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									         COMPANY NOTE
         Company Update

         USA | Consumer | Apparel, Footwear & Textiles                             January 3, 2012

Deckers Outdoor (DECK)                                                                                                                  Conviction List

                                                                                                                                                                     EQUITY RESEARCH AMERICAS
Deep Dive Ahead of 2012                                                                                                                Price target $125.00
                                                                                                                                                Price $75.57

Key Takeaway
While DECK remains a favorite name of ours into 2012, we see a scenario
where management guides initial FY12 EPS up to 50c below consensus but
ultimately reports FY12 EPS well above. Our call is specific to how we see the                               Financial Summary
company guiding margins. We would be buyers on related (if any) weakness as                                  Book Value (MM):                            $656.0
management has a history of guiding conservatively and ultimately crushing                                   Book Value/Share:                           $16.69
expectations. See our 20 page report for details.                                                            Net Debt (MM):                                $21.0
2012 Buy Thesis. Our view continues to be based on upward sales bias from accelerating                       Return on Avg. Equity:                       24.2%
UGG store growth and the Sanuk acquisition. We also see SG&A leverage opportunity from                       Long-Term Debt (MM):                           $0.0
the anniversary of one-time expenses. We expect retail growth and Sanuk alone to account                     LTD/Cap:                                      0.0%
for 15% sales growth next year. With consensus currently calling for 20% sales growth next
                                                                                                             Dividend Yield:                               0.0%
year, the implied global wholesale assumption appears very conservative. We think 30%
+ sales growth and SG&A leverage are achievable in FY12 but unlikely to be reflected in                      Cash & ST Invest. (MM):                       $90.0
management's initial (conservative) guidance.                                                                Market Data
Thoughts on Initial FY12 Guidance. Consistent with our published research, we think                          52 Week Range:            $118.90 - $71.18
management may guide FY12 below consensus on conservative margin assumptions. We                             Total Entprs. Value (MM):        $2,990.9
provide numerous scenarios for sales & EPS growth in the attached report. The most likely                    Market Cap. (MM):                $2,969.9
case, in our opinion, will be an initial FY12 guide of 15-20% sales growth and 5% EPS
                                                                                                             Insider Ownership:                   4.2%
growth. This compares to consensus, which is calling for 20% sales growth and 17% EPS
growth. While consensus GM% expectations (down 210 bps) have become more realistic,                          Institutional Ownership:          100.9%
the operating margin line (down 40 bps) appears too aggressive versus where management                       Shares Out. (MM):                     39.3
may ultimately guide. Recall the 3Q call where the company spoke to investments such as                      Float (MM):                           37.0
new stores and personnel. This, to us, suggests that the initial guide will not call for SG&A                Avg. Daily Vol.:                1,427,245
leverage. That said, there is a very strong case to be made for SG&A leverage in FY12.

Three Important EPS Numbers. In forecasting DECK's FY12 initial guidance, there are
three important numbers to consider: consensus ($5.91), potential guidance range ($5.50-
$5.75) and EPS power ($6.50). Our FY12 estimate of $6.10 is at the mid-point of the potential
initial guidance and EPS power figures.

DECK trades at 15x forward EPS and 10x EV/EBITDA. These metrics are a discount to history.
Our PT reflects a premium multiple as justified by a stronger growth profile and upward                                             Taposh Bari, CFA, CPA *
EPS bias. We arrive at $125 using a blended average of 25x P/E and 15.5x EV/EBITDA. Risks                                                     Equity Analyst
                                                                                                                                (212) 708-2712
include cost inflation, execution (retail, international), and fashion trends.
                                                                                                                                    * Jefferies & Company, Inc.

USD                Prev.   2009A          Prev.   2010A          Prev.   2011E           Prev.   2012E       Price Performance
EBITDA (MM)           --    192.0            --    262.0            --    309.0             --    361.0
EV/EBITDA                    15.6x                 11.4x                    9.7x                   8.3x
Consensus             --        --           --        --           --     4.83             --     5.86
Mar                   --     0.31            --     0.46            --    0.49A             --        --
Jun                   --     0.09            --     0.23            --   (0.19)A            --        --
Sep                   --     0.86            --     1.07            --    1.59A             --        --
Dec                   --     1.74            --     2.27            --     3.25             --        --
FY Dec                --     2.98            --     4.04            --      5.16            --     6.10           80
FY P/E                      25.4x                  18.7x                   14.6x                  12.4x

                                                                                                                       JAN-11    MAY-11      AUG-11     DEC-11

Jefferies does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Jefferies may have a conflict
of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 15 to 20 of this report.
        Company Update                                       Deckers Outdoor

        January 3, 2012
                                                             Buy: $125 Price Target

                                                                                                                                                                         THE LONG VIEW
  Target Investment Thesis                                 Upside Scenario                                        Downside Scenario
 Inherent EPS upside to management            Better than expected sales driven by UGG                        Deceleration of the boot cycle would have
  guidance and consensus given company’s        retail, UGG wholesale and Teva wholesale.                        an adverse effect on ASP’s and sales.
  history of easily exceeding expectations.    Margin leverage, particularly in the back                       Lack of sales upside would disrupt the EPS
 Sales growth led by retail expansion,         half of 2011, as incremental sales come                          beat + raise story that is expected and
  international growth, men’s initiatives and   from accretive international and retail                          priced into the stock.
  apparel & handbags growth.                    channels.                                                       2011 EPS: $4.90; Target Multiple: 16x
 Best in class management team and strong  2011 EPS: $5.35; Target Multiple: 27x;                              Target Price: $78
  net cash balance.                          Target Price: $145
 2011 EPS: $5.16; Target Multiple: 25x P/E,
  15x EV/EBITDA; Target Price $125

  Long Term Analysis
  1 Year Forward P/E                                       Long Term Financial Model Drivers                      Other Considerations
                                                           LT Earnings CAGR                           20%         DECK has accumulated a significant cash
                                                           Organic revenue growth                     15%         balance that is well in excess of its
                                                           Operating Margin Expansion                   5%        operational needs. The company has
                                                                                                                  been shopping for a lifestyle brand but
                                                                                                                  has yet to find one given the stringent set
                                                                                                                  of criteria. Ultimately, we believe an
                                                                                                                  increased share repurchase bodes well for
                                                                                                                  investors and provides a positive signal to
  Source: Capital IQ, Jefferies estimates
                                                                                                                  the market in management’s confidence
                                                                                                                  behind the core brands’ growth

