Deckers Outdoor (DECK) has crushed the S&P 500 (SPX) for a long time, logging a 588% gain over the past five years (versus 90% for the SPX in the same time frame). The footwear company is also up by 42% year-to-date and looks poised to go on a solid run. The company’s fast growth compared to competitors (implying rising market share) and strong financials make it a stock that can continue to outperform. Plus, it can receive extra momentum from an upcoming stock split. Thus, I am bullish on DECK stock.
Deckers Outdoor Is Speeding Up
Deckers Outdoor reported promising earnings to start Fiscal 2025. Revenue increased by 22% year-over-year to reach $825.3 million, while net income jumped by 82% year-over-year. Good earnings reports like that one are bound to draw attention, and a 30x P/E ratio makes the stock look reasonable, especially with rising profit margins.
HOKA, which sells running shoes and athletic apparel, represented more than half of Deckers Outdoor’s total sales in the first quarter of Fiscal 2025, and it was one of the fastest-growing segments. HOKA sales increased by 29.7% year-over-year in the quarter as the company continued to gain market share from rivals. Deckers Outdoor also has UGG, Teva, and other brands under its corporate umbrella.
Competitors Are Slowing Down
The company’s earnings report is even better when you consider the context. Most of Deckers Outdoor’s competitors aren’t seeing the same level of success, especially the giants within the industry. Nike (NKE) posted a year-over-year decline in revenue in Q4 FY24. Overall sales for the iconic company only inched up by 1% year-over-year throughout all of Fiscal 2024.
Nike isn’t the only competitor that is losing ground to Deckers Outdoor. Adidas (ADDYY) and Lululemon (LULU) both reported positive revenue growth, but their growth rates paled in comparison to Deckers Outdoor.
This contrast is important for investors to follow. This indicates that Deckers Outdoor is winning over more customers. If Deckers Outdoor continues to gobble up more market share, it can become one of the leaders in the footwear industry.
The Sanuk Sale Frees Up More Time and Capital
Most of the Deckers Outdoor brands continue to grow year-over-year, but there have been two exceptions. Teva sales decreased by 4.3% year-over-year, resulting in $46.3 million in total revenue. The low growth rate is manageable and easier to recover from, but the same can’t be said about Sanuk.
Deckers Outdoor reported that Sanuk brand net sales decreased by 28.4% year-over-year. Luckily, $6.8 million makes up a small portion of total sales, but Deckers Outdoor recently decided to sell off the company to Lolë Brands. It’s a smart move that will free up Deckers Outdoor’s time and capital to focus on other initiatives.
Even if Lolë Brands can bring Sanuk back to growth, it’s evident that Deckers Outdoor wasn’t able to get the job done. Now, it can focus on its successful brands like HOKA, UGG, and its smaller companies.
The “Other Brands” Segment Is Also Picking Up Momentum
HOKA sales are the main storyline for any Deckers Outdoor earnings report. However, the Other Brands segment is also encouraging. This component of the Deckers Outdoor business grew by 123.5% year-over-year to $4 million, primarily led by Koolaburra net sales.
Deckers Outdoor can focus on these brands, thanks to the Sanuk sale, and possibly maintain a high growth rate for several years. While Other Brands represents a small portion of total sales (less than 1%), it can become sizable by the time HOKA sales slow down in a meaningful way.
An Upcoming Stock Split Can Drive More Attention to the Stock
The trend of stock splits remains strong this year, and Deckers Outdoor is getting in on the action. Leadership announced a 6-for-1 stock split that will take effect on September 9. The stock split makes sense since Deckers Outdoor has previously traded above $1,000 per share.
While stock splits do not boost a company’s intrinsic value, they bring more attention to the stock. Deckers Outdoor benefited from the extra attention it received when it became a member of the S&P 500 earlier this year, so the same thing can happen with the stock split.
Is Deckers Outdoor Stock a Buy, According to Analysts?
Deckers Outdoor is currently rated as a Strong Buy on TipRanks based on 12 Buys and four Holds assigned by analysts in the past three months. The average DECK stock price target of $1,081.57 implies 13.8% upside from current levels, but some analysts are more optimistic than others. The highest price target of $1,350 implies that the stock can rally by an additional 42%.
The Bottom Line on Deckers Outdoor Stock
Deckers Outdoor has an opportunity to generate sizable returns for long-term investors. The company continues to post impressive revenue and net income growth while its competitors are decelerating. Some competitors are trying to maintain their market share, while others are losing ground.
Nike’s declining sales, in particular, create an opportunity for Deckers Outdoor and other competitors. Deckers Outdoor, in fact, is well-positioned to capitalize on this due to its attractive valuation and the robust growth rates of its brands like HOKA, UGG, and others. Additionally, the Sanuk sale should open up more time and capital for the company to commit to growth opportunities.
