CEO Gaffe of the Week: Deckers Outdoor
Sep 7th 2012 3:55PM
Updated Sep 7th 2012 4:00PM
This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!
This week I want to highlight the CEO of Deckers Outdoor (NAS: DECK) , Angel Martinez.
The dunce cap
Finally, a week in which we can relax! No insider-trading scandals, no LIBOR-fixing, and no Ponzi schemes -- just highlighting some good old-fashioned poor decision-making.
Enter Deckers Outdoor, the company that makes you say "Ugg." I'm not being purposefully mean or anything; the company's lead product really is the Ugg boot for men and women. In its most recent quarter, Ugg shoes accounted for 62% of total sales, with its Teva and recently purchased Sanuk brands accounting for its remaining revenue.
Earlier this week, Deckers Outdoor kicked off its fall 2012 advertising campaign, which involves utilizing New England Patriots quarterback Tom Brady as its new ambassador. Deckers will be targeting both online and print audiences with this campaign, including publications like ESPN the magazine, GQ, and Details. However, there was also one questionable piece of advertising included in the mix... a 225-foot painted wall of Tom Brady on the corner of 34th Street and Eighth Avenue in New York City.
And it was at this exact moment that every thought in my brain came to a screeching halt...
As a sports fanatic and someone who possesses common sense, I can't fathom what would compel Mr. Martinez or Deckers' management team to look at this situation and say, "Yes, let's put up a gigantic painting of an athlete vehemently hated by New Yorkers in the heart of New York City!" I'm seriously beside myself! In what world does Deckers see this as effective advertising?
A Deckers press release had this to say: "Tom Brady has the ability to bring millions of people together with the way he plays football. Whether you are a fan or not, you're drawn to watching him." Clearly, Deckers' management team and advertising coordinators have never, ever, set foot inside New York City!
This latest foul-up perpetuates a string of problems that have plagued Deckers Outdoor for the past couple of quarters.
Deckers' problems began with its plans to focus on growing its international business, specifically in Europe. Between higher-than-expected expansion costs and a slowdown in demand due to the ongoing sovereign debt crisis, disappointing earnings reports have become something of the norm. It also hasn't helped that sheepskin costs, one of the company's primary input costs, have been on the rise.
This isn't to say that every retailer is having trouble finding growth in Europe. Michael Kors (NYS: KORS) , for instance, has defied gravity and grown same-store sales by more than 30% in three straight quarters. However, even some of the best global brands have succumbed to weakness in Europe. Nike (NYS: NKE) blamed higher raw material costs and European sales weakness for its rare earnings miss. Automaker Ford (NYS: F) tripled its loss forecasts on weak European sales. Even global shipping giant FedEx (NYS: FDX) was tripped up by weak premium service spending in Europe. Yet this is the region that Deckers has been gung-ho about expanding into.
In Deckers' defense, the company did outline plans recently to move its product into Asia and it is doing what it can through the acquisition of the Sanuk line to reduce its dependence on the Ugg brand, but some of the decisions that Mr. Martinez has OK'd are enough to make shareholders bang their head repeatedly against a 225-foot brick wall.
Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may see your suggestion in the spotlight.
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The article CEO Gaffe of the Week: Deckers Outdoor originally appeared on Fool.com.Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at dubious CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. The Motley Fool owns shares of Ford. Motley Fool newsletter services have recommended buying shares of Nike, Ford, and FedEx, as well as creating a synthetic long position in Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.
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