Deckers defies investors: halts its active look for a buyer and launches share buyback program

The U.S. footwear company took the market by storm last week when openly contravened its investors: the retailer has halted its active search for a buyer after months of looking for a suitor.

The American company said it will no longer seek a sale after failing to find a potential bidder out of some 90 entities it had contacted. However, the company remains open to considering other strategic alternatives to boost stockholder value, said John Gibbons, chairman of the board, in a statement.

However, Deckers remains open to considering sale options in the future if they arise, COO Dave Lafitte advanced on the earnings call but is shifting its focus toward its 100 million dollars profit improvement program through the fiscal year 2020.

On a related note, Deckers also announced a new stock buyback program of up to 335 million dollars on top of the 65 million dollars remaining in its current plan. This initiative is part of the company strategic business review.

Deckers maintains its focus on streamlining the corporate structure

“We continue to focus on driving improvements in the business through streamlining our cost structure,” said President and CEO Dave Powers. “Our aim is to repurchase stock while continuing to improve our operating profit, which simultaneously returns capital to stockholders and positions Deckers for long-term growth.”

Deckers separately reported second-quarter earnings of 1.54 dollars a share on revenue of 482.5 million dollars, ahead of the 1.02 dollars a share in earnings and revenue of 438 million dollars forecast by analysts polled by FactSet.

Flat revenues of 482.5 million dollars beat expectations of a 10 percent drop, costs slimmed around 2.8 percent compared to the previous third quarter, and some product shipped earlier than expected, Lafitte said. Ugg sales fell 2.9 percent to 400.4 million dollars, but the Hoka One One, Teva and Sanuk brands all saw double-digit percentage increases, pointed out the company.

Net sales are projected to reach 735 million dollars to 745 million dollars in the third quarter and increase 1 percent to 2 percent for the full fiscal year, which will end March 31.

On the back of the news, shares of Deckers Brands (DECK) fell in Thursday's extended session.

Deckers faces mounting animadversion from investors

The company is still facing challenges from investors, who are seeking new leadership on the board of directors to compel a sale. In fact, just days before releasing its seasonal figures, Marcato Capital Management sued Deckers Outdoor Corp on Monday to force the maker of UGG boots to hold its annual meeting and classify the hedge fund’s board nominees so the company could avoid millions of dollars in financial penalties.

The lawsuit filed in Delaware Chancery Court heightens tensions between Deckers and the hedge fund, which has proposed replacing the company’s entire 10-member board.

Image: Deckers