Docstoc

DECK - PDF 2

Document Sample
DECK - PDF 2 Powered By Docstoc
					                                                                                            Company Report
                                                                                            July 27, 2012




  Deckers Outdoor Corp.                                                                     Underperform
  The perfect storm (literally) is needed to achieve FY12                                   DECK
  guidance and we don't see it coming.                                                      Price: Close $42.13
  Our Call                                                                                  Price Target $38.00
  We would short the stock at these levels despite the fact that guidance was
  maintained. Inventory levels are extremely high and look to remain there. We
                                                                                            Footwear & Apparel
  believe that the guidance is over-reliant on 4Q sales which are expected to
  increase 19% and the risks are too great to own the stock. (Details of 2Q results         Sam Poser
  and guidance are on page 2 of this note.)                                                 (212) 763-8226
  Inventory is not fine wine: The extraordinarily high inventory level, $346M               sposer@sterneagee.com
  (+65% YOY) on hand at the end of 2Q, combined with the tepid growth forecast              Ben Shamsian
  (+1%) for 3Q, and then the sudden acceleration to 19% revenue growth in 4Q                (212) 338-4721
  make us wonder if this guidance is anything more than looking to Tim Tebow for            bshamsian@sterneagee.com
  divine intervention. The $308M of UGG inventory (+72.9%) is made up of 85%
  fall product and 15% spring product. While the company did not break down the             Company Data
  complete makeup of the fall inventory, it did say that $80M of the $105M YOY              Rating                              Underperform
  increase were Classics and Slippers. Management confirmed that a majority of the          Price: Close                                $42.13
                                                                                            Price Target                                $38.00
  total fall inventory are Classics and slippers as well. It appears to us that DECK        52-Week Range                     $118.90 - $39.90
  management does not foresee fashion risk on the Classic product. We would say             Market Capitalization (M)                $1,647.0
  please reference Crocs (CROX-$16.23-Buy) in late '07 and '08.                             Shares Outstanding (M)                        38.5
                                                                                            Avg. Daily Vol. (000)                      1,793.2
  3Q & 4Q revenue growth guidance of +1% & +19% makes us believe that                       Dividend Yield                               0.0%
  management may be living in a river in Egypt. While FY12 EPS guidance of ~                Assets (M)                               $1,146.2
  $4.50 was maintained, the implied $1.09 (FC=$1.45) 3Q guidance and the implied
  $3.88 (FC=$3.37) 4Q guidance appear overly optimistic. The company says that              Revenue ($M) 2011A 2012E 2013E
                                                                                            FY                   1,377.3    1,514.0    1,605.1
  a large majority of its fall inventory has orders against it, and those orders give
  it confidence with the guidance. We do not understand why questions were not
  addressed on the earnings call regarding the shifting of orders from 3Q to 4Q. (We
  were not called upon for questions, though we buzzed in.) We contend that while
  orders may be in hand for the inventory, the lack of current demand will result in
  material cancellations and further erosion to the UGG brand. Management expects
  sheepskin prices to decrease in '13, but not to '11 levels. It appears as if UGG prices
  may be rolled back at that time, and we see that only as an admission that the brand
  is no longer as hot as it once was.
  Speaking of heat: Questions of the performance of the UGG brand during
  the Nordstrom (JWN-$53.34-NR) Anniversary Sale were asked on the call and
  management said they were pleased with the performance. At the same time, they
  said that the warm weather had delayed the start of Classic selling. What?? In years
  past women lined up to get the new UGG Classics in July at Nordstrom, weather
  notwithstanding. In other words UGG is losing or has lost the must-have status it
  once had. We remain unconvinced that DECK can achieve its guidance, and we are
  lowering our FY12/FY13 EPS estimates from $4.00/$4.50 to $3.97/$4.37 given
  the elevated inventory levels and despite the reiteration of guidance.                    Price Performance
  FYE Dec                      2011A       2012E       2012E       2013E       2013E           140

                               (Curr)      (Prev)      (Curr)      (Prev)      (Curr)          120

  EPS ($)                                                                                      100

  Q1 (Mar)                       0.49                    0.20        0.24        0.18            80

  Q2 (Jun)                      (0.19)      (0.60)      (0.53)      (0.37)      (0.49)           60

