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Marcato’s Proposal: Close profitable stores. Marcato’s proposal to rapidly shutter profitable locations to reach a store count of fewer than 80 demonstrates a clear lack of understanding of both our business and industry. Marcato ignores the critical importance of Deckers’ omni-channel strategy and retail store presence to effectively engage with the consumer and drive e-commerce sales. Furthermore, a rapid exit from this many stores would require a substantial cash outlay and result in a number of early termination penalties, significantly impacting our profitability.

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Deckers’ retail strategy is designed to support profitability and is an integral component of our omni-channel strategy. Not only do our retail stores elevate the consumer experience for the UGG brand, but they also allow us to showcase our broader product line in order to build a more sustainable, predictable year-round business. Weclosely monitor the performance and profitability of each store. As part of Deckers’ transformation, we have already closed 25 stores in order to focus on our most profitable locations. We are targeting 125 company-owned stores globally, down from 160 stores at the start of fiscal year 2018. By the end of fiscal year 2020, our global retail fleet will contribute 20% or more in four wall operating contribution.

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Marcato’s Proposal: Implement draconian cost cuts and unsustainable margin targets. Marcato’s cuts would return Deckers to dependence on wholesalers and distributors whose own business model is under significant pressure. Diversification, including in our brands and channels, has been and remains a key pillar of our strategy to mitigate risk and grow in a sustainable way. Furthermore, Marcato’s proposed cuts and margin targets would not only require significant closures of profitable stores and the sale of several of our brands, but would also require slashing key talent and innovation, stifling Deckers’ ability to invest in and grow the business and our brands. Simply put, cuts of the magnitude proposed by Marcato would result in Deckers having no pathway to growth.

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Deckers has already taken out significant costs—without compromising growth or innovation in the business. Since we announced the beginning of our restructuring plan in February 2016—well before Marcato disclosed its investment in Deckers in February 2017—we have made significant progress improving our gross profit margin and reducing our spend by improving input costs, shortening product development cycles, rationalizing our retail footprint, consolidating offices and controlling indirect spend. In February 2017, we announced a plan to implement additional cost savings in both cost of goods (COGS) and sales, general & administrative (SG&A) expenses.

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Marcato’s Proposal: Sell our non-UGG brands. Marcato’s push for a sale of all of our non-UGG brands would return Deckers to a more seasonal revenue stream and make Deckers entirely dependent on UGG. Marcato ignores that profits for the non-UGG brands are improving and the value of a diversified portfolio to sustain growth and leverage our foundation. In addition, Marcato would have us sell Hoka One One and give the vast growth opportunity of that brand to someone else, just as Hoka is reaching new consumer segments and target audiences.

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Deckers is strategically investing in our brands to fuel growth and profitability.We are implementing a multi-season product strategy, which increases the year-round utilization of our infrastructure to offset our traditional reliance on the colder months when the UGG brand is in higher demand. To do this, we are focused on delivering a more diversified collection of UGG spring/summer products and UGG Men’s. We are also growing our Performance Lifestyle Group, which consists of Hoka, Teva and Sanuk. This group has posted double digit growth since fiscal year 2014 and demand for these brands is strongest during the months when demand for our Classic boot is low.

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Marcato’s Proposal: Take on significant debt. Marcato believes that Deckers should double its leverage target in a shortsighted maneuver that would significantly reduce our financial flexibility. Increasing debt to Marcato’s proposed level would make it more difficult to manage the near-term headwinds that all retailers face, as well as our seasonal working capital needs. It would also largely prevent us from pursuing attractive opportunities as they arise. Marcato’s proposal, which has led to the demise of many retailers in recent years, is very risky in the current environment and we believe exposes stockholders to excessive risk.

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Deckers has a prudent capital allocation plan to maintain a strong balance sheet. The Deckers Board has a disciplined, prudent approach to capital allocation to ensure that we can successfully manage through the current environment. We are returning capital to all stockholders through our recently announced $400 million stock repurchase plan, the most significant stock repurchase plan in the Company’s history. Additionally, we are using the strength of our balance sheet—together with our profitability improvements—to invest in the highest return opportunities.

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Marcato’s Proposal: Saddle Deckers with weak, unqualified directors. Marcato is proposing to replace highly qualified, proven directors on the Deckers Board with individuals who lack critical experience. Marcato’s nominees are unvetted and unknown. Most have never served on the board of a public company and many have no C-level executive experience. Nearly all of Marcato’s nominees lack retail experience, and certain nominees with retail experience did not work in operating or strategic roles. We believe that the election of any of Marcato’s nominees has the potential to result in a serious setback to the demonstrated progress that Deckers has made in its transformation plan. It would also jeopardize the pace of, and further opportunity for, stockholder value creation.

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Deckers has an experienced Board focused on growing stockholder value. The Deckers Board is composed of nine active and highly engaged directors who are extremely knowledgeable in our business and are holding management accountable for executing on our strategic plan. All Board members are outstandingly qualified, with seven of the nine directors being current or former CEOs, CFOs, COOs or Chief Administrative Officers of major companies. The Board is drawn from many different backgrounds and experiences, and is deeply committed to acting in the best interests of all stockholders. The Board has been—and will continue to be—a significant agent of change to improve Deckers’ performance.