Turning around a boot brand
Steve’s breakdown: Ugg is the brand and Deckers is the company. A recent interview with the president will give you all the hints needed to pitch the brand. Read on . . .
GOLETA, CA: A little more than a year since stepping into her role as president of fashion lifestyle at Deckers Brands — a position in which she’s leading the Ugg turnaround — Andrea O’Donnell is striking off items on a carefully crafted to-do list.
“It’s well-understood in the industry that today’s consumers are more discerning than ever — they are spending more on experiences and less in retail,” O’Donnell said.
“This means that if you want to connect with them and build a meaningful business, you need a brand that is engaging and product that is beautiful. [That’s why], in the short term, I am very much focused on the brand, what it stands for and how we communicate it.”
After gaining a cultlike following in the early 2000s, Ugg’s softening demand and uneven sales have caused some experts and stakeholders to question its sticking power.
“You have a [label] that grew to prominence as an accessible luxury brand, and the problem is that it is becoming less luxurious and more accessible,” said Susquehanna Financial Group LLLP analyst Sam Poser.
“They recently opened up distribution to Macy’s — a retailer that is in a different [tier] than its [longtime] sellers such as Nordstrom and Dillard’s — and have been sacrificing the brand [image] in order to drive short-term sales.”
O’Donnell, who is well-aware of challenges when it comes to Ugg’s distribution, is already working on reining in retail partnerships. “We continue to reduce our points of wholesale distribution in the U.S.,” she said. “Our intention is to partner strategically with key accounts and only open new points of sale when we will gain access to new customers and elevate the Ugg brand.”
Nevertheless, it may take some time — and significant results — for naysayers to come around. Days after Deckers’ stock took a tumble on its significant third-quarter earnings miss in February, activist hedge fund Marcato Capital Management LP snapped up a 6 percent stake in the firm. The move was widely considered the first big sign, following months of speculation, that Deckers might be on the selling block. The company’s confirmation that it was pursuing strategic alternatives — including a sale or other transaction — came two months later, in April.
Marcato has since upped the ante, sending a letter to Deckers’ board in Junecriticizing the strategic-review process and management’s handling of the Ugg brand, which brings in the lion’s share of the firm’s revenue. Despite the turbulent waters, O’Donnell — who has spent decades in retail, most recently as president of global merchandising for DFS Group Ltd., a multibillion-dollar retailer majority owned by LVMH — said she’s forging ahead with a plan, and she expects to reap dividends in due time.
Here, she talks about doubling Ugg’s revenues, creating innovative product and retail’s woes.
How did you know that joining Ugg was the right move for you?
“I have been fortunate enough to work in many great global businesses and brands during my career, and I’m always attracted by the same things: the people, the culture of the business and the potential of the brand. I have lots of energy— one of my peers at Ugg has nicknamed me ‘the Tasmanian Devil.’ I like to put that energy into making a difference for the people who work for me and in growing brands. Even before I considered this role, I always thought Ugg had huge potential. Not only does it have an iconic product at its heart, but it also has an emotional connection with its customer. This means that the opportunities to grow Ugg are significant, and it is very easy for me to see how we could double the size of the business.”
Describe your management style.
“I work fast, have high standards, and like to deliver great results and quickly. To do this, you need a highly capable team that is clear on their objectives, feels supported and rewarded for their efforts and has fun together. I spend a lot of time creating an environment that achieves this.”
How do you plan to reinvigorate the freshness of Ugg’s product offering?
“[In addition to being] very much focused on the brand [image], I spend the other 50 percent of my time on product. In terms of priorities, we continue to focus on the Classic family. We [also] have plans to grow our men’s line, spring/summer 2017, lifestyle and key categories such as boots in winter. We’re elevating the overall offer: Our customers will have more design, technology and quality in their Ugg product than ever before for the same price.”
What do you view as the biggest challenges and opportunities for the Ugg brand?
“The opportunity is in leveraging the strength of the Ugg brand so that it realizes its true potential. The challenge is in executing the strategy as quickly as possible.”
How are you approaching industrywide challenges such as consumer shifts to digital and heavy promotions?
“We already have a very strong omnichannel business — more than 40 percent of our Ugg business is done through Ugg direct-to-consumer channels, and we have won numerous awards for our customer experience. We’re well-placed to benefit from channel migration. We also continue to believe that consumers will always want to experience the brand, whether that’s through flagship shops or events that allow us to bring the brand to life. We will adjust our investments to reflect these trends.
Global retail is at an exciting inflection point where the landscape going forward will look very different to what we have seen in the past. The winners will be those that develop new capabilities quickly and create cultures where employees have the freedom to be imaginative and creative.”