SAN FRANCISCO,
June 27, 2017 /PRNewswire/ -- Marcato
Capital Management LP ("Marcato"), a San
Francisco-based investment manager which manages funds that
beneficially own approximately 6.0% of the outstanding common
shares of Deckers Outdoor Corporation (NYSE: DECK) ("Deckers" or
the "Company"), today sent a letter to Deckers' Board of Directors
highlighting the Company's history of underperformance and
questioning the Company's leadership and ability to generate
sustainable, long-term profitability.
Accordingly, if Deckers' strategic review process does not
culminate in a sale of the Company at an attractive value to all
shareholders, Marcato 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.
Marcato has retained Cadwalader, Wickersham & Taft LLP
as legal counsel in connection with this matter.
The full text of the letter is below.
June 27, 2017
Deckers Outdoor Corporation Board of Directors
c/o Corporate Secretary
250 Coromar
Drive
Goleta, CA
93117
Attn: John M.
Gibbons, Lead Director
Dear Members of the Board of Directors,
Marcato Capital Management LP ("Marcato," "we" or "us")
beneficially owns 6.0% of the outstanding shares of Deckers Outdoor
Corporation ("Deckers" or the "Company"). For several years, while
Deckers has enjoyed a strong, profitable brand with UGG, the
Company has failed to translate this brand strength into growth in
earnings and stockholder value. Throughout this period,
recommendations made by stockholders to take corrective strategic
action to improve profitability and stockholder value have been
consistently ignored. The inevitable consequence has been a
total collapse in shareholders' confidence in the Company's Board
of Directors and management team: to our knowledge, prior to the
Company engaging Moelis, at least six significant shareholders
wrote letters to the Board demanding the Company pursue a sale of
the
business.
We acknowledge the Company's announcement on April 25, 2017 that the "Board has initiated a
process to review a broad range of strategic alternatives."
However, given a lack of transparency in the process, along with
the Company's history of strategic, operational, and capital
allocation missteps, we remain concerned that the Company's
strategic review process conducted under the direction of the
current Board and management team may not result in the maximum
value for all stockholders. We also note that the Board lacks
any meaningful stockholder representation and does not contain any
members with deep professional experience in business valuation or
corporate M&A, facts that, when combined with limited insider
ownership, raise further doubts about the Board's ability and
incentive to maximize stockholder value during this critical
time. Lastly, we observe that Angel
Martinez, the Company's Chairman and former CEO, has
recently launched a campaign to be elected Mayor of Santa Barbara in this coming November's
election. These circumstances force shareholders to question
whether the Board will have the appropriate leadership, focus, and
urgency during this process.
For these reasons, we proposed to the Company that Marcato
be afforded limited representation on the Company's Board — a
proposal that the Board has refused to take up in a timely
fashion.
Our concerns are supported by a review of Deckers' history
of underperformance, which is not the result of one-off events
beyond the Company's control, but is instead attributable to years
of poor decision making and operational neglect, highlighted by a
failed retail expansion strategy, runaway corporate expenses, and
wasteful capital allocation. While the Company has
articulated a commitment to realize expense reductions totaling an
estimated $100 million, our research
and that of a highly-credible global consulting firm suggests that
the true expense opportunity is much greater, likely more than
$200 million in annual savings
opportunity. In either case, we do not have confidence that,
given the track record of this management team and Board of
Directors, these expense opportunities will be achieved in an
appropriate time frame. Instead, we expect that these cost
savings opportunities represent sources of value to potential
acquirers that should accrue to shareholders' benefit in an
effective sale process.
While we typically seek to work constructively with boards
to implement change, we view this situation differently. Given
Deckers' chronic underperformance, stockholder frustration and
fatigue, a sale of the Company in this case very likely offers the
highest risk-adjusted return for stockholders. If, for any
reason, the process fails to produce a desirable outcome, we
believe a new management team led by a new Board of Directors will
be much more likely to succeed in achieving the revenue and expense
opportunities at Deckers. We are highly confident that the majority
of Deckers' stockholders share this perspective. Therefore,
should Deckers' strategic review process not culminate in a sale of
the Company at an attractive value to all stockholders, 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.
Sincerely,
Mick McGuire
Managing Partner
Marcato Capital Management
LP
Cautionary Statement Regarding Forward-Looking
Statements:
The information herein may contain
forward-looking statements which reflect Marcato's views with
respect to, among other things, future events and financial
performance. Specific forward-looking statements can be
identified by the fact that they do not relate strictly to
historical or current facts and include, without limitation, words
such as "may," "will," "expects," "believes," "anticipates,"
"plans," "estimates," "projects," "targets," "forecasts," "seeks,"
"could," "should" or the negative of such terms or other variations
on such terms or comparable terminology. Similarly, statements that
describe Marcato's objectives, plans or goals are forward-looking.
Forward-looking statements are subject to various risks and
uncertainties and assumptions. There can be no assurance that any
idea or assumption herein is, or will be proven, correct. If one or
more of the risks or uncertainties materialize, or if Marcato's
underlying assumptions prove to be incorrect, the actual results
may vary materially from outcomes indicated by these statements.
Accordingly, forward-looking statements should not be regarded as a
representation by Marcato that the future plans, estimates or
expectations contemplated will ever be achieved.
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SOURCE Marcato Capital Management LP