that I believe

are not reflective of Deckers. I weighted Steve Madden at 30% rather than 35% in my analysis because of the

lower growth.

Timberland (TBL) 20%

The Timberland Company engages in the design, development, marketing, and distribution of footwear, apparel,

and accessories products for men, women, and children under the Timberland, Timberland PRO, TimberlandBoot Company, SmartWool, howies, and IPATH brands in North America, Europe, and Asia. The company

offers basic, premium, and chukka boots, including roll-tops; Field Boot, Euro Hiker, and Euro Sprint Hiker sport

boots; and casual footwear series, such as authentic rugged handsewn oxfords, boat shoes, and casual bucks. It

also provides outdoor performance footwear for outdoor recreationalists and enthusiasts for outdoor adventures.

The companys apparel products line includes casual, outdoor adventure and outdoor leisure, and sports apparel

for men, women, and kids. In addition, it offers a range of accessories products, including packs and travel gear,


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womens handbags, belts, wallets, socks, headwear, gloves, watches, sunglasses, eyewear, ophthalmic frames, and

various other small leather goods. The company markets its products through independent retailers, department

stores, athletic stores, national retailers, and Timberland specialty stores, as well as through a mix of independent

distributors, franchisees, and licensees. It also sells its products through online at timberland.com,

smartwool.com, and ipath.com in the United States, as well as at timberlandonline.co.uk and howies.co.uk in theUnited Kingdom. As of December 31, 2009, The Timberland Company operated 6 specialty stores, 59 factory

outlet stores, and 4 footwear plus stores in the United States; 44 company-owned specialty stores and shops, and

16 factory outlet stores in Europe; and 67 company-owned specialty stores and shops, and 19 factory outlet stores

in Asia. The company was founded in 1933 and is headquartered in Stratham, New Hampshire.-Yahoo! Finance

Timberland is a solid comparable company because of their exposure to outdoor footwear and similar growth

rates. Deckers owns two brands that operate in the outdoor footwear industry, Teva and Ahnu. These brands sell a

number of hiking boots and other products that are very similar to that of Timberland. This makes them direct

competitors in many markets in addition to having similar revenues and gross profits. Timberland operates

wholesale, eCommerce and retail store segments in the footwear industry which makes them a very comparable

company to Deckers Outdoor. Timberland does not sell as many womens boots which makes the comparisonmore clouded. I weighted Timberland 20% in my comparable analysis because of their exposure to outdoor

footwear, similar capital structure and store growth.

Crocs (CROX) 25%

Crocs, Inc. and its subsidiaries engage in the design, development, manufacture, marketing, and distribution of

footwear for men, women, and children. The company primarily offers casual and athletic shoes, and shoe

charms. It also designs and sells a range of footwear and accessories that utilize its proprietary closed cell-resin,

called Croslite. In addition, the company offers a line of apparel for boys and girls; men featuring Croslite

material; and accessories, including snap-on charms and messenger bags. Further, it provides leather and ethylene

vinyl acetate based sandals principally for the beach, adventure, and action sports markets. The company sells its

products through domestic and international retailers and distributors, as well as directly to end-user consumers

through its Web stores, company-operated retail stores, outlets, and kiosks primarily under the Crocs, Jibbitz,

Ocean Minded, and YOU by Crocs brand names. As of December 31, 2009, it operated 170 domestic and

international retail kiosks located in malls and other high foot traffic areas; 84 domestic and international retail

stores; 63 domestic and international outlet stores; and 23 Web stores. Crocs, Inc. operates in the Americas,

Europe, and Asia. The company was formerly known as Western Brands, LLC and changed its name to Crocs,

Inc. in January 2005. Crocs, Inc. was founded in 1999 and is based in Niwot, Colorado.-Yahoo! Finance

Crocs is a footwear company that is comparable to Deckers Outdoor because of their international growth, unisexniche brand, and similar fashion risks. Crocs is expanding internationally, using retail stores in the same way that

Deckers management plans to in coming years. The company is also similar because they sell a non -traditional

style of shoe that has an emphasis on comfort. They have high gross margins and the majority of their sales come

from a core product or brand. Additionally, most of their sales are in the womens lines, which is comparable to

Deckers. There are a few differences that stand out, including the fact that Crocs has some debt on their balance

sheet and are currently less trendy then UGG worldwide. I weighted Crocs 25% on my comparable analysis due

to these factors.