  Peer Group
  Group P/Es                                               Earnings Growth vs P/E                                 Recommendation / Price Target
                                                                                                                  Ticker                      Rec.             PT
                                                                                                                  DECK                         Buy          $125
                                                                                                                  WWW                         Hold            $40
                                                                                                                  UA                          Hold            $75
                                                                                                                  LULU                        Hold            $54
                                                                                                                  NKE                          Buy           $115

   Source: Capital IQ, Jefferies estimates                 Source: Capital IQ, Jefferies estimates

  Catalysts                                               Company Description
 February 2012: 4Q11 earnings results                    Deckers is a leading designer and wholesaler of footwear brands based in Goleta,
                                                          California. The company’s portfolio of brands includes UGG, Teva, Sanuk, Simple, Tsubo
 February 2012: 2012 preliminary guidance
                                                          and Ahnu. UGG accounts for 90% of sales and is the leading driver of the investment story.
                                                          UGG is mainly sold at wholesale through a limited distribution network that includes better
                                                          department stores (Nordstrom being its largest account), specialty store chains and
                                                          independent retailers. Going forward, we view UGG as a brand that represents comfort,
                                                          first and foremost, with growth levers that include: 1) U.S. expansion, 2) retail, and 3)
                                                          international (which replicates the U.S. model).

  page 2 of 20                                                                              Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

  Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            Laying Out the Parts for 2012 Guidance
                                                            Deckers is set to provide initial FY12 guidance with 4Q11 earnings in late February.
                                                            Management has a history of guiding conservatively and ultimately crushing
                                                            expectations. Despite this pattern, management’s initial FY guidance has rarely been
                                                            below consensus with FY09 being a recent exception. We believe a below consensus
                                                            guide is possible for FY12 and would use any related weakness as a major buying

                                                            4Q, which is still to be reported, will play a key role in the absolute level of FY12 EPS
                                                            guidance. Historically, the company’s out-year sales and EPS growth forecasts have been
                                                            on the lighter side but more than offset by a strong 4Q beat. The combination of
                                                            conservative out-year EPS growth and a strong 4Q has, in most cases, led to above
                                                            consensus out-year EPS guidance.

                                                            This coming year, we believe the margin headwinds are too strong to be offset by a 4Q
                                                            beat. As a result, there is a chance that management’s initial FY12 EPS outlook could fall
                                                            below consensus. The last time this happened at Deckers was in 2009 with the stock
                                                            declining 22% the following trading day.

                                                            We see three important EPS figures to consider ahead of 2012:

                                                                  1.    2012 consensus EPS = $5.91

                                                                  2.    2012 potential EPS guidance range = $5.50 - $5.75

                                                                  3.    2012 EPS power = $6.50

                                                            Bottom line, we think management could guide up to $0.50 below consensus but
                                                            ultimately report FY12 $1.00 above guidance.

                                                            In analyzing consensus estimates, we believe assumptions for gross margin (down 210
                                                            bps) and operating margin (down 40 bps), while possible when all said and done, are
                                                            above where management will likely guide. Gross margins face ongoing pressure from
                                                            product cost inflation and limited pricing power while SG&A faces the ongoing challenge
                                                            of ‚investments.‛

                                                            Coming out of the 3Q11 call in October, our impression was that gross margins would be
                                                            down a few hundred basis points (at least 200, in our opinion) and SG&A will not achieve
                                                            leverage. While these assumptions should ultimately prove conservative, we think it’s fair
                                                            to assume that management will, at least initially, guide within the confines of its 3Q

                                                            Although consensus margin expectations appear to be too aggressive (at least versus
                                                            where management will initially guide) we strongly believe that consensus sales estimates
                                                            are too conservative.

                                                            Deckers has a number of highly visible revenue catalysts in 2012 including the opening of
                                                            25 new retail stores, full year of the Sanuk acquisition, and global wholesale growth. We
                                                            (conservatively) model new retail store openings and Sanuk to contribute around 15% of
                                                            revenue growth alone. Consensus is currently forecasting 20% total revenue growth in
                                                            2012, which implies global organic wholesale growth of 3-4%. To put this figure in
                                                            greater perspective, 2011 year-to-date wholesale growth is >25% (excluding international
                                                            transition benefit of $50m) and was 20% in 2010 and 13% in 2009. Bottom line – the
                                                            implied 3-4% wholesale growth assumption in consensus estimates appears very

page 3 of 20                                                                         Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            Scenario Analysis
                                                            We believe management’s initial FY12 EPS outlook could fall within the range of $5.50 -
                                                            $5.75. The table below details the numerous possible outcomes based on a function of
                                                            4Q11 actual results and FY12 sales / EPS growth assumptions. Our estimated range is
                                                            based on a ~10% 4Q11 beat vs. guidance (DECK exceeded its last two 4Q guides by 20%,
                                                            each) and 5% EPS growth for FY12.

                                                            Chart 1: Scenarios Based on 4Q11 Actuals and FY12 Sales, EPS Growth

                                                                                                                                  2012 Sales % / EPS % Growth Scenarios
                                                                                                                     10% / 0%          15% / 0%         15% / 5%     20% / 5%       20% / 10%
                                                                                                             2.85       4.75             4.75             5.00           5.00          5.23

                                                                    4Q11 EPS Scenarios
                                                                                                             2.95       4.85             4.85             5.10           5.10          5.32
                                                                                          guidance           3.02       4.92             4.92             5.17           5.17          5.41
                                                                                          consensus          3.13       5.03             5.03             5.28           5.28          5.58
                                                                                             JEF             3.25       5.15             5.15             5.41           5.72          5.72
                                                                                                             3.35       5.25             5.25             5.51           5.51          5.83
                                                                                                             3.45       5.35             5.35             5.62           5.62          5.94
                                                                                                             3.55       5.45             5.45             5.73           5.73          6.05

                                                                                         consensus FY12 EPS = $5.91

                                                            Source: Jefferies estimates

                                                            Our assumption throughout this report is that management will guide FY12 to 20%
                                                            revenue growth and 5% EPS growth. 20% sales growth would be comparable to FY11’s
                                                            initial guide, which comprised 15% organic growth and 5% from the international
                                                            transition. FY12 has a similar 5% benefit, this time from the full year benefit of Sanuk.

