Opinions
Stockchase Insights
Deckers Outdoor Corp.
DECK-N
BUY ON WEAKNESS
May 26, 2025
Stock price when the opinion was issued
You might be interested:
They just reported Q3: the largest and most profitable in history, beating sales, all-time high gross margins of 60%, and a strong EPS beat. Their brands did well, like Hoka up 23.7%. But then management gave a disappointing forecast for this quarter only 1% revenue growth (11% previously) with Ugg sales to decline and earnings -55% YOY. The strong momentum they had will end, disappointing the street. The stock was priced for perfection. Problem was that Ugg sold so well over holidays that this brand is now sold out. Also, Hoka's growth is slowing; Hoka is a big reason why people own these shares, but such growth expectations are too high. Sales of Hoka should normalize after they restock. Plus, the company has several big launches coming, and have $2.2 billion in cash and zero debt.
Leading footwear and apparel, founded 1973. Explosive growth in running shoes segment. Highly profitable lifestyle brand UGG boots. Very disciplined inventory management.
Direct-to-consumer channel very strong and driving margin expansion. Global demand for premium footwear is rising, this name can capture that market share. Robust balance sheet, good management execution. Sees ~15% earnings growth.
Short-term comments and guidance caused stock to drop to the 200-day MA, but he's not worried longer term. Good chance to buy a quality name. No dividend.
They report Thursday. In the shoe business, Skechers got a bid to go private, On Holdings delivered a super quarter, and Dick's Sporting Goods paid nearly twice the price to buy Foot Locker. Deckers are excellent operators. Their last quarter disappointed, partly because one of their brands ran out of inventory. He doesn't expect another weak quarter. Buy ahead of their report.
EPS of $1.00 beat estimates of 59c; revenue of $1.02B beat estimates of $1.00B. EBITDA of $215M beat estimates of $127.1M. But DECK provided a weak next-quarter forecasts and declined to provide a full-year forecast due to economic/tariff uncertainty. Deckers' fiscal 1Q sales view for 7.8-10.3% growth could still prove conservative given better-than-expected 4Q results, with sales up by mid-single digits on stronger performance at Ugg. Any upside hinges on Hoka momentum persisting globally and reaccelerating in the US. Hoka is forecast to rise by low-double digits, with Clifton 10 and Bondi 9 launches driving demand, while Ugg's spring styles and growing men's traction could support mid-single-digit brand gains. Gross margin rose 50 bps in 4Q amid higher levels of full-price selling for Ugg, yet persistent freight headwinds, channel mix shifts and higher promotions may weigh on 1Q margin. That, coupled with tariff impacts, could drag gross margin down 250 bps in 1Q. Pricing and cost actions to mitigate pressure may begin to aid margin in 2H. The big decline on Friday brings the year to -50%, and valuation to 16X earnings. Cash flow remains good. It has a strong balance sheet. We would be getting more interested here into any more declines.
Unlock Premium - Try 5i Free