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Lululemon Athletica (LULU) 25%

Lululemon Athletica Inc. engages in the design, manufacture, and distribution of athletic apparel and accessories

for women, men, and female youth in Canada, the United States, and Australia. The companys apparel products

include fitness pants, shorts, tops, and jackets for healthy lifestyle activities, such as yoga, running, and general

fitness. Its fitness-related accessories comprise an array of items, such as bags, socks, underwear, yoga mats,

instructional yoga DVDs, and water bottles. The company sells its products through its retail stores; independent

franchises; and a network of wholesale accounts that includes yoga studios, health clubs, and fitness centers, as

well as directly through e-commerce. As of January 31, 2010, it operated 124 company-owned and franchise

stores under the Lululemon athletica and ivivva athletica brand names. Lululemon Athletica Inc. was founded in

1998 and is based in Vancouver, Canada.-Yahoo! Finance

When doing my search for comparable companies, I wasnt just searching for companies that had similar growthrates, beta and capital structure. I was looking for apparel companies that dominated a niche market in the way

UGG brand does. Lululemon is a prime example, dominating the niche market for high end yoga pants andrelated apparel. Lululemon is benefiting from current fashion trends, has comparable margins combined with asimilar capital structure. Lululemon does have a higher growth rate, however they sell primarily womensproducts in the same way UGGs does. They face many similar risks to their product sales and their eCommerceand retail store segments are very comparable. Management at Deckers believes they are going to pursue a verysimilar strategy as Lululemon going forward, so I believe they are extremely comparable despite the valuationgap.

I also believe that the gap between analysts growth estimates for Lululemon and Deckers Outdoor will bereduced substantially after Deckers management team gives more detail on the mens line during the 4 th quarterconference call on February 23, 2011. I believe Lululemon is the best comparison on a growth basis and becauseof this I reiterate that similar, although lower, multiples could be applied to Deckers Outdoor. I weighted LULU

25% on my comparable analysis because of the domination of their niche market, the current popularity of theirproducts among the same demographic and the similar growth prospects for both companies.

DISCOUNTED CASH FLOWANALYSIS

The line items in the discounted cash flow analysis (DCF) were projected as a percentage of revenue in order to

arrive at the firms annual free cash flow. The DCF analysis received a weighting of 50% and yielded an implied

price of $85.76.

Revenue

UGG Australia Wholesale UGG brand sales are projected to increase rapidly over the next several years. This is primarily due to

domestic and overseas demand for their womens line of sheepskin boots, which have been increasing

popularity with the younger demographics. Market research has shown that 77% of UGG brand femaleconsumers are ages 18 to 54 years old. Out of those consumers, 47% of are ages 18 to 34 and 30% are 35to 54. I expect this trend to continue and accelerate as the younger generation is able to increase theirdiscretionary spending as the job market strengthens domestically. Turning to the international segment,UGG has yet to meaningfully penetrate Asian markets, particularly China where demand is very high. I


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expect that international demand will be the primary driver of top line growth for the UGG wholesalesegment for many years to come. I have projected the segment to have a 15.75% CAGR going into theterminal year of 2020.

Teva Wholesale Teva brand revenues are projected to increase at a higher rate than in years past because of a resurgence

in demand from the Asian markets. Management believes that the brand is rapidly gaining traction inthese markets because its already a well-respected and revered brand. Tevas growth potential in theinternational segment was evidenced when they reported 51.7% year over year growth in the 3rd quarter.Management now believes that Teva can easily double revenues by 2014 and they have plans toaggressively market the line in emerging Asian markets. The Teva segment is projected to have a 15.5%CAGR going into 2020.

Other Brand Wholesale The Simple, TSUBO, AHNU, and Mozo brands are projected to gain traction in coming years as

management increases marketing spending to create better brand awareness. This increased awarenessand shelf space in retail outlets should result in solid growth rates going into the terminal year. Brands

like Mozo have also had great success overseas in places like Japan. This top line growth is expected tocontinue at a moderate pace as more consumers are exposed to the products these relatively small brandsoffer. The Simple brand has been successful at reaching a niche market of socially conscious andenvironmentally sensitive consumers, a market segment that is growing at a healthy pace. These fourbrands combined are projected to have a 16.1% CAGR for the years 2010 through 2020. This growthincludes the acquisition of an additional small brand for around 4 million in 2015.

eCommerce This segment should expand very rapidly in the next 10 years as the trend of online shopping becomes

even more pronounced. The company has been spending an increasing amount of money to drawconsumers onto the websites of their various brands. They recently have begun to market on Facebookand other social networking sites which should begin to show up within the next few years. This segmentshould accelerate in later years as fuel prices increase and online shopping becomes increasingly

convenient and affordable. The eCommerce segment is expected to grow the top line at a 16.25% CAGRinto the terminal year.

Retail Stores The UGG brand retail store segment is currently the main focus for managements plans for expansion.

Because of the higher margins in the retail store segment management feels it can be a very important partof the companys future. Deckers Outdoor currently only operates 24 stores worldwide and plans toexpand this segment very significantly. The company opened eight new stores since the 3 rd quarter of2009 and plans to accelerate this growth in years to come. This is also reflected in the projections for capex spending, which trend along with store openings. Many of these retail stores are in internationalmarkets, including two new stores in Shanghai and one in Hong Kong. This is just the beginning of what Ianticipate will be a very pronounced push into the international retail market. This segment is projected to

have a 15.3% CAGR into 2020.

