Can Deckers maintain growth? (Symbol image, photo: Frederik, Wayhomestudio)
Deckers Outdoor Corporation competes with well -known shoe brands such as Nike, On Holding and Skechers. But the success story of Decker’s outdoor is unique. While Deckers outdoor Over the past 10 years for shareholders, a return of 27 percent per year has only been able to keep up as a challenger since the 2021 stock exchange debut. Over a period of more than 10 years, the annual return of Skechers was 11.5 percent.
Nike, on the other hand, as a renowned global brand and favorite of many investors, has a significantly weaker development with only 6.4 percent per year and is also behind the MSCI World. What is the secret of Deckers Outdoor’s success? Or is it a question of fashion trend?
Focus on performance and lifestyle shoes
Deckers Outdoor specializes in the design, marketing and distribution of performance and lifestyle shoes. The California company, founded in 1973, currently includes a portfolio of well -known brands such as UGG, Hoka, Teva and Koolaburra. However, Deckers intends to concentrate on the 2 main brands UGG and Hoka. Therefore, Koolaburra is also to be sold a few months after the sale of Sanuk.
94 percent of the income already comes from UGG and Hoka
The two main brands UGG and Hoka already generate 94 percent of the total income. They are also the most margin products. The warm lamb and sheepskin boots of UGG remain the highest sales brand with around $ 2.2 billion.
However, Hoka is the growth star. The popular running shoe brand has more than tenfold within 6 years from $ 132,688 to $ 1.8 billion! Hoka has successfully positioned itself as a serious competitor to Nike, Adidas and on Running in the premium running division. Hoka wins market shares from competitors.
Two -track sales strategy with a focus on direct sales
In addition to classic wholesale with department stores and specialist dealers, Deckers also pursues direct sales via their own shops and online stores. The strategic change towards direct sales has led to the more margin sales sales and contributed significantly to profit growth. Deckers Outdoor counts 164 retail stores worldwide. Two thirds of sales are achieved in the USA.
However, international growth is steadily increasing. While sales in the USA increased by 14 percent in 2024, the company grew by 33 percent internationally. The same applies to sales via direct sales. Although around 57 percent of sales are still generated by wholesale, growth via direct sales is at the center of strategic measures.
The recent numbers have led to a sale of the share
As is well known, Hoka is the most growing product and has been able to grow 50 to 100 percent for years. The ever increasing comparison values now have a growth -damping effect. With “only” 27 percent growth, the curve flattens increasingly. Due to this percentage, investors have a decline in growth and worried that delivery bottlenecks could occur in UGG orders, the share sent at the beginning of the year.
However, investors hide the fact that Hoka continues to conquer market shares and that the company comes up with an exceptional gross margin of 54 percent, an operational margin of 22 percent and a free cash flow of 22 percent. The return on capital is also exceptional and is around 40 percent.
Future challenges
The greatest challenges are to maintain the growth of Hoka and to maintain the brand strength of UGG. There is no castle ditch for Decker’s outdoor. Quality alone is not enough. The competition is hard and extensive. Comfortable, cheaper or better products as well as change in the consumer trend can have a significant impact on the success of the company. Brands such as Nike, Adidas and on Running are strong competitors for Hoka.
Deckers has to invest more in innovation, marketing and new categories in order to protect the market position. Consumer trends are increasingly influenced by social media these days.
Conclusion on Deckers Outdoor
In the rear -view mirror, the course success of Deckers seems logical. The growth was gigantic with Hoka. Now the question arises how much Hoka can continue to grow. The company bundles all resources to concentrate on the two core brands UGG and Hoka. The evaluation of Deckers Outdoor is currently with one Course-profit ratio (KGV) of 22 much more attractive than that of On Holding (KGV 46) or Nike (KGV 40). Growth should also remain in double digits. The recent decline in price could be a purchase opportunity.
Disclaimer:
No investment advice. No call to buy or sell securities.