Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.

This week, a particularly interesting request concerned a U.S. retailer with a reputation for quality. Deckers Outdoors has many popular brands, but it is contending with a highly competitive market.

Q: Pat: What is your recommendation on Deckers Outdoor? Thanks.

A: Deckers Outdoor Corp., (symbol DECK on Nasdaq, www.deckers.com), designs, makes and sells high-quality footwear. Its shoes are mainly sport sandals and footwear made from sheepskin and natural “sustainable” materials.

Deckers sells its three main brands — Teva, UGG and Simple — through domestic retailers and international distributors. It also sells directly to consumers through its web site, catalogues and outlet stores. The company gets 54% of its sales from the U.S.

In the second quarter of 2011, sales rose 12.5%, to $154.2 million from $137.1 million a year earlier. Sales of UGG shoes (which accounted for 70% of the company’s total sales) rose 8.0%, and sales of Teva shoes (26% of sales) jumped 29.1%. Sales of other brands, which account for 4% of the company’s sales, rose just 0.4%.

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Growth stocks: Deckers makes a profitable acquisition

Even with the higher sales, Deckers lost $7.3 million, or $0.19 a share, in the quarter. That’s mainly because the company now sells its products in the U.K. and France directly to retailers instead of using independent distributors. The costs stemming from this switch were the main reason for the loss. A year earlier, the company earned $9.0 million, or $0.23 a share.

In July 2011, Deckers paid $126.6 million for Sanuk, which makes flip-flops and beach sandals. Sanuk is profitable, and will add $43 million to this growth stock’s annual revenue. It will also add to the company’s lineup of summer footwear.

Footwear is a fickle and ever-changing market, but Deckers aims to keep its brands competitive.

You can see Pat’s recommendation on Deckers Outdoor and his analysis and recommendations on other stocks Inner Circle members asked about in this week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.

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