Outlines Marcato’s Shortsighted and Value
Destructive Agenda
Urges Stockholders to Vote “FOR” ALL of
Deckers’ Highly Qualified Director Nominees on the WHITE
Proxy Card TODAY
Deckers Brands (NYSE: DECK), a global leader in designing,
marketing and distributing innovative footwear, apparel and
accessories, announced today that its Board of Directors is sending
a letter to stockholders underscoring the Board and management
team’s success in delivering significant value for stockholders.
The letter also outlines Marcato’s shortsighted and value
destructive agenda and the danger of electing any of Marcato’s
director nominees. The proxy statement, investor presentation and
other important information related to Deckers’ 2017 Annual Meeting
of Stockholders to be held on December 14, 2017, can be found on
Deckers’ website at www.votedeckers.com.
This press release features multimedia. View
the full release here:
http://www.businesswire.com/news/home/20171117005181/en/
Deckers’ Board of Directors unanimously recommends that
stockholders vote “FOR” ALL of Deckers’ highly
qualified, experienced nominees using the WHITE proxy card
today.
The full text of the letter follows:
VOTE THE ENCLOSED WHITE PROXY CARD TODAY FOR DECKERS’ HIGHLY
QUALIFIED DIRECTORS
November 17, 2017
Dear Fellow Stockholder:
Deckers’ December 14th Annual Meeting of Stockholders is rapidly
approaching and your vote is critically important to the future of
your company, no matter how many shares you own. Your Board of
Directors unanimously recommends that you vote “FOR” the reelection
of ALL our highly qualified director nominees.
Deckers is making tremendous, measurable progress on our
transformation. We have built a strong foundation and have
significantly reduced our cost structure to position our business
for sustained future success. Our solid first half earnings results
and recently announced $400 million stock repurchase plan—the most
significant stock repurchase plan in our history—demonstrate our
positive momentum and commitment to delivering stockholder value.
Simply put, our transformation strategy is working.
Now, that progress and our momentum is at serious risk.
Marcato Capital Management is waging a costly and distracting proxy
contest to replace our highly qualified, proven directors with
individuals who we believe are far inferior in both experience and
knowledge, and who would implement an agenda that we believe is
shortsighted and value destructive. We are writing to present
the truth about Marcato’s agenda and underscore the significant
value that the current Board and management team are creating over
the near and longer-term.
THE TRUTH ABOUT MARCATO’S SHORT-TERM AND VALUE
DESTRUCTIVE AGENDA
X
Marcato’s Proposal: Close profitable
stores. Marcato’s proposal to rapidly shutter profitable
locations to reach a store count of fewer than 80 demonstrates a
clear lack of understanding of both our business and industry.
Marcato ignores the critical importance of Deckers’ omni-channel
strategy and retail store presence to effectively engage with
the consumer and drive e-commerce sales. Furthermore, a rapid exit
from this many stores would require a substantial cash outlay and
result in a number of early termination penalties, significantly
impacting our profitability.
√
Deckers’ retail strategy is designed to
support profitability and is an integral component of our
omni-channel strategy. Not only do our retail stores elevate
the consumer experience for the UGG brand, but they also allow us
to showcase our broader product line in order to build a more
sustainable, predictable year-round business. We closely monitor
the performance and profitability of each store. As part of
Deckers’ transformation, we have already closed 25 stores in order
to focus on our most profitable locations. We are targeting 125
company-owned stores globally, down from 160 stores at the start of
fiscal year 2018. By the end of fiscal year 2020, our global retail
fleet will contribute 20% or more in four wall operating
contribution.
X
Marcato’s Proposal: Implement draconian
cost cuts and unsustainable margin targets. Marcato’s cuts
would return Deckers to dependence on wholesalers and distributors
whose own business model is under significant pressure.
Diversification, including in our brands and channels, has been and
remains a key pillar of our strategy to mitigate risk and grow in a
sustainable way. Furthermore, Marcato’s proposed cuts and margin
targets would not only require significant closures of profitable
stores and the sale of several of our brands, but would also
require slashing key talent and innovation, stifling Deckers’
ability to invest in and grow the business and our brands. Simply
put, cuts of the magnitude proposed by Marcato would result in
Deckers having no pathway to growth.