Beta I ran a five year monthly regression of DECK against the S&P 500 and derived a beta of 1.59. This beta is

similar to that of the comparable companies listed and also accurately reflects the risks associated with thecompany. Considering the high growth rate and solid balance sheet of the company I believe this beta isan accurate representation of the risk when compared to comparable companies.


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Cost of Goods Sold

Cost of goods sold is projected to decrease as a percentage of revenue as compared to years past. This isprimarily due to offering higher margin products such as the Jimmy Choo UGG line which retail from$495 to $795 and offer increased margin. The decrease in cost of goods sold as a percentage of revenue is

also due to the increased gross margins from the retail store segment. These higher margins should offsetthe 5 to 10% rise in commodity costs that management sees impacting next year. I believe the impact willbe minimal because the company has pricing power with their brands.

Management has stated that SG&A costs will rise as the company opens more retail stores. I projectedthese expenses to increase in accordance with the number of new store openings annually, which can beseen in the revenue model. SG&A costs continue to rise until the number of new store openingsbeginning to level off, at which time I reduced the rate of growth in SG&A expenses. There are someadditional SG&A costs in the earlier years that are related to the build out of the eCommerce business,however these costs trail off and have minimal impact by 2013.

Research & Development This has historically been a very small expense for Deckers, however I feel that this will not be the case

going forward. As the UGG brand expands the existing product offerings in the womens line and begins

to develop a more complete mens line of footwear, significant R&D expenses will be incurred. Thehigher rate of R&D spending is projected to continue into the terminal year because I expect that themens line will take significant time to develop. I projected all R&D expenses as a percentage of revenue.

Advertising & Marketing With the addition of Tom Brady to the new UGG advertising campaign I assumed that marketing

expenses would rise in coming years. Not only will the endorsement probably cost the company on anannual basis, but the company will probably be spending more on top of that to get extra exposure. I haveprojected that marketing expenses climb to around 3.5% to 4% of total revenues. This is in line with whatother lifestyle brands such as Ralph Lauren traditionally spend to build consumer awareness.Management stated in the 3rd quarter conference call that they will increase marketing expenses and thatthey will stay in this 3.5% to 4% range going forward.

Working Capital In my working capital model I decided to back out the cash balance from the current assets. I did this

because the company is able to cover all their expenses from free cash flow. The cash was added backinto the firm value in the DCG assumptions.

RECOMMENDATION

I am recommending Deckers Outdoor as a BUY for all portfolios because of its excellent growth prospects both

domestically and internationally. My target price implies that it is current undervalued by about 18%. I believethat the new UGG mens line will be a success, adding incremental revenue and net income growth into

perpetuity. The success of the mens line will increase market share in the footwear industry and solidify the

companys status as a lifestyle brand. The resurgence of the Teva brand will make the business less seasonal and

expand international growth for years to come. Margins are improved by opening up more retail stores in key

Asian markets such as China and Hong Kong. This should help increase brand exposure and drive international

sales of UGG, which have just begun to scratch the surface from the standpoint of market penetration. The

eCommerce segment has plenty of room to grow both domestically and should benefit from increasing levels


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online shopping. Furthermore, I believe that the current market capitalization of Deckers Outdoor is too low

considering the market opportunity. I am recommending DECK as a BUY for all portfolios.

Analysis Weighting PriceComparable Target 50% 88.94$

DCF Target 50% 85.76$

Weighted Target Price 87.35$

Current Price 74.13$

Undervalued (Over) 17.83%


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APPENDIX 1COMPARABLESANALYSISThe University of Oregon Investment Group

30.00% 20.00% 25.00% 25.00% Weighted Avg.

($ in thousands, except per share data) DECK SHOO TBL CROX LULU

Stock Characteristics Max Min Avg. Median

Current Price 67.08$ 15.92$ 36.99$ 32.49$ 74.13$ 38.13$ 26.84$ 15.92$ 67.08$

50 Day Moving Avg.

150 Day Moving Avg.

200 Day Moving Avg.

Beta 2.60 1.31 1.85 1.75 1.59 1.53 1.31 1.97 2.60

Size

ST Debt (MRQ) 1,900$ -$ 475$ -$ -$ -$ -$ 1,900$ -$LT Debt (MRQ) 1,200$ -$ 300$ -$ -$ -$ -$ 1,200$ -$

Cash and Cash Equiv. (MRQ) 224,800$ 49,440$ 131,660$ 126,200$ 250,736$ 49,440$ 108,800$ 143,600$ 224,800$