                                                            The lower EPS growth assumption is based on around 300 bps of operating margin
                                                            compression. We arrive at this figure using around 250-300 bps of gross margin pressure
                                                            and 0-50 bps of SG&A pressure. Again, this is how we expect management to initially
                                                            guide FY12 with 4Q11 earnings in late February.

                                                            The following table illustrates the different scenarios in a more detailed manner versus the
                                                            table above. What’s evident is that even in the case of a strong 4Q11 beat, there is still a
                                                            likelihood that FY12 guidance will be below consensus of $5.91.

         Our baseline assumption is
                                                            Chart 2: FY12 EPS Guidance Scenarios
         management initially guiding fiscal                 4Q11                                     JEF            Guidance              BETTER Case              BEST Case        consensus
         2012 revenues to grow 20% and EPS                  sales                                     569               555                     577                    590             560
         5%.                                                sales growth                           32.3%               29.0%                    34.0%                 37.0%            30.2%
                                                            margins                                   (30)             (185)                     40                    165             (110)
                                                            EPS                                      3.25              3.02                     3.35                  3.55             3.12

                                                             2011                                     JEF            Guidance              BETTER Case              BEST Case        consensus
                                                            sales                                  1,343               1,329                    1,351                 1,364           1,336
                                                            EPS                                      5.16              4.93                     5.26                  5.46             5.01

                                                             2012 Initial Guide                       JEF       Off of FY11 Guidance     Off of FY11 BETTER      Off of FY11 BEST    consensus
                                                            sales                                  1,679               1,595                    1,621                 1,637           1,606
                                                            sales growth                           25.0%               20.0%                    20.0%                 20.0%            20%
                                                            operating margins                        (153)             (300)                    (300)                 (300)            (40)
                                                             EPS                                   6.10                5.16                     5.51                  5.73            5.91
                                                            EPS growth, %                             18%               5%                       5%                    5%              18%

                                                            Source: Jefferies estimates

page 4 of 20                                                                                                   Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            DECK Initial FY Guidance History
                                                            It is no secret that Deckers management is notorious for guiding conservatively. That said,
                                                            the initial fiscal year outlook (with 4Q earnings) is often above consensus as a strong 4Q
                                                            beat offsets an initially modest EPS growth rate.

                                                            The table below lists guidance statistics for 2009, 2010 and 2011 along with how we
                                                            think 2012 could materialize. 2009 stands out as the year which management guided
                                                            below consensus with a corresponding 22% decline in the stock on the following day.
                                                            Ironically, the company ultimately not only exceeded its initial guidance by 25% but also
                                                            the initial consensus estimate by 11%.

                                                            We see a similar situation occurring in 2012 with a below-consensus guide and ultimately
                                                            a result that is above (original) consensus.

                                                            Chart 3: Stock Reaction to Initial FY Guidance
                                                             fiscal year   report date      consensus        guidance        guide vs. cons    stock move       actual FY reported actual vs. guide
                                                            2009           2/26/09               2.69           2.38             below              -22%               2.98              25%
                                                            2010           2/25/10               2.79           3.13             above              -2%                4.01              28%
                                                            2011           2/24/11               4.25           4.44             above              11%          $5.03 (consensus)       13%
                                                            2012E*         2/1/12                5.91        5.50 - 5.75         below                           $6.50 (EPS power)       15%

                                                            *2012E line based on JEF estimates

                                                            Source: Jefferies estimates

                                                            The table below illustrates the company’s initial sales and EPS growth forecasts going
                                                            back to 2003. The conclusion here is obvious but worth mentioning nonetheless. The
                                                            company’s actual results have exceeded management’s initial outlook in every single year
                                                            (including the recession years in 2008, 2009).

                                                            This further supports our belief that a below-consensus guide combined with a stock sell-
                                                            off would create an attractive entry point for investors.

         Actual results have exceeded initial
                                                            Chart 4: DECK Guidance History
         guidance every single year since                                                2003           2004     2005          2006      2007         2008       2009         2010   2011 2012E*
         2003, including the recession (2008,               out-year initial guide
                                                              sales growth, %                3%            7%          5%        -2%          15%         25%        8%        11%    20%      20%
                                                              EPS growth, %                 15%           20%          5%       -15%           5%         20%       -1%         5%    10%       5%

                                                            actual results
                                                              sales growth, %              22%            77%          23%       15%          48%         54%      18%         23%    34%      30%
                                                              EPS growth, %               118%           175%          23%       32%          56%         43%      23%         35%    29%      25%

                                                              sales growth, %              19%            70%          18%       17%          33%         29%      10%         12%    14%      10%
                                                              EPS growth, %               103%           155%          18%       47%          51%         23%      24%         30%    19%      20%

                                                            *2012E b ased on JEF estimates

                                                            Source: Jefferies estimates

page 5 of 20                                                                                            Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            Revenue Growth
                                                            Our 2012 outlook assumes a robust and visible sales outlook. Anchoring this forecast is
                                                            retail store acceleration with 25 new stores planned for 2012 (from 17 new stores in
                                                            2011). We model these new stores to add about $120 million in sales next year. Sanuk is
                                                            another visible sales driver next year as DECK records its first spring/summer season for
                                                            the newly acquired brand. This represents another $60 million of revenues. Combined,
                                                            we model retail and Sanuk to contribute 15% to DECK’s fiscal 2012 sales growth.

                                                            Additionally, we also model wholesale to grow 15% globally. This equates to 11%
                                                            contribution to net sales growth (wholesale = 2/3 of sales). The table below illustrates the
                                                            aforementioned sales levers and their collective contribution to our 25% revenue growth
                                                            forecast for 2012.

