It may be UGG season in much of the U.S., but it has been Deckers Brands' (NYSE: DECK) HOKA banner that has helped the stock gain 75% over the past year. The footwear company has been a huge winner in the past decade, up more than 1,000% due to the popularity of those two main brands.
More recently, Deckers stock surged on the back of strong earnings results and increased guidance. Let's look at the company's most recent quarterly results to see if its momentum can continue.
HOKA continues to run away from the competition
In perhaps one of the best-ever acquisitions in the footwear and apparel space, Deckers bought running shoe brand HOKA in 2012 for the bargain price of $1.1 million. Last quarter, HOKA revenue jumped 35% year over year to $570.9 million as the brand surpassed $2 billion in annual revenue.
Its popular Clifton and Bondi running shoes continue to see strong growth, while new product introductions, such as Skyflow and Mach X2, have also been well received. International revenue growth, meanwhile, outpaced growth in the U.S. The company continues to work to build awareness in international markets, and it has an increasing retail presence in major cities such as Tokyo, Paris, London, and Shanghai.
While Deckers' UGG brand has been around a long time, it also continues to show strong growth, helped by introducing new seasonal colors and complementary silhouettes. For the fiscal 2025 second quarter (ended Sept. 30), UGG sales rose 13% year over year to $689.9 million. International sales led the way, helped by lean inventory management to drive demand.
Overall revenue climbed 20% to $1.31 billion, while earnings per share (EPS) rose 39% to $1.59. That topped analysts' estimates for EPS of $1.24 on revenue of $1.20 billion.
Domestic sales rose 14% to $853.9 million, while international sales climbed 33% to $457.4 million.
Both direct-to-consumer and wholesale revenue rose approximately 20%. The company said retailers were working to get both HOKA and UGG products on their shelves earlier than in past years, given the strong demand for the brands. The holiday season is the largest and most important for UGG, especially as a cooler weather brand.
Gross margin improved by 250 basis points in the quarter to 55.9%. The company credited this to a higher mix of HOKA sales, which are higher-margin, and sales of higher-margin products within the UGG product line.
Deckers has a pristine balance sheet with $1.23 billion in cash and equivalents and no debt. Inventories, meanwhile, grew less than sales, up 7% to $777.9 million. This is yet another sign of a healthy, well-positioned footwear company.
Looking ahead, Deckers projected full-year sales to grow 12% to $4.8 billion, up from a prior outlook of 10% growth to $4.7 billion. It expects gross margin to be between 55% and 55.5%, up from a previous view of 54%. It projected EPS in a range of $5.15 to $5.25, up from $4.96 to $5.11 after taking into account its recent 6-for-1 stock split.
Image source: Getty Images.
Is Deckers stock still a buy?
HOKA continues to be the core growth driver for Deckers, and the company is expanding the brand into adjacent categories beyond running, such as trail, fitness, and lifestyle. Meanwhile, management plans to upgrade its popular Bondi and Clifton styles early next year. While HOKA has become a $2 billion brand, Deckers still has a lot of room to grow brand awareness both internationally and in the U.S.
The UGG brand, meanwhile, continues to be a strong performer year in and year out. The company's classic boot has become a core staple with a solid replenishment cycle, while it changes up colors and silhouettes to keep up with trends and drive growth.
Turning to valuation, Deckers stock trades at a forward price-to-earnings (P/E) multiple of 27. That's just above a struggling Nike and well below On Holding, which makes its own popular running shoe.
Data by YCharts.
While Deckers may not qualify as a bargain, the stock is still attractive given the strength of its core brands. Meanwhile, the company is flush with cash, giving it options to invest in growth or buy back stock. While I'd prefer to buy the stock on a dip, it has all the potential of long-term winner.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool recommends On Holding. The Motley Fool has a disclosure policy.
