UGGs Maker’s Run Just Starting

Deckers Outdoor ain’t done going up, Cramer said on Tuesday. So don’t think the bullish numbers coming out of the most recent quarter mean the stock has peaked.

Deckers’ Q4 was just a snapshot of the recent past – albeit a great one, with earnings and revenues coming in above the Street’s estimates and same-store sales jumping about 28 percent. But the company, which makes the uber popular UGG boots and Teva sandals, also upped its 2010 guidance. This is why Cramer expects still greater things from Deckers, even more than the $19 run it’s had since the Feb. 25 report.

“The stock is already up big,” the Mad Money host said, “but I think it can go even higher.”

And this is no mere conjecture. Soaring UGG sales drove the quarter, and the introduction of new seasonal lines should play a pivotal role for Deckers going forward. And management on the conference call said that it is seeing “great sales trends” in pre-bookings across the board, which is a bullish sign. Not to mention, the blizzards that pummeled much of the Eastern seaboard in February, Cramer said, alone “bought Deckers an additional month’s worth of...sales.”

Hit the Deck?
Hit the Deck?   

But there’s been a game changer in the company’s business plan, too. Once just wholesaling to retailers, Deckers is now selling directly to customers. Both outlets and online accounted for 13% of revenues each last quarter, with in-store sales jumping 89% year-over-year. This under-the-radar strategy switch was a big reason no one on Wall Street saw such a big quarter coming, Cramer said, and it should boost profits in the future.

Another key part of Deckers’ strength? The Teva turnaround. Sales last year were down 18% from 2008, Cramer said, but the company did a much better job of controlling inventory. That allowed the merchandise to sell at full price rather than at fire-sale rates. Now that the bleeding as stopped, Deckers should be able to squeeze even more earnings out of every quarter.

Despite soaring 47% since Cramer’s Oct. 13 recommendation, DECK trades at only 12 times 2011 earnings with a 22% long-term growth rate. Given the strength of the business, Cramer said, that’s just too cheap. He called the stock a “screaming buy, even after the run.”

“It’s as hot as UGGs are,” Cramer said.

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