Deckers Outdoor: HOKA Trend Catapults Stock Price to New Heights

Shares of Deckers Outdoor have been among the top performers in the stock market this year, experiencing an impressive 95% increase in value. At the core of this success story is the HOKA brand, known for its running and hiking shoes, which has now also ventured into the lifestyle sector. The company's recent financial results emphasize this trend with strong growth and significantly improved profitability. Deckers Outdoor, originally famous for its sheepskin UGG boots, also owns the Teva label alongside HOKA. The acquisition of HOKA in 2012 for $1.1 million has proven to be a complete success. It is now expected that HOKA will generate over $2 billion in revenue this year. The shoes are characterized by a unique design and innovative cushioning techniques, which sustains their popularity, especially among professional athletes. In the first quarter of fiscal year 2025, which ended on June 30, Deckers Outdoor's revenue increased by 22%, led by an impressive 30% rise in HOKA sales. This positive development also contributed to an 88% increase in earnings per share. The UGG brand grew by 14%, while the smaller brands Teva and Sanuk remained more volatile. For the entire fiscal year, the company expects revenue of $4.7 billion, an increase of 10% compared to the previous year. Additionally, a slight growth in earnings per share between 2% and 5% is projected. This solid position is supported by a debt-free balance sheet with $1.4 billion in cash, and the company is actively repurchasing its own shares. At a time when leading players in the footwear and apparel industry, such as Nike and Lululemon Athletica, are complaining of declining demand, Deckers Outdoor appears particularly resilient. The plans for international expansion and entry into new product categories like apparel highlight the potential seen by the company in strengthening its brand. Deckers' diversification strategy, which extends beyond HOKA and uses the UGG brand as an independent growth source, is highly attractive from an investor's perspective. In the long term, this strategy could evolve from a pure footwear brand into a lifestyle portfolio, further boosting the stock price. Deckers shares trade at a price-earnings ratio of 30 for the whole year. Although this appears more expensive than peers like Nike and Lululemon, the financial fundamentals and growth potential are compelling. A comparison with On Holding, a competitor of HOKA, casts Deckers in a positive light, with On Holding being valued at a higher P/E ratio.