By Sabela Ojea

Deckers Outdoor has run into a high hurdle: Investors are doubting its ability to keep its strong growth rates going.

The shoe company on Thursday posted a 17% jump in third-quarter sales, led by a 24% increase by Hoka. One problem, however, is that Hoka sales had been growing at a faster clip earlier this year and the company's revenue guidance, while raised, fell short of where Wall Street analysts already were.

Deckers also posted a downtick in international sales, something that has boosted its growth for several quarters.

Shares of Deckers, which also owns Ugg and Teva, closed about 20% lower on Friday, its largest percentage decrease in nearly five years. The stock remains up almost 21% in the past year.

The steep drop reflects the perils of high-flying consumer companies when they fail to exceed the expectations set by Wall Street.

"Sometimes being so successful can be tricky," said Neil Saunders, retail analyst and managing director at GlobalData. "Wall Street wants you to keep producing at that level, but that doesn't always happen that way. Investors tend to overestimate the growth they can generate."

Another concern for investors could be a lack of growth among other brands in Deckers' portfolio.

"Deckers seems to be very reliant on Ugg and Hoka and there are probably concerns the business is becoming increasingly more unbalanced," Saunders said.

Stifel analyst Jim Duffy said that Deckers' executive team is doing a good job managing the company for the long term, even if that discipline isn't well received. "It's a matter of whether what's good for the business over the next 12 months is tolerable for the market," Duffy said.

Jefferies points to Hoka's discounting pressure and lower wholesale growth as key headwinds the brand is facing after seeing an increase of 21% in wholesale sales in the third quarter, down from 38% in the second quarter and 28% in the first quarter.

Deckers' success with Hoka made it a strong stock performer in recent years, taking market share from giants including Nike, but share growth may have run too far ahead of the pack.

"While we continue to favor Deckers' brand strength, management execution, margin expansion prospects, and clean balance sheet, we would prefer to see a better entry point before getting involved," Jefferies' analysts Ashley Helgans and Blake Anderson said.

Write to Sabela Ojea at sabela.ojea@wsj.com; @sabelaojeaguix

(END) Dow Jones Newswires

January 31, 2025 17:45 ET (22:45 GMT)

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