Key Takeaways
- Deckers shares fell 5% today after its second-quarter sales of $1.48 billion missed the $1.51 billion analysts expected, and it cut its full-year sales outlook to $5.70 billion to $5.73 billion.
- Deckers chose not to match rivals’ discounts in US athletic footwear, which helped its margin but cost it sales on its own websites and in its own stores.
- About $0.52 of Deckers’ raised full-year EPS range of $7.80 to $7.95 comes from tariff refunds that it doesn’t expect to get again.
- The stock now trades close to its lowest forward earnings multiple in five years, so a lot of lost share is already priced in.
Deckers Outdoor (DECK) is down 5% today after missing on sales and cutting its full-year sales outlook after Thursday’s close.
The reason is a choice. As CEO Stefano Caroti said on Deckers’ second-quarter call:
“In the US, we saw promotional activity increase throughout the quarter, particularly in athletic footwear, which weighed on our US e-commerce performance as we maintained full-price discipline.”
Rivals slashed prices, and Deckers didn’t follow.
What exactly happened
Sales for the quarter ended Sept. 30 rose 3.5% to $1.48 billion, short of the $1.51 billion analysts expected:
- HOKA rose 6.8% to $677.2 million, and UGG 3.5% to $786.4 million.
- Wholesale sales grew 5.5%, and international sales 9.0%.
- But direct-to-consumer comparable sales fell 6.4%.
Deckers now expects $5.70 billion to $5.73 billion in sales for the year ending March 2027, below the $5.88 billion analysts expected. That’s growth of 4% to 5%, after 16% and 10% in the two years before…
And it guided third-quarter EPS to $3.52 to $3.60, below the $3.70 analysts expected.
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The discipline shows up in the margin
Gross margin jumped to 60.5% from 56.2%. Tariff refunds added about 3.1 points, but the underlying margin still rose about 1.2 points on full-price selling…
The refunds also make the raised full-year EPS range of $7.80 to $7.95 look better than it is: about $0.52 of it comes from refunds Deckers isn’t counting on again.
Holding prices costs Deckers share. Caroti said it can lose share at “the more compressed price points below $120, where the competition is greater.”
Priced like the growth is over
Deckers traded at about 11x forward earnings at Thursday’s close, around half its five-year average of 21x. After today’s drop, it’s closer to 10x, right around its five-year low.
Wall Street is split. Piper Sandler downgraded the stock to Underweight this morning with a $75 target, while UBS kept its Buy rating and a $137 target.
My take: holding the line on price is the right call for a premium brand, and this multiple already prices in a lot of lost share. Deckers has no debt and $1.21 billion of cash. Its outlook assumes $1 billion of buybacks this year, and that money goes a lot further at 10x earnings.
Of course, the holiday quarter is the real test. If US direct sales keep shrinking through it, that discipline starts to look a lot more like lost share.
So what is Deckers stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
