Angel Martinez frequently touts his business expertise in campaign speeches.
Paul Wellman (file)

Angel Martinez, former CEO of Deckers Outdoor Corporation and still the company’s chair, is facing pressure from investors over his campaign to become mayor of Santa Barbara. In an open letter dated June 27, Marcato Capital Management LP, a San Francisco–based investment firm that owns 6 percent of Deckers’ stock, stated that Martinez’s mayoral bid coupled with what it described as a series of “missteps” and the “lack of transparency” about a strategic review at the company has forced shareholders “to question whether the Board will have the appropriate leadership, focus, and urgency” to address its financial challenges.

Deckers, with a current market capitalization of $2.05 billion, reported a net loss of $12.7 million for fiscal year 2017, compared to $34.6 million in net income the prior year, according to the Pacific Coast Business Times. Since 2014, its share prices have dropped from highs of around $100 to now hovering in the low $60s. Martinez retired as CEO in May 2016.

In its letter, Marcato essentially issues an ultimatum, demanding that Deckers sell itself at an attractive valuation or replace its entire board and install a new management team. Marcato says it’s aware of at least six other shareholders who feel the same way. In March, Red Mountain Capital Partners openly pushed the company to explore a sale. “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,” the Marcato letter reads.

According to a Bloomberg market report earlier this summer, Deckers’ Ugg business accounts for about 80 percent of the company’s sales, but Deckers unwisely undercut the value of the sheepskin boot brand by widening its distribution through big retailers like Macy’s and Amazon. “Ugg started as an accessible luxury brand, and now the brand has become much more accessible and much less luxurious,” a financial analyst named Sam Poser is quoted as saying.

Deckers did not respond to the Santa Barbara Independent’s request for comment but previously addressed shareholders’ concerns in a prepared statement: “We appreciate the views of our stockholders. As previously announced on April 25, 2017, our board of directors is reviewing a broad range of strategic alternatives to enhance stockholder value. As always, our board of directors will continue to take actions that are in the best interests of the company and all stockholders.” The company also outlined a plan to improve operating profits by $100 million by fiscal year 2020.

Martinez and his campaign declined to comment for this story.


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