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Deckers Marches Ahead of Industry: Rises 75% in 6 Months

Zacks Equity Research
·4 min read

Deckers Outdoor Corporation DECK is one of the top-notch performers amid the COVID-19 jitters, courtesy of its sound fundamentals and growth efforts that reinforce its position in the ultra-competitive environment. The company’s focus on expanding brand assortments, introducing more innovative line of products, targeting consumers digitally and optimizing omni-channel distribution bode well.

Impressively, shares of this designer, marketer and distributor of footwear, apparel, and accessories have climbed 75.3% in the past six months compared with the industry’s rally of 53.2%. This Goleta, CA-based company has also comfortably outperformed the S&P 500 Index that has advanced 26.2% in the same time frame.

Further, the stock hit a new 52-week high of $251.52 on Oct 9. There is a likelihood that Deckers with a long-term earnings growth rate of 16.9% can attain new highs. A Growth  Score of B highlights this Zacks Rank #2 (Buy) stock’s upside potential.

 

Let’s Introspect

In keeping with the changing trends, Deckers has been constantly developing its e-commerce portal to capture incremental sales. The company has made substantial investments to strengthen its online presence and improve shopping experience for its customers. The company’s direct-to-consumer business was robust throughout first-quarter fiscal 2021 driven by the strong consumer demand for its brands online.

In fact, 49% of net sales came from direct-to-consumer channel, heavily skewed toward e-commerce. We note that direct-to-consumer net sales jumped 74.2% driven by online growth in both the UGG and HOKA ONE ONE brands. The UGG brand registered a 53% increase in its direct-to-consumer business with e-commerce helping in recouping much of the lost volume on account of owned retail store closures. HOKA ONE ONE witnessed triple-digit revenue growth in its direct-to-consumer business due to a rise in customer acquisition year over year. Further, the expansion of the brand internationally bodes well.

Recently, HOKA ONE ONE made a four-year agreement with the running team Northern Arizona Elite to support the club's athletes and infrastructure. Also, UGG and Zappos.Com teamed up to launch UGG UNIVERSAL, the inclusive footwear collection. Going ahead, management will continue making investments in the brands and increase awareness about the same to boost global growth. Moreover, the company is focusing on expanding its product categories according to the customer-purchasing trends that differ with weather. With people largely staying at and working from home owing to the coronavirus pandemic, demand for casual and comfortable shoes to wear indoors has increased. In this regard, the company’s Fluff and Oh Yeah styles resonate well with customers.

Wrapping Up

Deckers’ restructuring efforts to realign brands, optimize retail-store fleet, and consolidate management and operations bode well for long-term growth. Strength in the company’s HOKA ONE ONE label and direct-to-consumer channel including e-commerce will continue helping the company navigate through these turbulent times.

More Key Picks

NIKE, Inc. NKE has a long-term earnings growth rate of 16.7% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Caleres, Inc. CAL, a Zacks Rank #1 stock, has a trailing four-quarter earnings surprise of 21%, on average.

Wolverine World Wide, Inc. WWW has a long-term earnings growth rate of 10% and a Zacks Rank #2.

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