  Q3 (Sept)                      1.59        1.32        1.09        1.37        1.22            40

  Q4 (Dec)                       3.18        3.08        3.20        3.26        3.46            20
                                                                                                 Jul-11   Oct-11    Jan-12     Apr-12    Jul-12
  FY EPS                         5.07        4.00        3.97        4.50        4.37                 Deckers Outdoor Corp.
  P/E                            8.3x                   10.6x                    9.6x                 Morgan Stanley Retail Index (MVRX)

                                                                                            Source: FactSet

   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
                    800 Shades Creek ParkwaySuite 700Birmingham, AL 35209205-949-3500
                                   Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
                                                                                  July 27, 2012
2Q Results and Estimates
                           2Q12A            Estimate   Variance     2Q11A     Variance
Revenue                    174.4M            164.1M        6.28%    154.2M       13.1%
Gross Margin                42.18%           43.00%     (82) bps    42.74%     (56) bps
SG&A % of Sales             58.64%           63.50%    (486) bps    49.74%      890bps
Operating Margin           (16.46%)         (20.50%)     404bps     (7.00%)   (946) bps
EBITDA                      -18.9M           (22.7M)     (16.83%)    -5.1M      267.9%
Adj EPS                      -$0.40          ($0.54)     (24.79%)    -$0.11     264.0%
GAAP EPS                     -$0.53          ($0.60)     (10.55%)    -$0.19     180.5%

Segment Revenue
UGG                         107.9M            89.3M     20.87%      108.3M     (0.34%)
Teva                         34.1M            40.3M    (15.37%)      40.3M    (15.37%)
Other                         4.5M             4.6M     (1.47%)       5.7M    (21.18%)
Sanuk                        28.0M            30.0M     (6.67%)       0.0M


Source: Company Reports and Sterne Agee estimates



2Q12 results: DECK posted adjusted/GAAP EPS of -$0.59/-$0.53 versus our estimate of -
$0.54/-$0.60. Revenue was up 13% slightly above our estimate.

Sales by brand: UGG increased 0.3% to $107.9M, Teva -15.4% to $34.1M, Sanuk $28M, and
Other $4.5M.

Sales by geography and channel: Domestic sales increased 37.1% to $113.5M. International
sales decreased 14.7% to $61.0M. Retail sales were up 25%. SSS increased 6.8%. Domestic
SSS were up MSD and international SSS were up HSD. Ecommerce sales were up 40% with
growth in domestic and decline in international.

GM was down 56BPS to 42.2%: The 50 basis point decline (80BPS below management’s
expectation) was due to an increase in product cost, a negative mix impact of a decline in
Europe wholesale sales, and foreign exchange partially offset by the contribution to Sanuk
brand, and increased pricing compared with a year ago.

SGA increased by 890BPS: $14.8M came from the newly acquired Sanuk brand, of which
$7.2M was from amortization and tangible assets and purchase price accounting, and has been
reflected in our adjusted EPS. The 21 new retail stores contributed to an additional $8.2M.
There was also an additional $3.9M in marketing to support the UGG men’s and Classic
campaigns.

Inventory still too high: Total inventory was up 65% to $346M or 21 forward weeks of
supply versus 11 LY. UGG inventory was up $130M or 72% to $309M. Management
provided the following information regarding the UGG inventory: 85% of the inventory is fall
product and 15% spring. In dollars, the increase of fall inventory is $105M of which $80M
are made of Classics and slippers for which DECK has orders in hand, and $25M is fall 2012
product. The increase in UGG inventory is comprised of $40M due to increased product costs
and $10M to support newly opened stores.

Share Repurchases: During the quarter DECK repurchased 1.5 million shares of the stock for
a total of $89M. The company completed the $100M stock repurchase program, and the board
has authorized a new 200 million stock repurchase program to begin in the third quarter of
2012.