Minority Interest 4,500$ -$ 1,275$ 300$ 1$ -$ -$ 600$ 4,500$

Market Value Preferred Stock -$ -$ -$ -$ -$ -$ -$

Diluted Share Count 87248 27742 59763 62030 39228 27742 52230 87,248 71830

Market Cap 4,818,356$ 1,057,802$ 2,166,750$ 1,395,421$ 2,907,972$ 1,057,802$ 1,401,853$ 1,388,988$ 4,818,356$

Enterprise Value 4,598,056$ 1,008,362$ 2,037,140$ 1,271,071$ 2,657,237$ 1,008,362$ 1,293,053$ 1,249,088$ 4,598,056$

Profitability Margins

Gross Margin 55.1% 43.3% 50.5% 51.7% 48.8% 43.3% 48.5% 54.8% 55.1%

EBIT Margin 25.0% 9.3% 16.5% 15.9% 24.8% 19.5% 9.3% 12.3% 25.0%

EBITDA Margin 28.0% 11.2% 19.3% 18.9% 25.9% 21.2% 11.2% 16.6% 28.0%

Net Margin 15.2% 6.7% 10.9% 10.9% 15.6% 12.2% 6.7% 9.5% 15.2%

Credit Metrics

Interest Expense (MRQ)

Debt/Equity (MRQ)

Debt/EBITDA (LTM)

EBITDA/Interest Expense (LTM)

Operating Results

Revenue (2011 EST) 1,432,000$ 694,500$ 980,725$ 898,200$ 1,236,874$ 694,500$ 1,432,000$ 915,200$ 881,200$

Gross Profit (2011 EST) 695,100$ 301,000$ 495,850$ 493,650$ 602,976$ 301,000$ 695,100$ 501,700$ 485,600$

EBIT (2011 EST) 219,900$ 112,200$ 150,175$ 134,300$ 306,126$ 135,400$ 133,200$ 112,200$ 219,900$

EBITDA (2011 EST) 246,300$ 147,300$ 176,675$ 156,550$ 320,350$ 147,300$ 160,900$ 152,200$ 246,300$

Net Income (2011 EST) 133,900$ 84,700$ 100,613$ 91,925$ 193,472$ 84,700$ 96,600$ 87,250$ 133,900$

Operating Cash Flow (2011 EST) 155,900$ 84,500$ 120,125$ 120,050$ 207,696$ 84,500$ 120,600$ 119,500$ 155,900$

Valuation

EV/Revenue 2.15 x 1.45 x 0.90 x 1.36 x 5.22 x 2.2

EV/Gross Profit 4.41 x 3 x 1.86 x 2.49 x 9.47 x 4.3

EV/EBITDA 8.29 x 6.85 x 8.04 x 8.21 x 18.67 x 10.3

EV/Net Income 13.73 x 11.91 x 13.39 x 14.32 x 34.34 x 18.4

PEG (TTM) 0.87 x 1.00 x 1.34 x 1.83 x 1.71 x 1.4

Metric Implied Price Weight

EV/Revenue 77.71$ 30.00%

EV/Net Income 97.20$ 30.00%

EV/EBITDA 91.16$ 40.00%

Price Target 88.94$

Current Price 74.13

Under (Over) Valued 20.0%


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APPENDIX 2DISCOUNTED CASH FLOWS ANALYSIS

($ in thousands, except per share data) 0.25 1.25 2.25 3.25 4.25 5.25 6.25 7.25 8.25 9.25 12007 2008 2009 2010 Q1-3A 2010 Q4E 2010A+E 2011 E 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E 2018 E 2019 E 2020 E

Total Company Revenue 448,929$ 689,445$ 813,177$ 570,865$ 425,000$ 995,865$ 1,236,874$ 1,545,257$ 1,923,374$ 2,339,419$ 2,749,034$ 3,140,260$ 3,503,682$ 3,794,811$ 4,030,417$ 4,291,$% Y/Y Growth 47.64% 53.58% 17.95% 22.47% 24.20% 24.93% 24.47% 21.63% 17.51% 14.23% 11.57% 8.31% 6.21% 6.

Cost of Goods Sold 241,458$ 384,127$ 442,087$ 301,262$ 206,125$ 507,387$ 633,898$ 787,308$ 990,538$ 1,201,291$ 1,413,004$ 1,614,094$ 1,799,141$ 1,946,738$ 2,065,589$ 2,253,$

% Revenue 53.79% 55.72% 54.37% 52.77% 48.50% 50.50% 51.25% 50.95% 51.50% 51.35% 51.40% 51.40% 51.35% 51.30% 51.25% 52.Gross Profit 207,471$ 305,318$ 371,090$ 269,603$ 218,875$ 488,478$ 602,976$ 757,948$ 932,837$ 1,138,127$ 1,336,031$ 1,526,167$ 1,704,541$ 1,848,073$ 1,964,828$ 2,038,$