         Retail and Sanuk alone should
                                                            Chart 5: (Visual) 2012 Revenue Growth Levers
         contribute 15% points of sales
                                                                                                                                                               1%           25%
         growth in 2012. Consensus is                                                    350                                                     5%
         currently forecasting 20% growth,                                               300
         implying that global wholesale will                                                                                       5%
                                                                 2012 Sales Growth, $m

         grow 3-4% in 2012 (we think this is                                             250

         too low).                                                                       200

                                                                                         150    9%



                                                                                               retail     wholesale (int'l) wholesale (U.S.)    Sanuk       e-commerce   2012 sales

                                                            Source: Jefferies estimates

                                                            The following table outlines Deckers’ 2012 revenue growth drivers numerically. The
                                                            important take-away from this presentation: our modeled 25% revenue forecast for fiscal
                                                            2012 is above consensus’ 20% but still implies conservative assumptions around global
                                                            wholesale. Specifically, we are modeling global wholesale to grow 15% (9% U.S.). For
                                                            context, Deckers’ wholesale division is up 25% year-to-date (after excluding the $50
                                                            million benefit from the international transition) and grew 31% and 19% in 2010 and
                                                            2009, respectively.

                                                            We think a 15% global wholesale growth rate in 2012 is fair given the distribution
                                                            opportunities the recent UK / Benelux investments created. Meanwhile, our 9% modeled
                                                            U.S. wholesale growth rate compares to a business that is up 20% year-to-date.

         Our 25% sales growth assumption
                                                            Chart 6: (Numerical) 2012 Revenue Growth Levers
         for FY12 assumes global wholesale
                                                                                                                                    2012 growth
         growth of 15% vs. consensus of 3-
                                                                                                   % of sales            dollars, $m           percent, %        growth contribution
                                                             retail                                     20%                  121                  57%                    9%

         2011 YTD organic wholesale growth                   wholesale (int'l)                          22%                   75                  25%                    6%

         is running up 25%+.                                 wholesale (U.S.)                           46%                   66                  9%                     5%
                                                             Sanuk                                      5%                    61                  25%                    5%
                                                             e-commerce                                 7%                    16                  15%                    1%
                                                                                                        100%                 338                  25%                    25%

                                                            Source: Jefferies estimates

page 6 of 20                                                                                                  Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            Retail Growth
                                                            One of the core pillars of our Buy thesis is DECK’s positively inflecting retail store
                                                            trajectory. We find that investors typically gravitate towards these types of stories that
                                                            often provide highly visible and tangible growth.

                                                            In 2012, we expect the company to open 25 new UGG stores, increasing the total from
                                                            44 in 2011 to 69 by year-end.

         A margin accretive UGG retail                      Chart 7: Retail Growth Forecast
         strategy is just now beginning to                               150
         accelerate for DECK.
                                                                                                    2011 = retail growth inflection

                                                                Stores    75



                                                                               2006   2007      2008         2009    2010   2011E    2012E    2013E    2014E   2015E

                                                                                                       Store Base           New Stores

                                                            Source: Jefferies, company data

                                                            The following table outlines the math behind our retail assumptions. Simply put, we
                                                            applied last year’s same sales/average store productivity to the 2012 average store count.
                                                            Our model yields $121 million of new store sales associated with the 25 new store
                                                            growth. This represents around 9% sales growth contribution on 2011’s base.

                                                            Chart 8: Retail Model
                                                             (in millions, $)                     2007              2008     2009        2010         2011E     2012E

                                                             retail sales                           $18              $38       $79       $126          $212       $332
                                                               change                                                 20        40           47          86        121

                                                             retail stores                              7             10        17           27          44            69
                                                             new stores                                 2             3          7           10          17            25

                                                             average # of stores                        6             9         14           22          36            57
                                                             sales per average store                   3.1           4.5       5.8           5.7        6.0        5.9

                                                            Source: Jefferies, company data

                                                            Our assumptions for 2012 also include 15% organic e-commerce growth.

page 7 of 20                                                                                 Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            Sanuk Acquisition
                                                            Deckers acquired Sanuk on July 1, 2011, the first day of its fiscal 3Q11. As a result, it did
                                                            not report Sanuk operations in its 1H11 financial statements. 1H is Sanuk’s higher
                                                            volume, more profitable selling season and will be nicely accretive to sales and EPS in

                                                            Assuming Sanuk grows 25% in 2012, we arrive at $61 million of incremental sales for
                                                            DECK. This includes $43 million of unrecorded 1H11 sales and $18 million of organic

                                                            At $61 million, Sanuk contributes another 5% to DECK’s sales growth profile for 2012.

                                                            Chart 9: Sanuk Revenue Model
                                                             (in millions, $m)                                         2010                  2011E           2012E
                                                             1H sales                                                         --                43               54
                                                             2H sales                                                         --                28*              35
                                                             Sanuk full year sales                                      $48                    $71            $89
                                                               growth, %                                                                       48%             25%

                                                             Sanuk sales reported by DECK                                    $0                $28            $89
                                                               change, $m                                                                      $28             $61

                                                             *DECK acquired Sanuk on July 1, 2011.
                                                            Source: Jefferies estimates

                                                            Wholesale Growth
                                                            Wholesale accounts for 70% of Deckers’ business and is one of the least visible channels
                                                            for investors. There is a perennial fear that this channel, especially in the U.S., is saturated
                                                            and lacks the catalysts to grow further.

                                                            In 2012, we believe international wholesale has an opportunity to surprise (positively)
                                                            with the company now directly operating its two largest markets, the UK and Benelux.
                                                            Currency and macro headwinds constrain the upside, but we still think a 25% growth rate
                                                            is achievable outside the U.S.

                                                            Domestically, we are modeling 9% organic growth (excluding Sanuk). This compares to
                                                            an implied consensus estimate of 3-4%, at most (this is the global growth estimate). Year-
                                                            to-date, DECK’s U.S. wholesale business is running up 20%.

                                                            In aggregate, we think 14% global wholesale growth is achievable for DECK in 2012.

                                                            Our $141 million incremental revenue growth represents an 11% contribution to revenue
                                                            2012 growth.