√
Deckers has already taken out
significant costs—without compromising growth or innovation in the
business. Since we announced the beginning of our restructuring
plan in February 2016—well before Marcato disclosed its investment
in Deckers in February 2017—we have made significant progress
improving our gross profit margin and reducing our spend by
improving input costs, shortening product development cycles,
rationalizing our retail footprint, consolidating offices and
controlling indirect spend. In February 2017, we announced a plan
to implement additional cost savings in both cost of goods (COGS)
and sales, general & administrative (SG&A) expenses.
Combining these initiatives, we expect to
improve
operating profit by $100 million by the end of fiscal year 2020
as compared to fiscal year 2017 levels. This improvement will be
driven through gross cost savings of $150 million, which is made up
of $56 million in COGS and $94 million in SG&A savings. For
fiscal year 2018, we expect
operating margin to increase to
10.5%, a 130 basis point improvement year-over-year. We expect
operating margin to further improve to at least
13% by the end
of fiscal year 2020. We are targeting an operating margin
improvement of 380 basis points from fiscal year 2017 to the end of
fiscal year 2020, and to increase return on invested capital above
20% by the end of fiscal year 2020.
X
Marcato’s Proposal: Sell our non-UGG
brands. Marcato’s push for a sale of all of our non-UGG brands
would return Deckers to a more seasonal revenue stream and make
Deckers entirely dependent on UGG. Marcato ignores that profits for
the non-UGG brands are improving and the value of a diversified
portfolio to sustain growth and leverage our foundation. In
addition, Marcato would have us sell Hoka One One and give the vast
growth opportunity of that brand to someone else, just as Hoka is
reaching new consumer segments and target audiences.
√
Deckers is strategically investing in
our brands to fuel growth and profitability. We are
implementing a multi-season product strategy, which increases the
year-round utilization of our infrastructure to offset our
traditional reliance on the colder months when the UGG brand is in
higher demand. To do this, we are focused on delivering a more
diversified collection of UGG spring/summer products and UGG Men’s.
We are also growing our Performance Lifestyle Group, which consists
of Hoka, Teva and Sanuk. This group has posted double digit growth
since fiscal year 2014 and demand for these brands is strongest
during the months when demand for our Classic boot is low.
Over the past four years, Deckers has grown Hoka’s annual
sales over ten-fold,
from less than $10 million to over $100
million. We are increasing consumer awareness through strategic
marketing efforts, building on Hoka’s momentum among serious
runners and continuing to innovate product offerings through new
styles geared toward hiking, casual runners and women.
X
Marcato’s Proposal: Take on significant
debt. Marcato believes that Deckers should double its leverage
target in a shortsighted maneuver that would significantly reduce
our financial flexibility. Increasing debt to Marcato’s proposed
level would make it more difficult to manage the near-term
headwinds that all retailers face, as well as our seasonal working
capital needs. It would also largely prevent us from pursuing
attractive opportunities as they arise. Marcato’s proposal,
which has led to the demise of many retailers in recent years, is
very risky in the current environment and we believe exposes
stockholders to excessive risk.
√
Deckers has a prudent capital
allocation plan to maintain a strong balance sheet. The Deckers
Board has a disciplined, prudent approach to capital allocation to
ensure that we can successfully manage through the current
environment. We are returning capital to all stockholders through
our recently announced $400 million stock repurchase plan, the most
significant stock repurchase plan in the Company’s history.
Additionally, we are using the strength of our balance
sheet—together with our profitability improvements—to invest in the
highest return opportunities.
X
Marcato’s Proposal: Saddle Deckers with
weak, unqualified directors. Marcato is proposing to replace
highly qualified, proven directors on the Deckers Board with
individuals who lack critical experience. Marcato’s nominees are
unvetted and unknown. Most have never served on the board of a
public company and many have no C-level executive experience.
Nearly all of Marcato’s nominees lack retail experience, and
certain nominees with retail experience did not work in operating
or strategic roles. We believe that the election of any of
Marcato’s nominees has the potential to result in a serious setback
to the demonstrated progress that Deckers has made in its
transformation plan. It would also jeopardize the pace of, and
further opportunity for, stockholder value creation.
√
Deckers has an experienced Board
focused on growing stockholder value. The Deckers Board is
composed of nine active and highly engaged directors who are
extremely knowledgeable in our business and are holding management
accountable for executing on our strategic plan. All Board members
are outstandingly qualified, with seven of the nine directors being
current or former CEOs, CFOs, COOs or Chief Administrative Officers
of major companies. The Board is drawn from many different
backgrounds and experiences, and is deeply committed to acting in
the best interests of all stockholders. The Board has been—and will
continue to be—a significant agent of change to improve Deckers’
performance.
