There's no denying that the UGG brand from Deckers (NYSE:DECK) is still alive and kicking in America. The problem is, that's not necessarily the case when it comes to international sales, which have yet to see substantial growth over the past few years. With that said, I'd like to point out a couple of quotes regarding international expansion in China from last week's Q1 2013 conference call that really stuck out:
The other thing about China is that there is much known about 170 cities, a population over 1 million people, and we haven't even begun to penetrate those markets.
If I'm reading that correctly, those 170 cities represent a total of over 170 million people. Without calculating how much over the 1 million mark some of those cities are, we are talking about at least half that of the United States. That's an incredible additional market.
From that same conference call, the Deckers team talks about adding stores to China:
For 2013, we still expect to open in the neighborhood of 30 stores, 2/3 of which will be in Asia, primarily China and Japan, with the remainder in the U.S. and Europe.
How many actual new stores mentioned that will be opening in China is still unknown, but those stores are not necessarily the driving force behind UGG growth in China. Why? Because Deckers plans on bringing Omni-Channel options to China to boost sales growth, making buying options similar to how they currently are inside America:
I think what we are really looking at is the revolution going on called Omni-channel, which really begins to create a different mindset, if you will, for our consumers. They want to access brands, how they want, when they want. And many of them either do their initial shopping online and go buy in a store or they just only buy online. Yes, in footwear, we're all very fortunate that -- it's an experiential kind of purchase. So you got to go try something on, which brings people out in the stores, is very important. But the impact of Omni-channel over the next few years is going to continue to be a factor in distribution decisions. So my guess is that when the customer realizes they can buy a product online 24/7, a product they know and are comfortable with and they prefer to shop that way, it probably means you don't need that many more points of physical distribution than you currently have. So that's just sort of my theory. And I think so far, it's been validated by what we're seeing.
It's safe to say that Deckers has its work cut out for it in bringing the UGG line to China. Even though Deckers is moving quickly in expanding its stores present in China, that's not necessarily the biggest driving force in growing actual sales. Through other distribution channels, whether present inside other department stores or orders placed through its online ecommerce channel, Deckers will, in short time, present China's massive population with multiple purchasing options.
Disclosure: I am long DECK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.