DECK has net cash of $3.01 per share compared to $6.81 LY. The decrease in cash is due to
the Sanuk purchase and the increased inventory levels.
                                                                                          Page 2
                                                                              July 27, 2012
FY Outlook
                                   2012                       2013
                          Estimates           Prior   Estimates     Prior
Revenue                    1,514M            1,499M    1,605M      1,590M
Gross Margin               45.29%            45.99%    44.78%      46.02%
SG&A % of Sales            30.89%            31.05%    30.47%      30.21%
Operating Margin           14.40%            14.94%    14.31%      15.81%
EBITDA                      262M              272M      302M        329M
Adj EPS                     $4.27             $4.23     $4.37       $4.50
GAAP EPS                    $3.97             $4.00     $4.37       $4.50

Segment Revenue
UGG                        1280.7M          1260.4M   1345.1M     1324.3M
Teva                        118.0M           124.2M    123.9M      130.4M
Other                        20.5M            20.5M     17.4M       17.4M
Sanuk                        94.9M            94.3M    118.7M      117.8M




Source: Company Reports and Sterne Agee estimates



DECK continues to forecast UGG sales up 10%. TEVA sales are now expected to be flat to
slightly down, versus prior guidance of up LSD-MSD. The other brands are expected to be
down 15%, and Sanuk expected sales are now $95M versus prior guidance of $90.

Gross Margin and SG&A: Management continues to expect a gross margin decline of
approximately 250BPS and SG&A as a percentage of sales of approximately 30%. Based on a
higher mix of domestic business, tax rate is now forecasted to be approximately 32%, up from
our previous projection of approximately 31%. For 3Q12, sales are expected to increase 1%
and EPS to decline 31%. For 4Q12, sales are expected to increase 19% with EPS to increase
22%.

Adjusting Estimates: All in, we are reducing our FY12 EPS estimate by 3 cents. Our 3Q
estimate decreases from $1.32 to $1.09 reflecting management’s guidance of a 43% GM,
versus our prior estimate of 45.5%. However for 4Q, given the heightened inventory levels,
we believe there are significant risks of cancellations and markdowns, and thus do not
subscribe to management’s 50% GM guidance. We are slightly raising our 4Q GM% estimate
to 47.5% from 47.10%. We are increasing our Q4 EPS estimate to $3.20 from $3.08,
reflecting slightly higher revenues and lower share count. We are reducing our FY13 ESP
estimate to $4.37 from $4.50 reflecting a 120bps decline in GM as we believe elevated
inventory levels will continue to pressure margins.

Inventory guidance is concerning: DECK now expects inventory at YE to be up 30% Y/Y or
roughly $329M. Inventory in 3Q is expected to be up slightly above 30%.

Ending the year with 30% increase in inventory or ~$329M would likely mean in excess of 26
weeks of supply of goods at that time. It also infers that the company will receive ~$600M of
inventory at cost, which means that over the next two quarters the company will have
~$930M of available inventory in order to sell $600M of inventory at COG basis. Such a
flow of goods in itself is extremely risky; however the need for a 19% increase in sales at a
50% GM, after what appears will be four consecutive quarters of margin pressure appears
farfetched, despite the management’s expectations for increased DTC business to drive
margin improvement.


                                                                                    Page 3
                                                                                 July 27, 2012


The following is how our model is forecasting COGS, Inventory and Receipt of goods in
3Q12 and 4Q12 based on Deckers’ implied guidance for 2H12.

COGS, Inventory and Receipts



                                      Q312E         Q412E     Total
BOQ Inventory                           346.3         465.0
COGS                                    241.0         360.7     601.7
Receipt                                 360.0         225.0     585.0
EOQ INV                                 465.2         329.3
Inventory YOY Change                     30%           30%
Average Inventory                                               380.2




Source: Company Reports and Sterne Agee estimates



The $585M in receipts plus the $346M in BOQ inventory equals $931M in goods available to
sell in 2H12. Why is $931M in inventory needed to support $602M in COGS? We do not
know. We recognize the prices have gone up and the company is opening stores, but the
inventory should result in sales. We believe that the appropriate inventory level should be
~$225M at most at the end of the year. Remember that inventory was $253M, up over 102%,
at the end of 4Q11. The planned inventory levels appear extreme and we believe put the
company at risk.

