Deckers Outdoor (DECK) is a top-performing stock, having gained 568% over the past five years. However, the shoemaker is likely to march even higher following its strong financial results for this year’s third quarter. Growth expanded across multiple segments while Deckers Outdoor once again reported higher profit margins. For these reasons, I am bullish on DECK stock.
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Growth Rates Continue to Impress
Impressive financial results are a reason to be bullish on Deckers Outdoors. The first thing I typically look for in an earnings report is the company’s revenue and net income growth rates. Deckers delivered good results on both of these fronts.
Revenue increased by 20% year-over-year to reach $1.31 billion. These gains come as rivals such as Nike (NKE) continue to lose ground. Lululemon (LULU) also posted positive year-over-year revenue growth, but that company only posted a mid-single-digit growth rate.
Deckers is outpacing many of its rivals while delivering higher profit margins. The firm reported 36% year-over-year net income growth, ending the quarter with $242.3 million in profits. That growth helped Deckers Outdoor notch an 18.5% net profit margin. Growth is expected to continue as Deckers raised its full-year revenue and EPS guidance. Revenue is expected to reach $4.8 billion while full-year EPS should range from $5.15 to $5.25 per share.
HOKA Running Shoes are Red Hot
The HOKA brand is carrying Deckers Outdoor to new heights and makes up almost half of the company’s revenue. Seeing this part of the business report a 34.7% year-over-year growth rate should be taken as a bullish sign by investors and is a reason I am positive on the stock.
As HOKA sales remain strong, it will have an outsized impact on the company’s financials. For instance, HOKA’s year-over-year revenue growth exceeded the company’s overall growth rate by 14 percentage points. HOKA isn’t the only successful brand under the Deckers Outdoor umbrella. UGG casual footwear grew by 13% year-over-year, generating $689.9 million in revenue.
The remaining brands only generated $50.6 million in the second quarter of fiscal 2025. Sanuk brand sales came to$2.8 million, but Deckers Outdoor recently sold off that part of the business. A deceleration in HOKA sales growth would change the bullish thesis, but right now, growth remains red hot.
The Running Boom is Growing
More people have taken up running since the Covid-19 pandemic, and that’s yet another reason to be bullish on Deckers Outdoor. The running boom is a bullish indicator for me as runners have to buy sneakers more frequently than people who don’t run. Running clubs are popping up in more locations, and many existing clubs are seeing an influx of members. This development will result in people running more miles, which is a great development for Deckers Outdoor.
Big marathons are also growing. The Berlin Marathon attracted 58,212 runners this year compared to 48,000 runners in 2023. The number of New York City Marathon finishers rose sharply from 47,745 people in 2022 to 51,348 in 2023.
Marathon runners aren’t afraid to spend money on good sneakers, gear, and athletic apparel. Deckers Outdoor may have more flexibility when charging higher prices for future products if it continues to establish itself as a top choice among elite and professional runners. It also has a wide range of products that cater to a wide range of runners, such as marathoners, mid-distance runners, and sprinters.
Is Deckers Outdoor Stock a Buy?
Deckers Outdoor is currently rated as a Moderate Buy among 18 analysts. The stock has received nine Buy ratings and nine Hold ratings. None of the analysts covering DECK stock rated it as a Sell. The average DECK price target of $185.79 implies 10% upside from current levels. The highest price target of $232 suggests a 38% upside from current levels. The most bearish price target of $150 per share suggests a potential 11% downside risk.
Read more analyst ratings on DECK stock
Conclusion
Deckers Outdoor is benefitting from the current running boom. The HOKA brand has a wide range of products that cater to runners looking for specific solutions, such as long-distance sneakers, marathon race-day sneakers, and spikes for the track. Deckers Outdoor has delighted investors again with impressive financial results and it looks like the good times will continue. As such, I am bullish on DECK stock.