Electing any of Marcato’s nominees now—just as the
transformation of Deckers is showing real results—would be highly
damaging and value destructive. Thanks to the current Board,
Deckers is a stronger, more focused company that is better able to
capitalize on a changing retail environment.
PROTECT YOUR INVESTMENT AND FUTURE
UPSIDE—VOTE ONLY THE WHITE PROXY CARD
TODAY
Your vote is extremely important, no matter how many shares you
own. We urge you to support your current Board, which continues
to implement a transformation plan designed to enhance value at
Deckers for all stockholders. Do not support the short-term and
value destructive agenda of a single stockholder who does not
understand our business, and who we believe will completely derail
our momentum.
To protect your investment, vote “FOR” ALL of Deckers’ highly
qualified directors using only the enclosed WHITE proxy card and
discard any Gold proxy card or other proxy materials you may
receive from Marcato. If you have already returned a Gold proxy
card, you can change your vote by signing, dating and returning a
WHITE proxy card TODAY. Only your latest-dated proxy card
counts.
Thank you for your continued support.
Sincerely,
John M. GibbonsChairman of the Board
PROTECT YOUR INVESTMENT! PLEASE VOTE TODAY ON THE
WHITE PROXY CARD! If you have questions, need assistance
in voting your shares, or wish to change a prior vote, please
contact:
INNISFREE M&A INCORPORATED Stockholders
Call Toll-Free:
(877) 750.0625 (from the U.S. and Canada) or
(412) 232.3651 (from other locations) Remember,
please simply discard any Gold proxy card you may receive from
Marcato. Your Board does not endorse any of Marcato’s nominees
and we urge you to NOT submit any proxy using Marcato’s Gold proxy
card, even as a protest vote. A withhold vote on Marcato’s Gold
proxy card will revoke any earlier proxy that you have submitted to
Deckers.
About Deckers Brands
Deckers Brands is a global leader in designing, marketing and
distributing innovative footwear, apparel and accessories developed
for both everyday casual lifestyle use and high performance
activities. The Company’s portfolio of brands includes UGG®,
Koolaburra®, HOKA ONE ONE®, Teva® and Sanuk®. Deckers Brands
products are sold in more than 50 countries and territories through
select department and specialty stores, Company-owned and operated
retail stores, and select online stores, including Company-owned
websites. Deckers Brands has a 40-year history of building niche
footwear brands into lifestyle market leaders attracting millions
of loyal consumers globally. For more information, please visit
www.deckers.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within
the meaning of the federal securities laws, which statements are
subject to considerable risks and uncertainties. These
forward-looking statements are intended to qualify for the safe
harbor from liability established by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements include
all statements other than statements of historical fact contained
in this press release, including statements regarding Deckers’
future strategies and cost-reduction initiatives. Deckers has
attempted to identify forward-looking statements by using words
such as “anticipate,” “believe,” “could,” “estimate,” “expect,”
“intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or
“would,” and similar expressions or the negative of these
expressions.
Forward-looking statements represent management’s current
expectations and predictions about trends affecting Deckers’
business and industry and are based on information available as of
the time such statements are made. Although Deckers does not make
forward-looking statements unless it believes that it has a
reasonable basis for doing so, Deckers cannot guarantee their
accuracy or completeness. Forward-looking statements involve
numerous known and unknown risks, uncertainties and other factors
that may cause its actual results, performance or achievements to
be materially different from any future results, performance or
achievements predicted, assumed or implied by the forward-looking
statements. Some of the risks and uncertainties that may cause
Deckers’ actual results to materially differ from those expressed
or implied by these forward-looking statements are described in the
section entitled “Risk Factors” in Decker’s Annual Report on Form
10-K for the fiscal year ended March 31, 2017, as well as in its
other filings with the Securities and Exchange Commission.
Except as required by applicable law or the listing rules of the
New York Stock Exchange, Deckers expressly disclaims any intent or
obligation to update any forward-looking statements, or to update
the reasons that actual results could differ materially from those
expressed or implied by these forward-looking statements, whether
to conform such statements to actual results or changes in Deckers’
expectations, or as a result of the availability of new
information.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171117005181/en/
Investors:Deckers BrandsSteve Fasching, 805-967-7611VP,
Strategy & Investor RelationsorInnisfree M&A
IncorporatedArthur B. Crozier, 212-750-5833orMedia:Joele
Frank, Wilkinson Brimmer KatcherEric Brielmann / Amy Feng,
415-869-3950
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