Gross Margin 46.21% 44.28% 45.63% 47.23% 51.00% 49.05% 48.75% 49.05% 48.50% 48.65% 48.60% 48.60% 48.65% 48.70% 48.75% 47.Operating Expenses

SG&A 81,967$ 122,089$ 152,005$ 161,252$ 90,313$ 251,565$ 230,059$ 275,828$ 348,131$ 425,774$ 497,575$ 569,957$ 641,174$ 698,245$ 739,582$ 783,$

% Revenue 18.26% 17.71% 18.69% 28.25% 21.25% 25.26% 18.60% 17.85% 18.10% 18.20% 18.10% 18.15% 18.30% 18.40% 18.35% 18.R&D 2,916$ 5,619$ 8,111$ -$ 18,553$ 19,316$ 21,157$ 24,564$ 30,239$ 31,403$ 35,037$ 41,743$ 46,350$ 53,$

% Revenue 0.65% 0.82% 1.00% 1.50% 1.25% 1.10% 1.05% 1.10% 1.00% 1.00% 1.10% 1.15% 1.Advertising & Marketing 17,035$ 24,866$ 28,727$ -$ 48,238$ 60,265$ 73,088$ 87,728$ 104,463$ 120,900$ 129,636$ 132,818$ 141,065$ 171,$

% Revenue 3.79% 3.61% 3.53% 3.90% 3.90% 3.80% 3.75% 3.80% 3.85% 3.70% 3.50% 3.50% 4.D&A 3,516$ 5,282$ 8,460$ 8,836$ 5,164$ 14,000$ 14,224$ 19,316$ 19,234$ 23,394$ 27,490$ 31,403$ 35,037$ 34,153$ 30,228$ 49,$

% Revenue 0.78% 0.77% 1.04% 1.55% 1.22% 1.20% 1.15% 1.25% 1.00% 1.00% 1.00% 1.00% 1.00% 0.90% 0.75% 1.Total Operating Expenses 343,376$ 536,701$ 630,930$ 161,252$ 90,313$ 758,952$ 930,748$ 1,142,717$ 1,432,914$ 1,739,358$ 2,045,282$ 2,336,354$ 2,604,988$ 2,819,545$ 2,992,585$ 3,261,$

% Revenue 76.49% 77.85% 77.59% 76.21% 75.25% 73.95% 74.50% 74.35% 74.40% 74.40% 74.35% 74.30% 74.25% 76.EBIT 105,553$ 152,744$ 182,247$ 108,351$ 128,563$ 236,914$ 306,126$ 402,539$ 490,460$ 600,061$ 703,753$ 803,907$ 898,695$ 975,266$ 1,037,832$ 1,030,$

% Revenue 23.51% 22.15% 22.41% 18.98% 30.25% 23.79% 24.75% 26.05% 25.50% 25.65% 25.60% 25.60% 25.65% 25.70% 25.75% 24.Other Expense (Income) (4,486)$ (3,583)$ (1,976)$ (775)$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ $

Interest Expense -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ $% Revenue 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.

Pre-tax Income 110,039$ 156,327$ 184,223$ 109,126$ 128,563$ 236,914$ 306,126$ 402,539$ 490,460$ 600,061$ 703,753$ 803,907$ 898,695$ 975,266$ 1,037,832$ 1,030,$% Revenue 24.51% 22.67% 22.65% 23.79% 24.75% 26.05% 25.50% 25.65% 25.60% 25.60% 25.65% 25.70% 25.75% 24.

Less Taxes (Benefit) 43,602$ 46,631$ 66,304$ 40,104$ 47,311$ 87,184$ 112,654$ 146,927$ 176,566$ 210,021$ 239,276$ 273,328$ 305,556$ 331,591$ 352,863$ 360,$Tax Rate 39.6% 29.8% 36.0% 36.8% 36.8% 36.8% 36.8% 36.5% 36.0% 35.0% 34.0% 34.0% 34.0% 34.0% 34.0% 35Net Income 66,437$ 109,696$ 117,919$ 69,022$ 81,252$ 149,729$ 193,472$ 255,613$ 313,895$ 390,040$ 464,477$ 530,578$ 593,138$ 643,676$ 684,969$ 669,$

Net Mar in 14.80% 15.91% 14.50% 12.09% 19.12% 15.04% 15.64% 16.54% 16.32% 16.67% 16.90% 16.90% 16.93% 16.96% 17.00% 15.Add Back Depreciation and Amortization 3,516$ 5,282$ 8,460$ 8,836$ 5,164$ 14,000$ 14,224$ 19,316$ 19,234$ 23,394$ 27,490$ 31,403$ 35,037$ 34,153$ 30,228$ 49,$

% Revenue 0.78% 0.77% 1.04% 1.55% 1.22% 1.41% 1.15% 1.25% 1.00% 1.00% 1.00% 1.00% 1.00% 0.90% 0.75% 1.Add Back Interest Expense*(1-Tax Rate) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ $

% Revenue 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.Operating Cash Flow 65,467$ 111,395$ 124,403$ 77,083$ 86,416$ 163,729$ 207,696$ 274,928$ 333,128$ 413,434$ 491,967$ 561,981$ 628,175$ 677,829$ 715,198$ 718,$% Revenue 14.58% 16.16% 15.30% 13.50% 20.33% 16.44% 16.79% 17.79% 17.32% 17.67% 17.90% 17.90% 17.93% 17.86% 17.75% 16.

