Deckers Pushes Uggs on Guys
Executives at Deckers Outdoor Corp. (DECK) recently asked a provocative question: Will guys embrace Uggs?
Few brands are more closely associated with women these days than the Australian sheepskin boots. While American guys will wear Uggs, Deckers found, they’re loath to come clean.
“They like the fuzzy stuff inside,” said Angel Martinez, chief executive officer of Deckers, which bought Ugg Australia in 1995. “They don’t really want to admit there is fuzzy stuff in there, but it sure feels good.”
Attracting men to a so-called female brand isn’t easy. Ask Talbots Inc. (TLB), which failed to make the transition last decade. Still, more men are shopping again post-recession, while the Metrosexual Effect has made it OK for dudes to take grooming and fashion seriously. That in turn has prompted the likes of Lululemon Athletica Inc. (LULU), Coach Inc. and Decker’s Ugg brand to discover -- or rediscover -- their inner guy.
In the fall, New England Patriots quarterback Tom Brady began pitching a line of male-oriented Uggs. Coach, the largest U.S. luxury handbag maker, brought in a new vice president to lead its men’s expansion and is opening more U.S. stores that sell to men only as well as locations catering to both genders. Lululemon, known for its $98 women’s yoga pants, said it is revamping its men’s line with “popping stuff.”
American men are spending more on their wardrobes and exhibiting an appetite for accessories. While ladies’ annual apparel sales, at more than $110 billion, are almost double those of gents’ clothes, menswear sales are growing faster.
In the 12 months ended in December, men spent 4.2 percent more on clothes than a year earlier, compared with a 3.1 percent gain for women’s fashion, according to market research firm NPD Group Inc. Celebrity icons like soccer star David Beckham are helping drive the trend, said equities analyst Omar Saad.
“It has become more culturally acceptable for men to explore their metrosexual side in ways that would have once been considered effeminate or unmanly,” said Saad, of International Strategy & Investment Group Inc. in New York.
Ugg, Coach and Lululemon’s ability to attract male customers is creating a larger long-term opportunity than investors realize, Saad said. The brands combined could sell $4.5 billion in goods to men annually by the end of 2016, his firm projects.
Talbots and Liz Claiborne Inc. (LIZ) failed to lure men in the past because the apparel makers were early to the party and because they tried to get their female customers to buy clothes for the men in their lives, he said.
That perpetuated the notion that American men’s brands like Ralph Lauren Corp., PVH Corp.’s Tommy Hilfiger and Abercrombie & Fitch Co. (ANF) could profitably expand into women’s categories while women’s brands couldn’t go the other way.
What these current brands bring to the mix is strong fashion sense and better quality at a luxurious yet still affordable price point, Saad said.
Men’s merchandise makes up 5 percent of Coach’s sales, about 10 percent of Ugg’s and 12 percent of Lululemon’s, Saad said. Those figures could grow to 25 percent, 20 percent and 40 percent respectively over the next five years, Saad projects.
While Ugg-style boots were originally worn in the 1960s by Australian surfers keen to keep their feet warm after battling the waves in the cold Tasman Sea, the brand became popular with the female set. Women, especially in their teens and 20s, have snapped up the “classic” Ugg boot, which is made of sheepskin and features a flat heel and rounded toe. The traditional color is natural brown, and the fuzzy stuff often peeks out the top. Girls have even worn them with shorts in the summer.
Instead of just pushing those on men, Deckers, which is based in Goleta, California, developed versions that show less sheepskin. It’s also touting rugged styles, including leather motorcycle boots. That theme is hammered in the Brady ads. In one commercial, the Patriots quarterback walks about wearing a range of Ugg styles as rapper Mos Def urges: “Have Fun Y’all.”
Two years ago, Coach (COH) hired Greg Unis from Brooks Brothers to spearhead its men’s initiative. The men’s leather goods market is highly fragmented and “we believe we can become the authority,” Unis said in an interview.
Coach’s strategy is to apply its classic styling -- signature burnished leather, hang tags -- to highly functional items such as $218 tablet cases and $398 messenger bags, Unis said. The company is pricing its men’s merchandise lower than that of traditional European luxury brands, Unis said. He notes that Coach already sells 800,000 wallets a year to American men.
“They already know us,” Unis said. “They are carrying us in their back pockets.”
Coach, which is based in New York, sells men’s products in 41 of its North America retail stores, including five free- standing men’s stores. In addition to planning new male-only and new dual-gender stores, the company is creating more men’s shops inside some of its 350 North American stores.
Vancouver, Canada-based Lululemon’s refashioning of its men’s hoodies, pants and running accessories line with “big, popping stuff” will really start to hit this summer, Chief Executive Officer Christine Day said on a Dec. 1 call. That work is “what I’m most excited about,” she said.
Men’s merchandise could add $1.14 a share annually to Coach’s profit, or an extra 39 percent, by the end of 2016; $1.57, or 32 percent, to Ugg’s; and $1.49, or 129 percent, to Lululemon’s, Saad projected. He recommends buying the three companies’ shares.
Men’s fashion is potentially more profitable than women's. Ugg men’s footwear, for example, could become a higher-margin line because men’s shoe styles typically are evergreen and don’t need reinventing each season, according to Diana Katz, a New York-based analyst with Lazard Capital. Plus, she said, they require less sheepskin to make.
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