                                                            Chart 10: Wholesale Model
                                                                                               2011E     Sanuk reported              organic       organic     2012E
                                                             (in millions, $)   % of sales      sales        growth ($)           growth ($)    growth (%)      sales

                                                            United States             70%         716                 61                 66            9%         842

                                                            International             30%         307                   --               75           25%         382

                                                             Total                             1,023                  61               141            14%     1,225

                                                            Source: Jefferies estimates

page 8 of 20                                                                                 Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            Gross Margin Contraction
                                                            Deckers’ 3Q11 earnings call (late October 2011) suggested continued pressure from
                                                            product costs. Sheepskin costs, in particular, are set to increase 40% in 2012 after rising
                                                            30% in 2011. In net, Deckers’ cost of goods will grow another 10% (after a 10% increase
                                                            in 2011).

                                                            Importantly, management has made it clear that investors should not expect the entire
                                                            COGS headwind to be offset like it was in 2011. This is because 2011’s gross margins had
                                                            the one-time benefit of Deckers taking over its higher gross margin UK/Benelux owned
                                                            wholesale businesses. The positive gross margin accretion from this event fully offset what
                                                            should have been around 400 bps of cost-related gross margin compression.

         2012 gross margins:                                Looking out to 2012, the company’s gross margins will face the same amount of
         -   -500 bps = 10% COGS growth                     inflationary pressure as in 2011 but without the offsetting one-time benefit. As a result,
         -   +100 bps = retail mix                          we expect to see a more meaningful contraction to gross margins. As we explain in the
         -   +50 bps = price increases                      SG&A section that follows, there should also be a corresponding leveraging benefit.
         -   +100 bps = other (brand,
             product mix)                                   The following are important considerations in modeling gross margins for 2012. Our
                                                            existing outlook of 250 bps of contraction incorporates -500 bps of COGS inflation offset
                                                            by +50 bps from price increases, +100 bps from retail mix and 100 bps from other factors
                                                            like Sanuk, international and product mix.

                                                                       10% COGS Inflation (-500 bps). Management’s 10% COGS inflation
                                                                        outlook for 2012 should itself drive 400-500 bps of gross margin compression
                                                                        (calculated as a 10% discount to 50% gross margin in 2011). This actually took
                                                                        place in 2011 as well, but was obscured by an offsetting benefit of ~425 bps
                                                                        from the integration of the gross margin accretive UK/Benelux wholesale
                                                                        businesses. This benefit will not repeat in 2012.

                                                                       Retail Mix (+100 bps). DECK is deploying an aggressive store growth
                                                                        strategy with the roll-out of UGG stores worldwide. These stores carry a much
                                                                        higher gross margin than the wholesale business. We model the spread to be
                                                                        about 25 points (75% retail vs. 50% wholesale). We expect DECK’s direct-to-
                                                                        consumer (retail + e-commerce) sales mix to grow 300-400 basis points in 2012.
                                                                        The resulting mix benefit is around 75-100 bps to DECK’s 2012 gross margins.

                                                                       Price Increases (+50 bps). The company will have to balance price increases
                                                                        carefully next year as it looks to retain its accessible price points and compete
                                                                        with lower-priced competition. As a result, the benefit to gross margins will only
                                                                        partially offset the inflationary pressure. Our 50 bps assumption is in-line with
                                                                        what we believe to have been the benefit in 2011.

                                                                       Other Mix (+100 bps). Having good visibility into the aforementioned gross
                                                                        margin variables, this will be the ‘wild card’ for 2012. There is a host of other
                                                                        potential mix benefits like brand mix (Sanuk’s 1H is margin accretive), product
                                                                        mix (shift away from sheepskin), international mix, etc. In aggregate, we model
                                                                        this benefit to account for +100 bps to Deckers’ 2012 gross margins.

page 9 of 20                                                                            Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            SG&A: Should Lever but Probably not in Guidance
                                                            In light of the cost pressure expected in 2012, there is a view that DECK should be able to
                                                            offset gross margin contraction with SG&A leverage. We agree and make a strong case in
                                                            the following bullets. However, management, on the 3Q11 earnings call, explicitly stated
                                                            that they will not compromise the long-term strategy by trying to manage to a single
                                                            year’s earnings estimate. As such, we expect the company to initially guide to some SG&A
                                                            de-leverage but ultimately exceed that plan and post SG&A leverage.

                                                            The following table summarizes our SG&A view into 2012. It is important to note that
                                                            while the company is likely to de-lever SG&A by around 350 bps in 2011 (management
                                                            guidance), this entire amount is being driven by the company’s UK/Benelux wholesale
                                                            business transition. In fact, if we were to exclude that event and the Sanuk banker fees
                                                            ($4.1 million), Deckers would have actually achieved 96 basis points of SG&A leverage in
                                                            2011. This is before adjusting for an $11 million increase in marketing spend, $7m legal
                                                            and 17 new stores.

                                                            This tells us that the company should be able to achieve leverage in 2012.

         After normalizing 2011’s one-time
                                                            Chart 11: SG&A Summary
         charges and mix shifts, it becomes                                                                2006      2007     2008     2009     2010    2011E     2012E
         evident that DECK would have                       SG&A                                            24.3%    22.7%    22.1%    23.2%    25.4%    28.9%     27.9%
         achieved around 100 bps leverage                     reported change (bps)                         192     (160)     (57)     109      214      354      (100)

         on SG&A.
                                                            2011 factors (bps):
                                                              higher SG&A UK/Benelux business model                                                       (350)
                                                              $9m international transition                                                                 (70)
                                                              $4.1m Sanuk transaction fees                                                                 (30)
                                                              2011 change (adjusted)                                                                      (96)

                                                            2012 factors (bps):
                                                              $3 million less legal spend                                                                           (20)
                                                              no repeat of $9m international transition                                                             (55)
                                                              no repeat of Sanuk transaction fees                                                                   (25)
                                                              25 new retail stores                                                                                   50
                                                              Sanuk earn-out & amortization                                                                          25
                                                              organic leverage on 25% sales growth                                                                  (75)
                                                              2012 change (expected)                                                                              (100)

                                                            Source: Jefferies estimates

                                                            Impact from UK / Benelux Ownership in 2011
                                                            A lot has been made of DECK’s international transition mix helping consolidated GM% by
                                                            425 bps in 2011. This amount, which offset the 10% COGS inflation in 2011, will not
                                                            anniversary in 2012. As such, DECK’s repeated 10% COGS inflation in 2012 will be fully
                                                            exposed and likely result in a significant GM% contraction versus 2011.

