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Are Investors Over the Crocs and Uggs Fads?


It looks like Wall Street's fashion sense may be improving.

Today is a bad day for anyone who invested in the long-term potential of appalling shoe fads.

Deckers Outdoor Corp. (DECK), which sells the much-hated but reputedly comfy Ugg brand of boots, is getting slammed by investors today, after the company's earnings release. The stock is down over 11.5% at midday.

The company actually earned its highest profit ever, far more than expected by analysts, most of whom must be flabbergasted at the company's continued ability to convince women to wear big, unflattering sheepskin boots with no arch support. Analysts give Deckers an average rating of outperform.

Crocs (CROX), another fashion felony that won't go away, also beat earnings expectations. Net profit rose 18%. Even so, Crocs shares are down 7.7%.

If earnings are in line, why the sell-off? Is Wall Street spurning these companies based on fashion taste?

Both companies' outlook for the next quarter earnings and the coming year isn't very good. In the case of Uggs, to the chagrin of fashionistas, sales aren't going to come down much (seasonally). Margins will be significantly hurt by a jump in the price of sheepskins. And the company is looking to add customers. New England Patriots quarterback Tom Brady is now hawking Uggs to, of all people, men. If that catches on, there might be some hope for the fuzzy boot.

In the case of Crocs, revenues are expected to slide. The company suffered during the recession because, well, it sells $30 flip-flops. Sales have recovered slowly since then, but it looks like they won't for long.

If the hypothetical Wisdom Tree Footwear Fad ETF existed, this would be bad news.

Twitter: @vincent_trivett
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No positions in stocks mentioned.
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