Shares of Deckers Brands (DECK) are sliding after Susquehanna analyst Sam Poser downgraded the stock to Negative, the firm's equivalent of a "Sell" rating, saying he believes the health of the UGG brand is "clearly at risk" after the company introduced a rewards program for customers that he believes will be met with a reaction from retailers of its products.

UGG REWARDS CONCERNS: Susquehanna's Poser downgraded Deckers Brands to Negative from Neutral as he believes the health of the UGG brand is at risk as the company has already started the promotional activity. The analyst noted that ugg.com has introduced $20 rewards certificates that are good in store or online earlier in October. Although the company may not believe the reward program is a promotional action, Poser's checks suggest that the brand's wholesale partners view this as the commencement of a promotional fall season. Therefore, the analyst told investors he foresees this initiative to result in retailers offering the same discounts on UGG items. Further, he pointed out that retailers such as Nordstrom (JWN), Genesco's (GCO) Journeys, and others are likely disturbed by the promotional kickoff and may ask Deckers to pay for the markdowns needed to match the ugg.com reward certificate discounts. Poser said he expects the need to liquidate excess inventory will result in less gross margin improvement than management expects. The analyst reduced his estimates and lowered his price target on Deckers' shares to $49 from $59.

'QUESTIONABLE' DECISIONS: Poser believes Deckers has made many questionable decisions in regard to the UGG brand, starting when it allowed the original Classic Styles to be promoted late last year. Additionally, he said that opening up distribution to Macy's (M) and selling to Amazon (AMZN ) risk making the UGG brand ubiquitous. Macy's has a history of being promotional as needed and is hard to control, he noted. Moreover, Poser thinks the decision to sell UGG directly to Amazon is "exceptionally dangerous" as Amazon will match price on any like item on its Marketplace and it does not appear to be interested in building brands. Allowing the UGG brand to be shared by Koolaburra in the moderate channel is also "dangerous," the analyst contended, saying it opens "more cans of worms."

PRICE ACTION: In morning trading, Deckers has dropped about 6.5% to $57 per share.