Current Assets 410,046$ 206,903$ 607,914$ 379,777$ 379,777$ 531,856$ 629,692$ 774,158$ 907,694$ 1,058,378$ 1,199,579$ 1,333,151$ 1,438,233$ 1,529,543$ 1,600,$% Revenue 0.00% 59.47% 25.44% 43.00% 40.75% 40.25% 38.80% 38.50% 38.20% 38.05% 37.90% 37.95% 37.

Current Liabilities 95,209$ 100,870$ 126,765$ 107,553$ 107,553$ 182,439$ 231,016$ 293,315$ 356,761$ 426,100$ 486,740$ 551,830$ 597,683$ 638,821$ 686,$

% Revenue 0.00% 13.81% 12.40% 10.80% 14.75% 14.95% 15.25% 15.25% 15.50% 15.50% 15.75% 15.75% 15.85% 16.Net Working Capital -$ 314,837$ 106,033$ 481,149$ 272,224$ 272,224$ 349,417$ 398,676$ 480,844$ 550,933$ 632,278$ 712,839$ 781,321$ 840,551$ 890,722$ 914,$

% Revenue 0.00% 45.67% 13.04% 27.34% 28.25% 25.80% 25.00% 23.55% 23.00% 22.70% 22.30% 22.15% 22.10% 21.Change in Net Working Capital 314,837$ (208,804)$ 61,032$ (147,776)$ 166,191$ 77,193$ 49,259$ 82,167$ 70,089$ 81,345$ 80,561$ 68,482$ 59,229$ 50,172$ 23,$Capital Expenditures 6,385$ 22,337$ 13,971$ 14,496$ 10,000$ 25,000$ 30,922$ 34,768$ 34,621$ 35,091$ 31,614$ 31,403$ 35,037$ 45,538$ 40,304$ 51,$

% Revenue 1.42% 3.24% 1.72% 2.51% 2.50% 2.25% 1.80% 1.50% 1.15% 1.00% 1.00% 1.20% 1.00% 1.Acquisitions -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ 4,000$ -$ -$ -$ -$ $

% Revenue 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.15% 0.00% 0.00% 0.00% 0.00% 0.Unlevered Free Cash Flow 63,568$ (222,196)$ 321,212$ 2,330$ 224,192$ (27,461)$ 99,581$ 190,901$ 216,340$ 308,253$ 375,008$ 450,017$ 524,656$ 573,062$ 624,722$ 643,$PV of Free Cash Flow 216,579$ 83,782$ 139,884$ 138,064$ 171,330$ 181,530$ 189,723$ 192,641$ 183,255$ 173,990$ 156,$

Discount % 84.14% 73.28% 63.82% 55.58% 48.41% 42.16% 36.72% 31.98% 27.85% 24.


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APPENDIX 3DISCOUNTED CASH FLOWSANALYSISASSUMPTIONS

APPENDIX 4

BETASENSITIVITYANALYSIS

Assumptions for Discounted Free Cash Flows Model

Tax Rate 35.00% Terminal Growth Rate 3.00%Risk-Free Rate 3.41% Terminal Value 5,747,548.98$

PV of Terminal Value 1,478,805$Beta 1.59 Sum of PV Free Cash Flows 1,634,670$Market Risk Premium 7% Firm Value 3,364,211$% Equity 100.00% LT Debt -$% Debt 0.00% Cash 250,736$

CAPM 14.54% Equity Value 3,364,211$WACC 14.54% Diluted Share Count 39,228

Implied Price 85.76$Current Price 72.38

Under (Over) Valued 18.49%

Beta St. Deviation Implied Price Under (Over) Valued

1.83 2.00 72.98$ -1.55%

1.77 1.50 75.84$ 2.31%

1.71 1.00 78.91$ 6.45%

1.65 0.50 82.21$ 10.90%

1.59 0.00 85.76$ 15.69%

1.53 -0.50 89.60$ 20.87%

1.47 -1.00 93.76$ 26.48%

1.41 -1.50 98.28$ 32.58%

1.35 -2.00 103.20$ 39.21%

($ in millions, except per share data) 2008 2009 2010 2011 E 2012 E 2013 E 2014 E 2015 E 2016 E 2017 E 2018 E 2019 E 2020 E

