Deckers Outdoor Corporation (DECK), a world leader in designing, marketing, and distributing innovative footwear, apparel, and accessories, reported record results during the fiscal year 2024, delivering revenue growth of 18% year-over-year and EPS growth of 51%, underscoring its commitment to maintain exceptional levels of profitability as its brands scale.

The company’s President and CEO, Dave Powers, said, “HOKA and UGG remain two of the most admired and well-positioned brands in the marketplace, each with a robust innovation product pipeline designed to win with global consumers. Looking forward, our talented teams are highly motivated to continue driving towards the long-term opportunities of these iconic brands.”

For the fourth quarter of the fiscal year 2024, DECK reported a net revenue of $959.76 million, exceeding the consensus estimate of $888.80 million. HOKA® brand net sales rose 34% year-over-year to $533 million, and UGG® brand net sales increased 14.9% from the year-ago value to $361.30 million.

Furthermore, the company’s fourth-quarter net income per share came in at $4.95, comfortably beating analysts’ expectations of $2.95.

Following an outstanding performance, DECK expressed confidence in its growth prospects by increasing its fiscal year 2025 guidance. The footwear and apparel giant expects full-year net sales to grow nearly 10% to $4.7 billion. Its gross margin is expected to be approximately 53.5%. In addition, its EPS is anticipated to be in the range of $29.50-$30.

Shares of DECK have surged 42.2% over the past six months and 46.3% year-to-date to close the last trading session at $978.08. However, the stock has declined 3.2% over the past month.

Let’s look at factors that could influence DECK’s performance in the upcoming months.

Positive Recent Developments

On April 29, HOKA launched the all-new Skyward X, the latest addition to its maximalist cushioned performance running shoes. Celebrating new advancements in footwear technology to deliver the signature HOKA cushioning, the Skyward X promises runners an entirely fresh and unmistakably HOKA experience. Such innovative product launches should bode well for the company.

Also, on March 25, AHNU, a division of Deckers Brands, introduced the star of its inaugural capsule, the Sequence 1 sneaker. Inspired by the fusion of performance and style, AHNU enters the market by launching timeless designs incorporating cutting-edge technologies designed for all-day comfort and tailored for forward-thinking individuals.

Solid Financials

For the fourth quarter that ended March 31, 2024, DECK’s net sales increased 21.2% year-over-year to $959.76 million. Its gross profit rose 36.2% year-over-year to $539.48 million. The company’s income from operations came in at $144.26 million, up 36.2% from the prior year’s period.

Additionally, the company’s net income was $127.55 million, or $4.95 per share, an increase of 39% and 43.1% from the previous year’s quarter, respectively. As of March 31, 2024, its cash and cash equivalents stood at $1.50 billion, compared to $981.80 million as of March 31, 2023.

Favorable Analyst Expectations

Analysts expect DECK’s revenue for the first quarter (ending June 2024) to grow 18.8% year-over-year to $802.50 million. The consensus EPS estimate of $3.32 for the current quarter indicates a 37.6% year-over-year increase. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.

Furthermore, for the fiscal year ending March 2025, DECK’s revenue and EPS are expected to increase 11.8% and 6% year-over-year to $4.79 billion and $30.92, respectively. Street expects the company’s revenue and EPS for the fiscal year 2026 are expected to grow 10.8% and 15% from the previous year to $5.31 billion and $35.57, respectively.

Solid Profitability

DECK’s trailing-12-month gross profit margin of 55.63% is 50.5% higher than the 36.97% industry average. The stock’s trailing-12-month EBIT margin of 21.85% is 181.3% higher than the 7.76% industry average. Similarly, its trailing-12-month net income margin of 17.71% is significantly higher than the 4.86% industry average.

Moreover, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 39.22%, 26.69%, and 24.22% favorably compared to the industry averages of 11.55%, 6.36%, and 4.21%, respectively. Its trailing-12-month levered FCF margin of 18.62% is 241.63% higher than the industry average of 5.45%

Elevated Valuation

In terms of forward non-GAAP P/E, AVGO is trading at 31.63x, 102.4% higher than the industry average of 15.63x. Likewise, the stock’s forward EV/Sales and EV/EBITDA of 4.93x and 22.90x are significantly higher than the respective industry averages of 1.20x and 9.62x.

Further, the stock’s forward Price/Sales of 5.19x is 484.3% higher than the industry average of 0.89x. Its forward Price/Book multiple of 9.30 is 290.5% higher than the industry average of 2.38.

POWR Ratings Reflect Uncertainty

DECK’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DECK has an A for Quality, consistent with its higher-than-industry profitability. It has a B grade for Growth, in sync with its stellar performance in the last reported quarter.

However, DECK has a D grade for Stability, justified by its 60-month beta of 1.11. Also, the stock has a D grade for Value, in sync with its higher valuation relative to its peers.

Within the A-rated Fashion & Luxury industry, DECK is ranked #33 out of 59 stocks.

Beyond what I have stated above, we have also given DECK grades for Sentiment and Momentum. Get all DECK ratings here.

Bottom Line

DECK surpassed analyst estimates on the top and bottom lines in the last reported quarter. The company’s outstanding fourth-quarter and fiscal year 2024 results demonstrate the robust demand for its brands, including HOK and UGG and the strength of Deckers’ nimble operating model.

The footwear and apparel giant’s long-term outlook appears rosy, driven by its innovative product pipeline designed to meet the needs of global consumers. However, DECK’s stock is currently trading at a premium compared to its peers. Given its stretched valuation and enhanced volatility, waiting for a better entry point in this stock seems wise now.

How Does Deckers Outdoor Corporation (DECK) Stack Up Against Its Peers?

Given its near-term uncertain prospects, the odds of DECK outperforming in the weeks and months ahead are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these three A (Strong Buy) or B (Buy) stocks from the Fashion & Luxury industry instead:

Hugo Boss AG (BOSSY)

Weyco Group, Inc. (WEYS)

J.Jill, Inc. (JILL)

To explore more A and B-rated fashion stocks, click here.

What To Do Next?

Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:

10 Stocks to SELL NOW! >

DECK shares were unchanged in premarket trading Tuesday. Year-to-date, DECK has gained 46.32%, versus a 14.76% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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