Deckers Outdoor (DECK), the parent company of Hoka and Ugg, impressed investors with a stellar fiscal second-quarter performance, driven primarily by surging demand for Hoka athletic shoes.
Reporting a 20% increase in revenue year-over-year to $1.31 billion, Deckers significantly exceeded market expectations. The strong earnings, alongside a raised revenue forecast for the year, sent Deckers shares up 13% to $172.57 in early Friday trading.
Hoka, the brand that’s taken the running category by storm, reported nearly 35% growth to a record-breaking $579.9 million in quarterly sales. Similarly, Ugg, a longstanding staple in Deckers’ portfolio, posted a healthy 13% rise in sales, contributing to the company’s sustained growth momentum. Dana Telsey of Telsey Advisory Group highlighted Deckers' success, emphasizing that the company’s well-diversified brand portfolio and innovative product offerings have allowed it to thrive even amid a challenging retail landscape.
Expanding Margins and Conservative Outlook
While Deckers continues to gain share in a competitive retail environment, its growth has been accompanied by an improvement in profitability. Deckers reported a gross margin of 55.9%, up from 53.4% the prior year, attributed largely to the premium positioning of Hoka and Ugg. In contrast, competitors like Skechers have resorted to price cuts, which saw their gross margins dip. Deckers’ conservative approach to guidance, which analysts note often understates future potential, anticipates a 12% revenue increase for fiscal 2025, or approximately $4.8 billion, slightly below Wall Street estimates.
Investors are optimistic that Deckers' historically cautious guidance may ultimately result in higher-than-forecasted growth. Telsey Advisory Group raised its price target to $190, asserting that Deckers’ robust brand portfolio, particularly Hoka, positions the company well to capture further market share from competitors like Nike (NKE).
Strong Demand Across Channels and Geographies
The appeal of Deckers' footwear extends beyond domestic borders, with international revenue surging 33% year-over-year to $457.4 million. Domestically, Deckers reported a 14.2% revenue increase to $853.9 million, showcasing strength across both direct-to-consumer (DTC) and wholesale channels. DTC sales grew nearly 20%, underscoring the efficacy of Deckers’ multi-channel approach and its ability to reach consumers worldwide.
Deckers Outdoor has now surpassed earnings and revenue expectations for twelve consecutive quarters, cementing its position as a top performer in the athletic and casual footwear market.
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