We are at a loss to understand why DECK needs to have $329M of inventory at the end of 4Q
this year. We also have no idea why inventory level, regardless of the makeup, is at the
current level. At the end of 2Q11, Deck had $210M of inventory, and had COGS in 3Q11 of
$211M. Why they need the current $346M in inventory to support 3Q COGS of $240M is a
head scratcher. Management cites the increased product costs, but inventory, we believe, is
designed to turn into revenue, so higher inventory should result in higher sales. Unfortunately,
it appears that the current elevated inventory will only result in lower margins, and the
potential irrevocable harm to the UGG brand.




                                                                                       Page 4
                                                                                                                        July 27, 2012



Valuation and Risks
                                                                         FY1 Rel      FY1                       FY2 Rel     FY2       FY2
Ticker       Name         Price Market Cap      EV      Short   FY1 PE     PE      EV/EBITD FY1 EV/S   FY2 PE     PE      EV/EBITD   EV/S
DECK        Deckers      $42.13  $1,621       $1,368     24%      7.9x    0.61x       3.9x    0.86x      7.1x    0.62x      3.1x     0.78x
  RL     Ralph Lauren   $147.54  $8,936       $12,776    4%      18.6x    1.43x       9.4x    1.76x     16.1x    1.39x      8.4x     1.60x
 COH         Coach       $59.72  $17,162      $15,926    5%      16.9x    1.30x       9.4x    3.31x     14.5x    1.25x      8.2x     2.93x
FOSL         Fossil      $70.91  $4,392       $3,962     7%      13.4x    1.03x       7.0x    1.35x     11.5x    1.00x      6.1x     1.20x
WWW       Wolverine      $44.79  $2,188       $2,008     9%      17.1x    1.32x      10.1x    1.34x     15.2x    1.32x      8.8x     1.27x
 WRC       Warnaco       $41.94  $1,721       $1,762     5%      10.4x    0.80x       5.2x    0.70x      9.2x    0.80x      4.8x     0.67x
COLM      Columbia       $52.38  $1,769       $1,471     14%     16.9x    1.30x       7.7x    0.84x     15.8x    1.37x      6.8x     0.80x
 VFC        VF Corp     $148.91 $16,315       $18,566    2%      16.0x    1.23x      11.1x    1.65x     13.6x    1.18x      9.7x     1.51x
 JNY       Jones NY      $10.20   $838        $1,334     16%      9.8x    0.75x       4.7x    0.35x      8.4x    0.73x      4.3x     0.34x
 HBI     Hanesbrands     $28.71  $2,801       $4,886     10%     11.3x    0.87x       9.4x    1.03x      9.1x    0.79x      8.2x     1.00x

                                             Group Mean #REF!   14.49x   1.12x      4.67x     1.37x    12.51x   1.09x      7.27x     1.26x
                                             DECK Prem (Disc)   (46%)    (46%)      (17%)     (37%)    (43%)    (43%)      (57%)     (38%)




Source: Company Reports, Factset, and SALI Estimates


Over the preceding five years, DECK has traded at an average of 16.4x (range: 5.4 to 36) and
14.1x (range: 5 to 29.6) FY1 and FY2 estimated earnings. Valuation levels came in greatly
during the recession due to: 1) re-pricing of risk across the marketplace and 2) investor
sentiment that the UGG brand was unsustainable and hence brand equity would not survive
the downturn intact.

We believe there is the possibility that negative earnings revisions will result in further
multiple compression. Specifically, the multiple has proven susceptible to perception of
discounting, waning brand momentum or indications of maturation in the core U.S. wholesale
channel.

Our $38 price target implies the shares trade at 9.6X our FY12 GAAP EPS estimates. Our PT
also implies that shares trade at 8.7X our FY13 GAAP EPS estimates.



Risks:

Upward idiosyncratic risks include: a significant alteration in current weather patterns
stimulating demand, accelerating international business compensating for domestic weakness,
significant pricing offsetting unit weakness in ’12, or if the company becomes an acquisition
target.