                                                            There is a corresponding SG&A moving piece, however, that the company has been less
                                                            vocal about. Recall that the UK/Benelux business, which DECK took over in 2011, is
                                                            margin accretive. As such, if this business helped GM% by 425 bps in 2011, it should have
                                                            elevated SG&A by somewhere near that figure (we estimate 350 bps). This excludes the
                                                            one-time $9m transition fees the company paid to the former operators. As a result, we
                                                            think it’s fair to imply that the 350 bps of de-leverage in 2011 is being driven by this
                                                            event. After backing out the $9 million one-time transition charge and $4.1 million Sanuk
                                                            banker fees, we find that DECK would have actually levered SG&A in 2011. This despite
                                                            $11 million more marketing spend, $7 million more legal spend and new store growth.

page 10 of 20                                                                                  Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            Anniversary of One-Time Expenses
                                                            2011 was an investment year for DECK with the tuck-in of the UK/Benelux wholesale UGG
                                                            business and Sanuk acquisition. The expenses associated with these events were included
                                                            in management guidance and consensus estimates for 2011. As we enter 2012, we do
                                                            not expect any significant investments to play a materially de-leveraging role in SG&A.
                                                            That said, the company did say on its 3Q11 call that there will be an ongoing
                                                            commitment to marketing (more on this below) and international personnel.

                                                            Specific expenses to consider include:

                                                                       $9 million international transition. This was a fee that DECK paid the
                                                                        incumbent distributors of the UK and Benelux businesses in 1Q and 2Q of 2011.
                                                                        This expense will not recur in 2012.

                                                                       $4.1 million Sanuk transaction fee. DECK’s 2011 EPS includes $4.1 million
                                                                        of fees related to the Sanuk transaction. These were one-time in nature and will
                                                                        not repeat in 2012.

                                                                       $3 million less legal spend. DECK’s legal expenses increased $7 million in
                                                                        2011. This expense is set to decline in 2012 by around $3 million.

                                                                       Simple closure. By discontinuing the Simple brand, the company will relieve
                                                                        itself of a $2 million operating loss. Part of that is likely to benefit SG&A in 2012.

                                                            Sanuk Accretion
                                                            As we outlined earlier, the acquisition of Sanuk in 3Q11 creates an accretive revenue
                                                            event in the first half of 2012. This brand is also set to make a strong (organic) EBIT
                                                            contribution as it makes most of its money in the first half of the year. Earn-out and
                                                            amortization charges should be considered, however, as they cut into the accretion by
                                                            around 21c.

                                                            Sanuk considerations in 2012:

                                                                       $43 million acquisitive sales at a high margin. 1H12 sales will include a
                                                                        baseline of $43 million in Sanuk sales, which is what the company made in
                                                                        1H11. Assuming a 35% 1H operating margin, this equates to a 30c EPS

                                                                       25% organic sales growth. Under this assumption (and 25% operating
                                                                        margins, flat to last year), we expect another 10c of organic EPS growth from

                                                                       Earn-out and amortization. The terms of the Sanuk deal include an earn-out
                                                                        to management over the next five years and are outlined in DECK’s 3Q 10Q.
                                                                        There is also a component of goodwill amortization that will be incurred as well
                                                                        (i.e. purchase accounting). In sum, management is guiding 2012 earn-out and
                                                                        amortization to be around $12 million. This is a $4.3 million increase to the $7.7
                                                                        million to be recorded in 2011 (all in the second half). Bottom line: the 40c of
                                                                        EPS accretion from Sanuk needs to be offset by 21c of earn-out and accretion

page 11 of 20                                                                            Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

                                                            A lot has been made of DECK’s marketing spend in 2011 between the Tom Brady men’s
                                                            campaign and efforts to broaden UGG awareness into a lifestyle brand. At the beginning
                                                            of 2011, management originally guided marketing to increase by $11-12 million, which
                                                            based on 15% sales growth implied around 50 bps of de-leverage to SG&A. Management
                                                            alluded that this ‘one-time’ ramp in marketing would ultimately stabilize at a higher
                                                            percentage of sales as UGG has historically under-spent on marketing versus its peers.

                                                            If we fast forward a year and look back at 2011, there are some interesting observations to
                                                            be made. First, and most important – marketing expense will not increase as a percent of
                                                            sales in 2011. The $11.5 million increase in marketing spend implies 35% growth YoY,
                                                            which is the same as our forecasted revenue growth. This suggests that marketing will be
                                                            flat to sales in 2011 at 3.3% (same as 2010).

                                                            In fact, throughout 2011, DECK managed to hold its advertising budget while its sales
                                                            growth expanded (originally guided up 20%, will ultimately be up 35%).

                                                            As we enter 2012, we expect marketing to again be an area of focus. However, it is hard
                                                            to expect a scenario where it grows more than the 35% we saw in 2011. In fact, we think
                                                            management grows marketing closer to 20-25% next year and ultimately achieves
                                                            leverage on that expense (by growing sales >25%).

                                                            25 New Retail Stores
                                                            DECK’s retail growth strategy is set to inflect further in 2012 with the opening of 25 new
                                                            retail stores, an increase from 17 new stores in 2011. As with the international wholesale
                                                            operations, retail is a business that carries higher GM% (about 25% points more than
                                                            wholesale) and SG&A. In net, it is accretive to operating margins by around 10% (our
                                                            estimate). This means that SG&A is around 15% higher for retail versus wholesale.

                                                            Assuming this math, we model new retail store openings to dilute DECK’s SG&A line by
                                                            around 50-60 bps in 2012. This assumes retail sales mix increasing by 400 bps (from 16%
                                                            to 20%) and a 15% point spread in SG&A between wholesale and retail.

