Wedbush analysts said Friday that Deckers Outdoor Corp.’s most recent quarter has made the battle between the company and the footwear industry more unfair than Kendrick vs. Drake.
Tom Nikic and Matt Quigley, two analysts, were talking about the recent fight between the two rappers. They have been at odds with each other since the early 2010s. In the past few months, the fight got worse when both artists put out diss tracks that included abuse claims. Along with other things, Lamar has won the Pulitzer Prize.
In a note sent to clients on Friday, analysts said that the parent company of the Ugg and Hoka brands had another strong performance for its fiscal first quarter. It beat sales and profit expectations by large amounts and increased its per-share earnings for fiscal 2025.
The analysts wrote, “Overall, we remain buyers of the name, given still conservative FY25 guidance (conservative sales and margin assumptions could lead to more beats-and-raises), best-in-class momentum at Hoka, and continued strength at UGG.” They kept their outperform rating on the stock, which is the same as “buy,” and set a price target of $1,030, which is 22% more than its current price.
The stock price of DECK 7.59% went up 8% as investors were happy with the numbers and the company’s claim that customers are happy to pay full price for its famous shoes around the world.
Analysts said that Hoka’s 30% sales growth and 33% increase in direct-to-consumer sales were better than expected. The 33% increase in DTC sales was a “significant” speedup from the 22% growth seen in the fourth quarter.
People like both the classic styles (Clifton and Bondi) and the new ones (Cielo and Skyward X). “They are having strong growth internationally, which is helped by the DTC buildout in Asia.” After the crazy 42% growth in Q4, wholesale grew 28%, which was a more “normalized” level, the note said.
Average growth for Ugg sales was 13%, but they went up 14% instead. Wholesale sales went up 18%, which helped. Direct-to-Consumer sales went up by 8%.
Analysts said, “Core styles like the Tasman continued to do well, but what may be most interesting is that the brand saw strength in new categories like sandals. Four silhouettes from “The Golden Collection” were in the top 10 best-selling items in the quarter.”
“All in all, it looks like UGG is getting a piece of the sandal market.”
The era of Dave Powers is coming to an end, according to analysts at Stifel. Powers joined the company in 2012 and became CEO in 2016. He will be retiring on August 1.
Powers will be replaced by Stefano Caroti, who is currently chief commercial officer.
With the shares reflecting a 30 times price/earnings multiple on the high end of fiscal 2025 EPS guidance, (Caroti) “inherits lofty expectations,” wrote Stifel analysts led by Jim Duffy.
“Hoka growth rates hold the key to the multiple given the premium
assigned to performance brands,” the analysts wrote. “Hoka is approaching a $2 billion run rate and we believe the multiple underwrites expectations for 25% plus growth (an incremental $500mn plus annually).”
However, given the slowing consumer backdrop and increasingly competitive performance running category, “this is a high hurdle to sustain,” they wrote.
Stifel has a hold rating on Deckers’ stock, but raised its stock price target to $887 from $825.
Raymond James agreed that Hoka is benefiting from “brand heat,” product diversification and growing awareness and distribution, “which is driving scale.”
And Ugg is progressing too with innovation helping while an intentional strategy of product scarcity is also keeping demand high, said analysts Rick Patel and Josh Reiss.
Raymond James has an outperform rating on the stock and $1,100 stock price target.
Deckers’ stock has gained 36% in the year to date, outperforming the S&P 500’s SPX 1.17% 14% gain.