                                                                                                                               Page 5
                                                                                                                                                                                                          July 27, 2012
Quarterly Income Statement
             ($M)                  FY10          Q111        Q211        Q311       Q411        FY11          Q112        Q212       Q312E      Q412E       FY12E      Q113E       Q213E      Q313E     Q413E     FY13E

  Teva                               101.37        50.41       40.29       14.69      19.40       124.79     49.83        34.10       14.69      19.40       118.02      52.32       35.81      15.43     20.37      123.92
  UGG                                873.15       148.43      108.27      376.70     568.50     1,201.89    158.07       107.90      377.40     637.29     1,280.66     169.29      113.74     388.05    674.07    1,345.15
  Other                               26.50         6.02        5.71       22.99      16.00        50.71     38.41        32.50       26.18      18.30       115.39      45.60       38.83      30.35     21.28      136.05
                                        -            -           -           -          -            -         -            -           -          -            -          -           -          -         -           -
Net Sales                         1,000.99       204.85      154.22      414.36     603.85     1,377.28    246.31       174.44      418.28     674.99     1,514.01     267.21      188.37     433.83    715.71    1,605.12
        Y/Y sales growth           23.10%        31.38%      12.52%      49.11%     40.39%      37.59%     20.24%       13.11%       0.95%     11.78%        9.93%      8.49%       7.99%      3.72%     6.03%       6.02%
COGS                                501.15        102.37       88.31      211.51     296.10      698.29     133.02       100.86      240.09     354.37      828.33     148.30       109.25    249.45    379.33      886.34
 Gross Profit                       499.84        102.48       65.91      202.85     307.75      679.00     113.29        73.58      178.19     320.62      685.67     118.91        79.12    184.38    336.38      718.79
   Y/Y gross profit growth         34.69%        31.54%      14.35%      54.91%     31.89%      35.84%     10.55%       11.63%     -12.16%      4.18%       0.98%      4.96%        7.52%     3.48%     4.92%       4.83%
SG&A                                254.62         74.28         76.71 112.19        130.97      394.16      101.36      102.29      119.00     145.00      467.64      109.56      105.49    120.17     153.88     489.09
    Y/Y Core SG&A growth           34.83%        51.33%       64.87% 73.57%         38.79%      54.80%      36.44%      33.34%       6.07%     10.71%      18.64%       8.09%       3.13%     0.98%      6.12%      4.59%
  Operating Income                 245.22         28.20        (10.80) 90.66        176.78      284.84       11.93       (28.71)     59.19     175.62      218.03         9.35     (26.37)    64.21     182.51     229.69
 Y/Y operating income growth       34.55%        -2.17%     -197.14% 36.71%         27.21%      16.16%     -57.68%     165.86%     -34.72%     -0.66%     -23.45%     -21.63%      -8.14%     8.48%      3.92%      5.35%

Interest Income                      (0.76)        (0.14)         -         0.00      (0.29)      (0.43)      (0.40)      (0.18)      (0.18)     (0.18)      (0.94)      (0.30)      (0.30)    (0.30)    (0.30)      (1.20)
Interest Expense & Other             (0.20)        (0.06)       (0.04)      0.05        -         (0.05)        -           -           -          -           -          0.02        0.02      0.02      0.02        0.07
Minority Interest                    (0.24)        (0.03)       (0.19)     (0.14)      2.48        2.12        0.15         -           -          -          0.15       (0.06)      (0.10)    (0.10)     0.41        0.15
  Pre-Tax Income                    246.41         28.33       (10.57)     90.75     174.59      283.20       12.19      (28.53)      59.36     175.80      218.82        9.70      (25.99)    64.59    182.38      230.67
Taxes                                88.34          8.50         (3.23)  28.27        49.87       83.40        4.30       (8.39)      18.40      56.25       70.57        3.01       (8.06)    20.02     56.54       71.51
           Tax Rate                 35.85%        30.00%       30.54%   31.15%       28.56%      29.45%      35.28%      29.41%      31.00%     32.00%      32.25%      31.00%      31.00%    31.00%    31.00%      31.00%
  Net Income                        157.82         19.18         (7.34)  62.48       124.73      199.05        7.89      (20.14)      40.96     119.54      148.25        6.69      (17.93)    44.57    125.84      159.16
    Y/Y net income growth          34.36%         7.17%     -196.87% 48.26%         38.27%      26.12%     -58.87%     174.41%     -34.45%     -4.16%     -25.52%     -15.15%     -10.95%     8.80%     5.27%       7.36%
One Time Charges                         (0.3)       3.0          3.1        1.9        2.9        10.9          2.1         4.9         3.3        1.2       11.5

