But the fundamentals tell a different story, Cramer said, at least for Under Armour. He looked at demand from the third quarter moving into the fourth with a focus on brand strength, the loyalty and performance of their key customers and the quality of management. Based on those metrics, Deckers is “the stronger investment across the board,” he said, and it’s cheaper.
Deckers sells UGG shoes, the popular brand that even garnered an Oprah endorsement. UGG accounts for 70% of the company’s sales, and business is good, especially with the release of new products that comes with every fall season. Deckers has done a great job of getting its shoes to its target customers, too, through high-end retail. Between the woman’s products and the international expansion, Cramer said, “I think there’s still a lot more room here for [Deckers] to run.”
Under Armour, however, has a great performance-apparel brand, but its footwear line is on “shaky ground.” CEO Kevin Plank said on his most recent conference call that integrating the two has been difficult. Not to mention, UA shoes are heavily discounted when they hit the shelves, which Cramer called “a major, major warning sign.” And even that much vaunted performance-apparel division is running out of growth, it seems, as competition from Nike and Champion eat away at market share.
Beyond the branding issue, Deckers has a stronger and more diverse customer base, better overseas exposure and a more positive sales outlook than Under Armour. And DECK trades at just 10 times 2011 earnings compared with UA’s 26 price-to-earnings multiple for the same year. Even when Cramer factored in Under Armour’s higher projected growth rate, Deckers was still cheaper. Also, DECK is up just 7% year-to-date, while UA is up 23%.
The charts may look the same, but based on the fundamentals Deckers is a buy and Under Amour is a sell.
“If you want a sports-apparel company,” Cramer said, “go buy Nike.”
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