Net Revenues 689,445$ 813,177$ 995,865$ 1,236,874$ 1,545,257$ 1,923,374$ 2,339,419$ 2,749,034$ 3,140,260$ 3,503,682$ 3,794,811$ 4,030,417$ 4,291,713$

Current Assets

Cash and Cash Equivalents 176,804$ 315,862$ 250,736$ 321,587$ 417,219$ 538,545$ 678,431$ 793,220$ 910,676$ 981,031$ 1,062,547$ 1,128,517$ 1,201,680$

% of Revenues 25.64% 38.84% 25.18% 26.00% 27.00% 28.00% 29.00% 29.00% 29.00% 28.00% 28.00% 28.00% 28.00%

Short term Investments 17,976$ 26,120$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

% of Revenues 2.61% 3.21% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

A/R 108,129$ 76,427$ 142,232$ 173,162$ 216,336$ 269,272$ 322,840$ 377,992$ 431,786$ 476,501$ 519,889$ 544,106$ 579,381$

% of Revenues 15.68% 9.40% 14.28% 14.00% 14.00% 14.00% 13.80% 13.75% 13.75% 13.60% 13.70% 13.50% 13.50%

Prov. For Doubtful Accts 10,706$ 11,790$ 22,599$ 160,794$ 185,431$ 211,571$ 233,942$ 274,903$ 314,026$ 350,368$ 379,481$ 403,042$ 386,254$

% of A/R 9.90% 15.43% 15.89% 13.00% 12.00% 11.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 9.00%

Total Inventory 92,740$ 85,356$ 197,313$ 185,531$ 216,336$ 278,889$ 333,367$ 384,865$ 431,786$ 481,756$ 512,300$ 554,182$ 592,256$

% of Revenues 13.45% 10.50% 19.81% 15.00% 14.00% 14.50% 14.25% 14.00% 13.75% 13.75% 13.50% 13.75% 13.80%

Prepaid Expenses & Other Current Assets 3,691$ 7,210$ 17,633$ 12,369$ 11,589$ 14,425$ 17,546$ 20,618$ 21,982$ 24,526$ 26,564$ 28,213$ 42,917$

% of Revenues 0.54% 0.89% 1.77% 1.00% 0.75% 0.75% 0.75% 0.75% 0.70% 0.70% 0.70% 0.70% 1.00%

Total Current Assets 410,046$ 522,765$ 630,513$ 853,443$ 1,046,911$ 1,312,703$ 1,586,126$ 1,851,598$ 2,110,255$ 2,314,182$ 2,500,781$ 2,658,060$ 2,802,489$

% of Revenues 59.47% 64.29% 63.31% 69.00% 67.75% 68.25% 67.80% 67.35% 67.20% 66.05% 65.90% 65.95% 65.30%

Adjusted Total Current Assets 233,242$ 206,903$ 379,777$ 531,856$ 629,692$ 774,158$ 907,694$ 1,058,378$ 1,199,579$ 1,333,151$ 1,438,233$ 1,529,543$ 1,600,809$

Current LiabilitiesA/P 42,960$ 47,331$ 59,752$ 77,305$ 96,579$ 120,211$ 146,214$ 171,815$ 196,266$ 218,980$ 237,176$ 251,901$ 268,232$

% of Revenues 6.23% 5.82% 6.00% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25% 6.25%

Accrued Payroll 14,996$ 20,869$ 27,884$ 37,106$ 49,448$ 67,318$ 81,880$ 103,089$ 117,760$ 140,147$ 151,792$ 165,247$ 182,398$

% of Revenues 2.18% 2.57% 2.80% 3.00% 3.20% 3.50% 3.50% 3.75% 3.75% 4.00% 4.00% 4.10% 4.25%

Income Taxes Payable 24,577$ 19,685$ -$ 43,291$ 54,084$ 67,318$ 81,880$ 96,216$ 109,909$ 122,629$ 132,818$ 141,065$ 150,210$

% of Revenues 3.56% 2.42% 0.00% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%

Other accrued expenses 12,676$ 12,985$ 19,917$ 24,737$ 30,905$ 38,467$ 46,788$ 54,981$ 62,805$ 70,074$ 75,896$ 80,608$ 85,834$

% of Revenues 1.84% 1.60% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%

Total Current Liabilities 95,209$ 100,870$ 107,553$ 182,439$ 231,016$ 293,315$ 356,761$ 426,100$ 486,740$ 551,830$ 597,683$ 638,821$ 686,674$

% of Revenues 13.81% 12.40% 10.80% 14.75% 14.95% 15.25% 15.25% 15.50% 15.50% 15.75% 15.75% 15.85% 16.00%


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APPENDIX 6SOURCES

FactSet Seeking Alpha Briefing.com TD Ameritrade Yahoo! Finance Deckers.com Teva.Com UggAustralia.com IBIS World

($ in thousands, except per share data)