Applicable Shares                     39.17        39.40        38.67      39.19      39.19        39.11      39.10        37.84      37.50      37.30        37.93      37.00       36.80      36.60     36.40       36.70
GAAP EPS                             $4.03        $0.49       ($0.19)     $1.59      $3.18        $5.07      $0.20       ($0.53)     $1.09      $3.20        $3.97      $0.18      ($0.49)     $1.22     $3.46       $4.37
Recurring Earnings                   $4.03        $0.56       ($0.11)     $1.64      $3.26        $5.35      $0.26       ($0.40)     $1.18      $3.24        $4.27      $0.18      ($0.49)     $1.22     $3.46       $4.37

Depreciation & Amortization          12.28          5.88         5.66       8.36       9.08       28.98        8.42        9.81       13.78      12.35       44.36      14.16        17.13     22.36     19.15       72.79
EBITDA                              257.50         34.07        (5.14)     99.02     185.86      313.82       20.35      (18.90)      72.97     187.97      262.39      23.51        (9.25)    86.57    201.66      302.49

Profitability Ratios
Gross Margin                      49.93%         50.03%      42.74%      48.96%     50.96%     49.30%        45.99%      42.18%       42.60%   47.50%        45.29%     44.50%      42.00%    42.50%    47.00%    44.78%
SG&A%                             25.44%         36.26%      49.74%      27.08%     21.69%     28.62%        41.15%      58.64%       28.45%   21.48%        30.89%     41.00%      56.00%    27.70%    21.50%    30.47%
EBITDA                            25.72%         16.63%      (3.33%)     23.90%     30.78%     22.79%         8.26%    (10.83%)       17.44%   27.85%        17.33%      8.80%     (4.91%)    19.95%    28.18%    18.85%
Inc/(Dec) EBITDA%                 34.64%          2.77%     (108.3%)     22.06%     25.01%     14.97%      (33.10%)    (68.07%)    (665.02%)     2.96%     (37.61%)     15.10%      69.26%    87.44%    33.61%    44.01%
EBIT%                             24.50%         13.76%      (7.00%)     21.88%     29.28%     20.68%         4.84%    (16.46%)       14.15%   26.02%        14.40%      3.50%    (14.00%)    14.80%    25.50%    14.31%
Inc/(Dec) EBIT %                  33.53%         (1.28%)    (127.7%)     17.84%     21.77%     10.53%      (39.23%)    (88.60%)    (803.50%)   (1.63%)     (48.86%)   (12.35%)      16.77%    32.28%    16.91%    12.80%
Pre-tax                           24.62%         13.83%      (6.85%)     21.90%     28.91%     20.56%         4.95%    (16.35%)       14.19%   26.04%        14.45%      3.63%    (13.80%)    14.89%    25.48%    14.37%
Net Margin                        15.77%          9.36%      (4.76%)     15.08%     20.66%     14.45%         3.20%    (11.55%)        9.79%   17.71%         9.79%      2.50%     (9.52%)    10.27%    17.58%    9.92%

Effeciency Analysis
Gross Margin                       430              6          68         183        (328)       (63)          (403)        (56)       (636)      (346)       (401)      (149)         (18)      (10)      (50)    (51)
SG&A/Net Sales                     221            478        1579         381         (25)      318             489         890         137        (21)        227        (15)        (264)      (75)        2     (42)
EBITDA                             206            (435)      (1315)        (90)      (233)      (294)          (837)       (750)       (645)      (293)       (545)        53          592       251        33     151
Operating Margin                   209            (472)      (1511)       (198)      (303)      (382)          (892)       (946)       (773)      (326)       (628)      (134)         246        65       (52)     (9)
Pre-tax                            197            (469)      (1532)       (210)      (345)      (405)          (888)       (950)       (771)      (287)       (611)      (132)         256        70       (56)     (8)
Net Margin                         132            (211)      (1029)         (9)       (32)      (131)          (616)       (679)       (529)      (295)       (466)       (70)         203        48       (13)     12
Source: Company reports and Sterne Agee estimates



                                                                                                                                                                                                                  Page 6
                                                                                                                              July 27, 2012


                                                       APPENDIX SECTION
Company Description:
Deckers Outdoor Corporation is a designer, producer, and brand manager of footwear for outdoor activities and casual lifestyles. It
sells its products directly to consumers through retailers in the United States, and through distributors in a number of international
countries. It markets its products under the brand names Teva, UGG, Simple, Ahnu and TSUBO.

