MW Deckers hikes its yearly outlook. Wall Street still has questions about demand.

By Bill Peters

Sales of Deckers footwear brands Ugg and Hoka increased during the third quarter

Deckers Brands on Thursday raised its full-year outlook and reported third-quarter results that topped estimates, helped by demand for Ugg boots and Hoka running shoes. But investors, apparently, had reservations, sending shares lower in after-hours trade.

During Deckers's $(DECK)$ earnings call, executives touted inroads with male shoppers, demand for waterproofed Ugg hybrid slippers and winter-season Hokas, international growth and plans to open more Hoka stores. But they said they expected higher freight costs, a harsher foreign-exchange backdrop and markdowns for its current fourth quarter.

Shares tumbled 16% after hours. The selloff follows a 73% gain for the stock over the past 12 months, which has of late had the stock hovering near record highs.

Chief Financial Officer Steven Fasching, during the company's earnings call, described the current quarter as one facing tougher comparisons.

Deckers ran low on Uggs and tried to catch up with demand through last year. But now, after strong demand and a stronger willingness to pay full price, the amount of Uggs to sell was now in shorter supply. Still, he said demand remained strong.

"That is not an indication of any change in demand. The demand for these brands is still incredible," he said. "This is about how we're managing again, the marketplace with the inventory that we have."

The company - also parent to the maker of Teva sandals and the all-day shoe brand Ahnu - said it expects sales for its full fiscal year to increase around 15% to $4.9 billion, a bit up from the $4.8 billion it forecast in October. According to FactSet, Wall Street analysts expect sales of $4.93 billion for Deckers's full fiscal year, which ends on March 31.

Deckers also forecast full-fiscal-year earnings per share of $5.75 to $5.80, up from the prior outlook for $5.15 to $5.25 and above the FactSet consensus estimate of $5.66.

Deckers reported the results after it tried to clear out old sneakers at retail stores to clear the way for the launch of its Hoka Bondi 9 - a shoe some analysts expected to drive more demand. Hokas have posed steeper competition to brands like Nike Inc. $(NKE)$. The company on Thursday expressed optimism about its efforts to move beyond boots and slippers into items like sandals and clogs.

For the third quarter, Deckers sales rose 17.1% to $1.83 billion, above the consensus analyst expectation of $1.73 billion. The company earned $3 a share, above the estimated $2.58.

Sales of Uggs rose 16.1% year over year to $1.244 billion during the quarter. Sales of Hokas were up 23.7% to $530.9 million. During the call, Chief Executive Stefano Caroti said the company would phase out the company's Koolaburra brand standalone products over this year to focus on better-performing brands.

"Ugg continued to experience incredible global momentum, with the brand's iconic franchises capturing strong full price consumer demand across all regions," Caroti said in the company's earnings release.

"At the same time, Hoka delivered impressive results consistent with our strategy, remaining focused on scaling through innovative performance products."

-Bill Peters

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January 30, 2025 20:07 ET (01:07 GMT)

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