Marcato Capital Management has taken what is now a 6% position in Deckers’ common stock.  That Marcato was buying Deckers’ shares first became public knowledge towards the end of May.  Partly in response to this and, apparently, to growing unhappiness on the part of other large shareholders, Deckers has undertaken a strategic review process to determine what should happen to the company.

Recently, Marcato sent Deckers’ Board of Director a letter saying that if the review process didn’t lead to an attractive sale of the company, “…we will be prepared to seek significant Board change at the Company’s next annual meeting by nominating a slate of director candidates to replace the entire Board.”

Here’s a link to the letter in its entirety.  It’s pretty damning of Deckers’ management and board and, if the letter is accurate, they aren’t the only ones unhappy.  I can see why they might be concerned that Angel Martinez, the former CEO and still Chairman of Deckers, is running for Mayor of Santa Barbara rather than focusing on the company.

I guess I see this as the final denouement in the purchase and destruction of the Sanuk brand.  That might not have been the only problem Deckers has, but it’s certainly a major and public symptom of what went wrong.

If I were to read between the lines of the Marcato letter, what I hear them saying is, “Look, UGG is a great brand with real potential, but your attempts to make the company into a big footwear player by buying all these smaller brands has fallen flat on its face.  It’s cost you a pile of money, time, and focus.  Get rid of them or sell the company or we’ll come in and do it for you.”

I will be interested in watching how this moves forward.

When I report on a public company’s results, it’s always important to review the numbers. But the more I do that the more I realize my focus needs to be on how companies are trying to transition to the new retail environment in circumstances of high uncertainty. That is, they must transition to something they can’t solidly identify yet. That’s awkward.

Deckers ended their March 31st fiscal year with 160 retail stores worldwide. 96 of them were what they call concept stores and the remainder outlet stores. “During fiscal year 2017,” they report in the 10-K, “we opened 17 new stores, reclassified 12 European concession stores as owned stores, converted two owned stores to partner retail stores, and closed 20 stores.” Over the next two years, we learn in the conference call from President Dave Powers, “In regards to our global retail fleet, as we look out over next two years, we are planning to reduce our global company own brick-and-mortar footprint back 30 to 40 stores.”

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