The shoe that won\'t quit

Tag : snow shoe

(Fortune Magazine) -- I finally decided to take the plunge thispast winter and buy a pair of Uggs. I had initially dismissed thesheepskin boots, favored by celebrities such as Britney Spears andJessica Simpson, as a fad and expected them to go the way ofprairie dresses. Instead, several years into the craze, Uggs'popularity showed no sign of ebbing. Not just for snow bunniesanymore, Uggs are becoming a shoe for all seasons (check out thenew sandals for spring). And the comfort factor seemed undeniable.After years of squeezing my feet into pointy-toed stilettos, thevery thought of those furry boots was seductive. But when I gotaround to shopping for my Uggs in late January, the style that Iwanted was sold out in all the stores in my area.
The scarcity factor was not a glitch in the supply chain, butrather a carefully calibrated strategy by Ugg parent DeckersOutdoor ( DECK ) that is one of the big reasons behind the brand's success.Deckers tightly controls distribution to ensure that supply doesnot outstrip demand by operating just three freestanding Ugg storesand selling to a limited number of department and specialty chains.To understand the importance of that strategy, consider the fate ofonce red-hot Crocs, the maker of the colorful clogs. Crocs floodedthe market, selling its shoes in its own freestanding stores andthrough a broad spectrum of third-party retailers. The oversupplytarnished the brand. Crocs ( CROX ) shares are down 85% from their recent high of $75 in lateOctober.
While other shoe companies have stumbled through the current rougheconomic patch, Deckers has continued to post the kind of numbersthat helped it secure spot No. 98 on our 2007 list ofFastest-Growing Companies. Earnings have exceeded analysts'estimates in each of the past 12 quarters. Ugg sales totaled $348million in 2007, up from $37 million in 2003. And the outlook ispromising, with product extensions like slippers and apparel, and abudding overseas business to boost growth. Ugg sales surged 84% inthe first quarter, and anticipation of continued strength in thebrand led Deckers to lift its 2008 earnings and revenue guidance inlate April. The company now expects to earn roughly $6.43 a shareon revenue of $588 million, compared with previous guidance ofaround $6.07 a share on revenue of $561 million. The stock hassoared 44% since dipping below $92 in mid-March.