Segment 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

UGG Wholesale 150,279$ 182,369$ 291,908$ 483,781$ 566,964$ 675,000$ 823,500$ 1,029,375$ 1,286,719$ 1,595,531$ 1,898,682$ 2,183,485$ 2,445,503$ 2,641,143$ 2,773,200$ 2,911,860$

% Change 21% 60% 66% 17% 19% 22% 25% 25% 24% 19% 15% 12% 8% 5% 5%

Teva Wholesale 80,446$ 75,283$ 82,003$ 80,882$ 71,952$ 97,900$ 123,354$ 156,660$ 192,691$ 235,083$ 275,048$ 316,305$ 354,261$ 379,060$ 390,431$ 413,857$

% Change -6% 9% -1% -11% 36% 26% 27% 23% 22% 17% 15% 12% 7% 3% 6%

Other Brands Wholesale 6,980$ 10,903$ 11,163$ 17,558$ 19,644$ 22,001$ 23,761$ 25,662$ 27,202$ 28,290$ 34,639$ 45,030$ 54,037$ 67,546$ 84,432$ 101,319$

% Change 56% 2% 57% 12% 12% 8% 8% 6% 4% 22% 30% 20% 25% 25% 20%eCommerce 25,912$ 28,886$ 45,473$ 68,769$ 75,666$ 86,964$ 100,009$ 115,010$ 143,762$ 161,014$ 185,166$ 212,941$ 244,882$ 284,063$ 332,354$ 392,177$

% Change 11% 57% 51% 10% 15% 15% 15% 25% 12% 15% 15% 15% 16% 17% 18%

Retail stores 1,143$ 6,982$ 18,382$ 38,455$ 78,951$ 114,000$ 166,250$ 218,550$ 273,000$ 319,500$ 355,500$ 382,500$ 405,000$ 423,000$ 450,000$ 472,500$

% Change 511% 163% 109% 105% 44% 46% 31% 25% 17% 11% 8% 6% 4% 6% 5%

Total 264,760$ 304,423$ 448,929$ 689,445$ 813,177$ 995,865$ 1,236,874$ 1,545,257$ 1,923,374$ 2,339,419$ 2,749,034$ 3,140,260$ 3,503,682$ 3,794,811$ 4,030,417$ 4,291,713$

15% 47% 54% 18% 22% 24% 25% 24% 22% 18% 14% 12% 8% 6% 6%

Net sales by location: 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

US 266,092 386,593$ 581,512$ 645,993$ 776,775$ 927,655$ 1,081,680$ 1,269,427$ 1,520,622$ 1,786,872$ 2,009,767$ 2,207,320$ 2,352,783$ 2,418,250$ 2,489,194$

% Revenue 87.4% 86.1% 84.3% 79.4% 78.0% 75.0% 70.0% 66.0% 65.0% 65.0% 64.0% 63.0% 62.0% 60.0% 58%

International 38,331 62,336$ 107,933$ 167,184$ 219,090$ 309,218$ 463,577$ 653,947$ 818,797$ 962,162$ 1,130,494$ 1,296,362$ 1,442,028$ 1,612,167$ 1,802,520$

% Revenue 12.6% 13.9% 15.7% 20.6% 22.0% 25.0% 30.0% 34.0% 35.0% 35.0% 36.0% 37.0% 38.0% 40.0% 42%

Total 304,423 448,929$ 689,445$ 813,177$ 995,865$ 1,236,874$ 1,545,257$ 1,923,374$ 2,339,419$ 2,749,034$ 3,140,260$ 3,503,682$ 3,794,811$ 4,030,417$ 4,291,713$

Retail Stores 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Store count 5 7 12 18 24 35 47 60 71 79 85 90 94 100 105

Revenue/Store 1,396$ 2,626$ 3,205$ 4,386$ 4,750$ 4,750$ 4,650$ 4,550$ 4,500$ 4,500$ 4,500$ 4,500$ 4,500$ 4,500$ 4,500$

Total Retail Revenue 6,982$ 18,382$ 38,455$ 78,951$ 114,000$ 166,250$ 218,550$ 273,000$ 319,500$ 355,500$ 382,500$ 405,000$ 423,000$ 450,000$ 472,500$

Margin 16.9% 17.4% 17.3% 23.4% 25.0% 25.0% 26.0% 26.5% 26.7% 27.0% 27.0% 27.1% 27.1% 27.2% 27.3%

Total Retail Income 1,180$ 3,194$ 6,649$ 18,498$ 28,500$ 41,563$ 56,823$ 72,345$ 85,307$ 95,985$ 103,275$ 109,755$ 114,633$ 122,400$ 128,756$

Income/Store 236$ 456$ 554$ 1,028$ 1,188$ 1,188$ 1,209$ 1,206$ 1,202$ 1,215$ 1,215$ 1,220$ 1,220$ 1,224$ 1,226$

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