                                                            As we stated in the previous GM% section, there is an associated benefit to the gross
                                                            margin line that more than offsets the SG&A de-leverage.

page 12 of 20                                                                        Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

Chart 12: Income Statement
 ($ Millions, except per share amounts) 2009           2010      2011E      2012E       1Q10      2Q10      3Q10      4Q10      1Q11       2Q11      3Q11    4Q11E
 Total Sales                               $813      $1,001     $1,343     $1,681      $156      $137      $278      $430      $205       $154      $414     $569
 Cost of Goods Sold                          442        499        662         872        78        76       148       197       102         88       212      260
 Gross Profit                                371        502        680         809        78        61       130       233       102         66       203      309
 SG&A                                        189        254        388         469        49        48        65        93        74         77       112      125
 Operating Income                           182        248        293        341         29        13        65       141        28        (11)       91      184
 Other (income) expense, net                 (2.0)      (1.0)      (0.2)       (0.8)     (0.1)     (0.5)     (0.2)     (0.2)     (0.1)      (0.0)     0.1      (0.1)
 Pretax Income                               184        249        293         341        29        14        66       141        28        (11)       91      185
 Income Taxes                                 67         90         91         102        11         5        25        50         9         (3)       28       57
 Net Income                                 118        159        202        239         18          9       41        91        20          (7)      62      127
 minority interest                             (0)        (2)       (0)          0        (0)        0         0        (2)       (1)         0         0        0
 Fully Diluted EPS                        $2.98       $4.01      $5.16      $6.10      $0.46     $0.23     $1.05     $2.27     $0.49     ($0.19)    $1.59    $3.25
 Fully Diluted Shares Outstanding           39.4        39.2      39.1        39.2      39.1      39.1      39.2      39.3      39.4       38.7      39.2     39.2

 % of Sales                                 2009       2010      2011E      2012E       1Q10      2Q10      3Q10      4Q10      1Q11       2Q11      3Q11    4Q11E
 Gross Profit                              45.6%       50.1%      50.7%      48.1%      50.0%     44.3%     46.8%     54.2%     50.0%      42.8%     49.0%    54.3%
 SG&A                                      23.2%       25.4%      28.9%      27.9%      31.5%     34.7%     23.3%     21.5%     36.3%      49.7%     27.1%    21.9%
 Operating Income                         22.4%       24.8%      21.8%      20.3%      18.5%      9.6%     23.5%     32.7%     13.7%      -6.9%     21.9%    32.4%
 Tax Rate (% of Pretax)                    36.2%       36.0%      31.0%      30.0%      37.2%     35.0%     37.5%     35.2%     30.1%      30.2%     31.2%    31.0%

 % Growth, YoY                              2009       2010      2011E      2012E       1Q10      2Q10      3Q10      4Q10      1Q11       2Q11      3Q11    4Q11E
 Sales                                     17.9%       23.1%      34.1%      25.2%      16.2%     33.7%     21.7%     23.6%     31.3%      12.6%     49.1%    32.3%
 Gross Profit                              21.5%       35.3%      35.5%      19.0%       32%       49%       33%       35%       31%         9%       56%      32%
 SG&A                                      23.8%       34.4%      52.7%      20.9%       24%       30%       44%       37%       51%        61%       74%      34%
 Operating Income                         19.3%       36.1%      17.9%      16.4%       49%      213%       23%       33%        -2%      -181%      39%      31%
 Net Income                                22.6%       35.6%      26.8%      18.3%       47%      163%       21%       34%        9%      -184%       52%      39%
 Diluted EPS                               23.0%       34.5%      28.5%      18.2%       47%      160%       22%       31%        6%      -182%       52%      43%

 BPs Change, YoY                            2009       2010      2011E      2012E       1Q10      2Q10      3Q10      4Q10      1Q11       2Q11      3Q11    4Q11E
 Gross Profit                                135        451         53       (253)       607       455       388       440         5       (155)      219        5
 SG&A                                        109        214        352       (100)       199       (98)      362       204       479      1,504       381       35
 Operating Income                            26        237       (299)      (153)       409       552        27       237      (474) (1,659)        (162)     (30)

 Marketing expense                          2009       2010      2011E      2012E
 Marketing expense                            29         33         45          56
    % of revenues                            3.5%       3.3%       3.3%        3.3%
    % growth                               15.5%       15.2%      34.7%        25%
    % of SG&A                              15.2%       13.0%      11.5%      11.9%

Source: Jefferies estimates, company data

page 13 of 20                                                                            Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

Chart 13: Segment Details
 Sales by Category                      2009     2010      2011E      2012E    1Q10       2Q10      3Q10      4Q10      1Q11      2Q11       3Q11    4Q11E
 Total Sales                            813     1,049     1,343      1,681     156         137       278       430       205       154       414       569
    Ugg                                  712       873      1,170     1,430     104         100       256       413       148       108       377       537
    Teva                                  78       101       122        140      43          31        14        13        50        40        15        17
    Sanuk                                  --       48         27        87       --          --        --        --        --        --       16        11
    Other                                 24        26         24        24       8           6         8         4         6         6         7         5

 Sales Growth, %                        2009     2010      2011E      2012E    1Q10       2Q10      3Q10      4Q10      1Q11      2Q11       3Q11    4Q11E
 Total Sales                             18%      29%        28%        25%     16%        34%       22%       24%       31%       13%       49%       32%
    Ugg                                  22%       23%        34%       22%     14%         35%       20%       24%       42%        8%       47%       30%
    Teva                                 -10%      31%        20%       15%     21%         38%       52%       26%       17%       29%        7%       25%
    Sanuk                                  --        --       20%       15%       --          --        --        --        --        --        --        --
    Other                                13%       12%       -10%         0%    15%          1%       26%        -4%     -28%        1%      -12%       20%

 other metrics                          2009     2010      2011E      2012E    1Q10       2Q10      3Q10      4Q10      1Q11      2Q11       3Q11    4Q11E
 Same-store sales, %                    27.6%    16.6%                         28.2%      19.2%     17.9%     11.6%       2.6%    23.6%      15.4%
 Retail: Sales per average store          5.3      5.6

 weighted avg selling price / pair, $   45.80    47.71                         30.71      35.41     58.61               34.24     38.28
    change, %                             8%        4%                         7.0%        1.8%      0.1%    #DIV/0!    11.5%      8.1%    -100.0%   #DIV/0!