IMPORTANT DISCLOSURES:
Regulation Analyst Certification:
I, Sam Poser and Ben Shamsian, hereby certify the views expressed in this research report accurately reflect my personal views about
the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or views expressed by me in this report.

Research Disclosures:
Sterne, Agee & Leach, Inc. makes a market in the following subject companies Deckers Outdoor Corp., Crocs Inc. and Nordstrom
Inc..
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach,
Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company
and/or companies in the next three months.

Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve
Sterne, Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect
demand for a company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or
industry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability
to recruit and retain competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could
affect the market price of a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities
Exchange Commission.
Company Specific Risks:
Upward idiosyncratic risks include: a significant alteration in current weather patterns stimulating demand, accelerating international
business compensating for domestic weakness, significant pricing offsetting unit weakness in ’12, or another highly accretive acquisition.

Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects
the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.
Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.

Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.

Ratings Distribution:
                                                                                                          IB Serv./ Past 12Mos.
Rating Category                        Count                     Percent                    Count                    Percent
Buy                                    231                       49.15%                     13                       5.63%
Neutral                                215                       45.74%                     8                        3.72%
Underperform                           24                        5.11%                      0                        0.00%


                                                                                                             Appendix Section, Page I
                                                                                                                           July 27, 2012



ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.
Copyright © 2012 Sterne, Agee & Leach, Inc. All Rights Reserved.




                                                                                                         Appendix Section, Page II
                                                                                                                   July 27, 2012




To receive price charts or other disclosures on the companies mentioned in this report, please visit our website at https://
sterneagee.bluematrix.com/sellside/Disclosures.action or contact Sterne, Agee & Leach, Inc. toll-free at (800) 240-1438 or
(205) 949-3689.




                                                                                                  Appendix Section, Page III
                       Founded in 1901, Sterne Agee has been providing investors like you with high-quality investment opportunities for over a century. During the
                       early years, our founders prominently established themselves in the financial securities industry in the southeastern United States. Today, we
                       have expanded to serve all regions of the country. Sterne, Agee is headquartered in Birmingham, Alabama with offices in 22 states. Sterne
                       Agee is one of the largest independent firms in the country. Sterne, Agee & Leach, Inc. is a division of Sterne Agee Group, Inc., which also
                       includes The Trust Company of Sterne, Agee & Leach, Inc.; Sterne Agee Asset Management, Inc.; Sterne Agee Clearing, Inc.; and Sterne Agee
                       Financial Services, Inc.—www.sterneagee.com

                                                              EQUITY CAPITAL MARKETS
                                         Ryan Medo             Managing Dir., Eq. Cap. Mkts.              (205) 949-3623


                     INSTITUTIONAL SALES                                                                      INSTITUTIONAL TRADING
William Jump       Head of Institutional Sales                (404) 814-3960           JT Cacciabaudo        Head of Trading                           (212) 763-8288
Jon Schenk         Assoc. Director of Inst. Sales             (212) 763-8221

                                                                    EQUITY RESEARCH
                                         Robert Hoehn           Director of Research                      (212) 338-4731
CONSUMER                                                                                  FINANCIAL SERVICES (CONT.)
 Apparel Retailing & Toys                                                                 Property/Casualty Insurance
  Margaret Whitfield                   SVP, Sr. Analyst       (973) 519-1019              Dan Farrell                          Mng. Dir.               (212) 338-4782
  Tom Nikic, CFA                       Analyst                (212) 338-4784              Nitin Chhabra, FCAS                  Analyst                 (212) 338-4779

