Deckers Outdoor Corporation (DECK), a premium footwear, apparel, and accessories designing, marketing, and distributing company, reported results for the fiscal year 2024 on May 23. The company’s revenue grew 18% year-over-year, and its EPS growth was 51%.

During the quarter, the company’s HOKA® brand net sales increased 34% to $533 million compared to $397.70 million in the prior year’s quarter and its UGG® brand net sales grew 14.9% from the year-ago value to $361.30 million.

Recently, the company expanded its product portfolio with the launch of Aventrail, first-of-its-kind, trail running sandal built for an uninhibited run experience by TEVA and with the launch of Skyward X, the latest addition to its maximalist cushioned performance running shoes, by HOKA.

The company’s President and CEO, Dave Powers, said, “Deckers achieved record results during fiscal year 2024, as we delivered revenue growth of 18% and increased earnings per share by 51%, reflecting a continued dedication to maintain exceptional levels of profitability as our brands scale.”

He added, “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.”

During the fourth fiscal quarter, DECK repurchased approximately 119 thousand shares of its common stock for a total of $104.3 million at a weighted average price paid per share of $875.01. As of March 31, 2024, the company had around $941.7 million remaining under its stock repurchase authorization.

Shares of DECK have gained 39.1% over the past six months and 78.1% over the past year to close its last trading session at $937.38. However, over the past month, the stock has plunged 13.3%.

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

Positive Recent Developments

On June 26, DECK’s division, TEVA launched the first-of-its-kind, trail running sandal built for an uninhibited run experience. Aventrail was created to bridge a gap in the trail running market between running sandals with minimal support and modern running shoes with underfoot innovation and cushion.

Aventrail offers an entirely new sensation of freedom while running and adventuring outdoors to the customers.

Also, on April 29, DECK’s division, HOKA unveiled the all-new Skyward X, the latest addition to its maximalist cushioned performance running shoes. It celebrated the new advancements in footwear technology which delivers the signature HOKA cushioning, the Skyward X promises runners an entirely fresh and unmistakably HOKA experience.

Robust Financials

During 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% from the year-ago value to $539.48 million. The company’s income from operations came in at $144.26 million, up 36.2% from the prior year’s quarter.

Furthermore, the company’s net income was $127.55 million, or $4.95 per share, reflecting increases of 39% and 43.1% year-over-year, respectively. Its cash and cash equivalents stood at $1.50 billion as of March 31, 2024, compared to $981.80 million as of March 31, 2023.

Solid Historical Growth

DECK’s revenue and EBITDA grew at CAGRs of 19% and 20.9% over the past three years, while its EBIT improved at a CAGR of 21.5% over the same timeframe. The company’s net income and EPS increased at respective CAGRs of 25.7% and 29.4% over the past three years.

Further, the company’s total assets and levered free cash flow grew at CAGRs of 13.1% and 16.3% over the same time frame, respectively.

Favorable Analyst Estimates

Analysts expect DECK’s revenue for the first quarter (ended June 2024) to come in at $802.99 million, indicating an increase of 18.8% year-over-year. The consensus EPS estimate of $3.33 for the same period reflects a 38.3% year-over-year improvement. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

For the fiscal year (ending March 2025), the company’s revenue and EPS are anticipated to grow 11.8% and 6.2% year-over-year to $4.79 billion and $30.98, respectively. In addition, Street expects its revenue and EPS for the fiscal year 2026 to grow 10.8% and 14.9% from the prior year to $5.31 billion and $35.61, respectively.

Mixed Profitability

DECK’s trailing-12-month gross profit margin of 55.63% is 50.5% higher than the 36.95% industry average. Its trailing-12-month EBIT margin of 21.85% is 178.6% higher than the industry average of 7.84%. And the stock’s trailing-12-month net income margin of 17.71% is considerably higher than the industry average of 4.76%.

Furthermore, the stock’s ROCE, ROTC, and ROTA of 39.22%, 26.69%, and 24.22% favorably compares to the 11.75%, 6.27%, and 4.25% industry average, respectively.

Elevated Valuation

In terms of forward non-GAAP P/E, DECK is currently trading at 32.31x, 131.4% higher than the industry average of 13.96x. Also, the stock’s forward EV/Sales and Price/Sales of 4.76x and 5.02x are considerably higher than the industry average of 1.16x and 0.86x, respectively.

Additionally, the stock’s forward EV/EBITDA and Price/Cash Flow of 22.11x and 27.79x are 135.9% and 204.4% higher than the industry averages of 9.37x and 9.13x, respectively.

POWR Ratings Reflect Uncertainty

DECK’s mixed fundamentals are reflected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 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. DECK has a D grade for Value, consistent with its elevated valuation.

DECK is ranked #26 among the 59 stocks in the A-rated Fashion & Luxury industry.

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

Bottom Line

DECK topped the analyst estimates on the top and bottom lines in the last reported quarter. The company’s outstanding fourth-quarter and fiscal year 2024 results together with its innovative product portfolio expansion through EVA and HOKA demonstrate the strength of Deckers’ nimble operating model.

The footwear and apparel giant’s long-term outlook appears bright, driven by its innovative and diverse 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.

Stocks to Consider Instead of Deckers Outdoor Corporation (DECK)

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 A (Strong Buy) or B (Buy) stocks from the Fashion & Luxury industry instead:

Weyco Group, Inc. (WEYS)

Hugo Boss AG (BOSSY)

PVH Corp. (PVH)

For exploring more A and B-rated software stocks, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

DECK shares were trading at $938.16 per share on Tuesday afternoon, down $8.14 (-0.86%). Year-to-date, DECK has gained 40.35%, versus a 15.93% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

More Resources for the Stocks in this Article