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Deckers Outdoor Soars on Strong Q4 Performance, ON Running Also Impresses

Deckers Outdoor (DECK) is celebrating an all-time high in its stock price, surging 13% to $1,027.00 on Friday following robust fourth-quarter earnings that exceeded expectations. 

This performance underscores the company's successful strategy in capitalizing on the softening demand experienced by traditional footwear giants like Nike (NKE) and Under Armour (UAA). Deckers' standout brands, Hoka and Ugg, continue to drive impressive growth, a trend mirrored by competitor On Running (ONON), which also posted strong quarterly results.

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Deckers Outdoor's Impressive Q4
Deckers' Q4 results highlighted a 21.2% year-over-year revenue increase, reaching $959.76 million. This growth was primarily driven by its Hoka and Ugg brands, which together accounted for over 93% of the quarter's total revenue. Hoka's sales soared by 34%, while Ugg saw a 14.9% increase, effectively countering declines in the Teva and Sanuk brands.

The company's direct-to-consumer (DTC) strategy played a significant role, with DTC net sales climbing 21.0% year-over-year. This channel's strength is a stark contrast to Nike's struggles in the DTC space, where its attempts to boost margins backfired, underscoring Deckers' adept management of its sales channels. Wholesale revenue also grew by 21.4%, reflecting balanced growth across different segments.

Deckers reported an adjusted earnings per share (EPS) beat, continuing its trend of exceeding expectations by over a dollar per share for the third consecutive quarter. For FY25, Deckers provided guidance for EPS between $29.50 and $30.00 and revenue of $4.70 billion, despite some margin pressure due to a more promotional market environment.

ON Running's Strong Start to FY24
Two weeks ago, On Running (ONON) also delivered impressive Q1 results, with a 20.9% year-over-year revenue increase to CHF 508.2 million, surpassing its own forecasts. This growth was fueled by robust demand, particularly in the Americas, where revenue surged 22.0%, and in Asia Pacific, which saw a 68.6% increase. The company also raised its FY24 revenue outlook to CHF 2.29 billion from CHF 2.25 billion, citing sustained demand and easing foreign exchange headwinds.

ON Running's focus on its DTC channel paid off, with a significant 500 basis point increase in DTC sales, which now represent 37.5% of total revenue. This growth was supported by the launch of its first commercial app and a tripling of its membership count over the past two years. Wholesale revenue, while growing at a slower pace of 12.2% year-over-year, is expected to pick up as the company shifts focus to its premium brand strategy.

Competitive Landscape and Future Outlook
Both Deckers and On Running are capitalizing on a market shift where consumers seek fresh designs and are willing to spend more on performance footwear. Deckers' success is largely attributed to its ability to maintain high demand for its Hoka and Ugg brands, even as it transitions leadership from CEO Dave Powers to CCO Stefano Caroti on August 1. Given the company's track record, Caroti is expected to continue leveraging Deckers' core strengths to drive growth.

On Running, meanwhile, is solidifying its market position by focusing on innovative products and a strong DTC presence. The company's growth across diverse geographic markets, especially in Japan and the broader Asia Pacific region, underscores its potential for continued expansion.

Conclusion
Deckers Outdoor's stellar Q4 performance and On Running's strong start to FY24 highlight the dynamic nature of the footwear industry, where strategic brand management and consumer-focused innovation are key drivers of success. As Deckers continues to leverage its Hoka and Ugg brands and On Running capitalizes on growing demand and an expanding DTC channel, both companies are well-positioned to maintain their upward trajectories amid shifting market conditions. Investors watching these stocks can take confidence in their robust performance and strategic growth plans.


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