 footwear volume (million pairs)         15.7     18.0                           4.0         3.6       4.5       5.9       4.7       3.6
    change, %                           6.8%     14.6%                         5.3%       28.6%     18.4%      7.3%     17.5%      0.0%    -100.0%   -100.0%

 Stores                                   18       27         44         69      18         19        24        27        27         30        37        44
    UGG retail (U.S.)                      6        10
    Outlet (U.S.)                          7         9
    UGG (International)                    5         8

 new stores (YoY)                          6         9         17        25       1           1         5         3         0         3         7         7

 sales / average store                                                           1.3         0.5       0.9       2.8       1.3       0.7       1.0       2.8

 Sales by Region                        2009     2010      2011E      2012E    1Q10       2Q10      3Q10      4Q10      1Q11      2Q11       3Q11    4Q11E
 Total Sales                            813     1,001                          156         137       278       430       206       154       414       569
    U.S.                                 646       764                          117          65       205       377       149        83       258       471
    International                        167       237                           39          72        73        53        57        72       156        98

 Sales Mix, %                           100%     100%                          100%       100%      100%      100%      100%      100%      100%      100%
    U.S.                                 79%       76%                          75%         48%       74%       88%       72%       54%       62%       83%
    International                        21%       24%                          25%         52%       26%       12%       28%       46%       38%       17%

 Sales Growth, %                         18%      23%                           16%        34%       22%       24%       32%       13%       49%       32%
    U.S.                                 11%       18%                          15%         16%       14%       22%       27%       27%       26%       25%
    International                        55%       42%                          21%         55%       48%       35%       46%        0%      114%       85%

Source: Jefferies estimates, company data

page 14 of 20                                                                         Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

Company Description
Deckers is a leading designer and wholesaler of footwear brands based in Goleta, California. The company's portfolio of brands includes
UGG, Teva, Simple, Tsubo and Ahnu.

Analyst Certification
I, Taposh Bari, CFA, CPA, certify that all of the views expressed in this research report accurately reflect my personal views about the subject
security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific
recommendations or views expressed in this research report.
As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives
compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as
appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority
of reports are published at irregular intervals as appropriate in the analyst's judgement.
Jefferies & Company, Inc makes a market in the securities or ADRs of Deckers Outdoor.
Jefferies & Company, Inc makes a market in the securities or ADRs of Lululemon Athletica.

Meanings of Jefferies Ratings
Buy - Describes stocks that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period.
Hold - Describes stocks that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period.
Underperform - Describes stocks that we expect to provide a total negative return (price appreciation plus yield) of 10% or more within a 12-month
The expected total return (price appreciation plus yield) for Buy rated stocks with an average stock price consistently below $10 is 20% or more within
a 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated stocks with an average stock price
consistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For Underperform
rated stocks with an average stock price consistently below $10, the expected total return (price appreciation plus yield) is minus 20% within a 12-
month period.
NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/
or Jefferies policies.
CS - Coverage Suspended. Jefferies has suspended coverage of this company.
NC - Not covered. Jefferies does not cover this company.
Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securities
regulations prohibit certain types of communications, including investment recommendations.
Monitor - Describes stocks whose company fundamentals and financials are being monitored, and for which no financial projections or opinions on
the investment merits of the company are provided.

Valuation Methodology
Jefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected total
return over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market
risk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF,
P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns,
and return on equity (ROE) over the next 12 months.

Conviction List Methodology
1. The aim of the conviction list is to publicise the best individual stocks ideas from the Jefferies Global Research.2. Only stocks with a Buy rating are
allowed to be included in the recommended list.

3. Stocks are screened for minimum market capitalisation and adequate daily turnover. Furthermore, a valuation, correlation and style screen is used
to ensure a well-diversified portfolio.

4. Stocks are sorted to a maximum of 30 stocks with the maximum country exposure at around 50%. Limits are also imposed on a sector basis.

5. Once a month, analysts are invited to recommend their best ideas. Analysts’ stock selection can be based on one or more of the following: non-
Consensus investment view, difference in earnings relative to Consensus, valuation methodology, target upside/downside % relative to the current
stock price.These are then assessed against existing holdings to ensure consistency. Stocks that have either reached their target price, been downgraded
over the course of the month or where a more suitable candidate has been found are removed.

6. All stocks are inserted at the last closing price and removed at the last closing price. There are no changes to the conviction list during the month.

7. Performance is calculated in US dollars on an equally weighted basis and is compared to MSCI World AC US$.

8. The conviction list is published once a month whilst global equity markets are closed

9. Transaction fees are not included
page 15 of 20                                                                      Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

10. All corporate actions are taken into account.

Risk which may impede the achievement of our Price Target
This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the
financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based
upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance of
the financial instruments recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, and
income from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financial
and political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may
adversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities such
as ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk.
Other Companies Mentioned in This Report
       • Lululemon Athletica (LULU: $46.66, HOLD)
       • Nike (NKE: $96.37, BUY)
       • Under Armour (UA: $71.79, HOLD)
       • Wolverine World Wide (WWW: $35.64, HOLD)

page 16 of 20                                                                      Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

page 17 of 20                                                                  Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

Distribution of Ratings
                                                                                                               IB Serv./Past 12 Mos.
                           Rating                                              Count          Percent            Count          Percent
  BUY                                                                            762           53.00%               107          14.04%
  HOLD                                                                           579           40.30%                58          10.02%
  UNDERPERFORM                                                                    96            6.70%                 2           2.08%

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Jefferies Equity Research refers to research reports produced by analysts employed by one of the following Jefferies Group, Inc. (“Jefferies”) group
United States: Jefferies & Company, Inc., which is an SEC registered firm and a member of FINRA.

page 18 of 20                                                                          Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

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page 19 of 20                                                                        Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.
      Company Update

      January 3, 2012

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page 20 of 20                                                                     Taposh Bari, CFA, CPA, Equity Analyst, (212) 708-2712,

Please see important disclosure information on pages 15 - 20 of this report.

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