  Interactive Entertainment / Internet                                                 INDUSTRIALS
  Arvind Bhatia, CFA                   Mng. Dir.              (214) 702-4001             Aerospace & Defense
  Brett Strauser                       VP, Analystt           (214) 702-4009              Peter Arment                         Mng. Dir.               (646) 376-5336
  Footwear & Apparel                                                                      Josh W. Sullivan                     Sr. Analyst             (646) 376-5337
  Sam Poser                            Mng. Dir.              (212) 763-8226
  Ben Shamsian                         Analyst                (212) 338-4721              Auto, Auto Parts and Auto Retailers
                                                                                          Michael P. Ward, CFA                 Mng. Dir.               (646) 376-5375
  Leisure & Entertainment
  David Bain                           Mng. Dir.              (949) 721-6651              Coal, Metals & Mining, Engineering & Construction
                                                                                          Michael S. Dudas, CFA                Mng. Dir.               (646) 376-5329
  Restaurants                                                                             Satyadeep Jain                       Analyst                 (646) 376-5357
  Lynne Collier                        Mng. Dir.              (214) 702-4045              Patrick Uotila, CPA                  Analyst                 (646) 376-5358
ENERGY                                                                                    Construction Materials & Diversified Industrials
  Exploration & Production                                                                Todd Vencil, CFA                     SVP, Sr. Analyst       (804) 282-7385
  Tim Rezvan, CFA                      Sr. Analyst            (212) 338-4736              Kevin Bennett, CFA                   Analyst                (804) 282-4506

  Oilfield Services & Equipment                                                        HEALTHCARE
  Stephen D. Gengaro                   Mng. Dir.              (646) 376-5331              Pharmaceutical Services
  Grant Fox                            Analyst                (212) 338-4723
                                                                                          Greg T. Bolan                        Mng. Dir.              (615) 760-1469
FINANCIAL SERVICES                                                                        Himanshu Rastogi, PhD, CFA           VP, Analyst            (615) 760-1478
  Asset Management                                                                     TECHNOLOGY
  Jason Weyeneth, CFA                  SVP, Sr. Analyst       (212) 763-8293
  Charles Warren                       VP, Analyst            (646) 376-5309
                                                                                         Data Networking and Storage
                                                                                          Alex Kurtz                           Mng. Dir                (415) 402-6015
                                                                                          Amelia Harris                        Analyst                 (415) 402-6018
  Banks & Thrifts
  Matthew Kelley                       Mng. Dir.              (207) 699-5800              Financial Technology
  Mike I. Shafir                       SVP, Sr. Analyst       (212) 763-8239              Greg Smith                           Mng. Dir                (818) 615-2029
  Matthew Breese                       Analyst                (207) 699-5800              Jennifer Dugan                       Analyst                 (415) 402-6051
  Brett Rabatin, CFA                   Mng. Dir.              (877) 457-8625
  Kenneth James                        VP, Sr. Analyst        (615) 760-1474              Hardware, Mobile Devices, IT Supply Chain
  Peyton Green                         Mng. Dir.              (877) 492-2663              Shaw Wu                               SVP, Sr. Analyst       (415) 362-7431
  Zachary Wollam                       VP, Analyst            (615) 760-1468
  Todd L. Hagerman                     Mng. Dir.              (212) 338-4744              LED Supply Chain
  Robert Greene                        Analyst                (212) 763-8296              Andrew Huang                          Mng. Dir.              (415) 362-6143

  Life Insurance                                                                          Semiconductors
  John M. Nadel                        Mng. Dir.              (212) 338-4717              Vijay Rakesh                         Mng. Dir.               (312) 525-8431
  Alex Levine                          Analyst                (212) 338-4748
                                                                                       TRANSPORTATION, SERVICES & EQUIPMENT
  Mortgage Finance & Specialty Finance
                                                                                          Jeffrey A. Kauffman                  Mng. Dir.               (212) 338-4765
  Henry J. Coffey, Jr., CFA            Mng. Dir.              (615) 760-1472
                                                                                          Sal Vitale                           VP, Sr. Analyst         (212) 338-4766
  Jason Weaver                         VP, Sr. Analyst        (615) 760-1475
                                                                                          Ryan Mueller                         Analyst                 (212) 338-4732
  Calvin Hotrum                        Analyst                (615) 760-1476




Email Address for Sterne Agee Employees: first initial + last name@sterneagee.com (e.g., jsmith@sterneagee.com)

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:1874
posted:7/27/2012
language:English
pages:10