Deckers Outdoor Corporation DECK is currently trading at a forward 12-month price-to-sales (P/S) multiple of 3.91X, which positions it at a premium compared with the Zacks Retail-Apparel and Shoes industry’s average of 1.61X and the Retail-Wholesale sector’s 1.63X. The stock is also trading above its median P/S level of 3.24 observed over the past five years. The valuation does suggest that Deckers is overvalued.

DECK Looks Expensive From Valuation Standpoint

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Despite the recent dip in the stock price, Deckers — designer, marketer and seller of footwear, apparel and accessories — continues to trade at a premium. Closing Friday’s trading session at $139.36, DECK shares have dropped 17.8% in the past month compared with the industry’s 9.4% decline. 

The stock’s recent decline reflects revenue slowdown amid inventory constraints, particularly for UGG, and potential gross margin pressure in the fourth quarter. Nonetheless, barring short-term hiccups, DECK's strong fundamentals positioned it for long-term success.

Deckers’ Past-Month Performance

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DECK’s Strong Brand Performance & Global Opportunities

Deckers is strengthening its brand assortments, introducing innovative products and optimizing distribution channels to drive sustainable growth. The rising popularity of UGG and HOKA, combined with a diversified product mix and global expansion, presents significant opportunities. The company has consistently delivered strong financial performances, achieving record sales in the third quarter of fiscal 2025. 

UGG dominates the premium lifestyle footwear segment, whereas HOKA is rapidly expanding in high-performance athletics. Deckers' ability to sustain full-price sell-through highlights its strong brand equity and disciplined inventory management. In the fiscal third quarter, HOKA and UGG achieved year-over-year sales growth of 23.7% and 16.1%, respectively.

A major driver of Deckers' success is its rapidly growing direct-to-consumer (DTC) business, which strengthens brand control, enhances customer engagement and generates higher-margin sales. DTC net sales increased 17.9% to $1.01 billion in the fiscal third quarter, with comparable net sales rising 18.3%. The company has steadily increased its DTC penetration, benefiting from robust digital sales and the expansion of flagship stores. Investments in omnichannel capabilities, e-commerce enhancements and loyalty programs, such as UGG Rewards, have significantly improved customer acquisition and retention, ensuring sustained consumer demand and deeper brand connections.

International expansion is another key growth pillar, with global markets playing an increasingly important role in Deckers' performance. HOKA, in particular, is seeing strong adoption worldwide, fueled by growing brand awareness and carefully managed wholesale expansion. UGG's diversification into new product categories and global markets strengthens its position. The company's targeted growth in high-potential regions, such as China, presents a substantial opportunity for long-term revenue acceleration.

Deckers’ commitment to innovation remains a cornerstone of its strategy, ensuring relevance in an evolving consumer landscape. HOKA's latest product launches, including the Bondi 9 and Cielo X1, reinforce its leadership in the performance footwear category. Meanwhile, UGG’s expansion beyond core winter products into sneakers, hybrid footwear and men’s fashion continues to broaden its consumer appeal. The company’s ability to introduce and scale new product categories highlights its strength in innovation, positioning Deckers for continued success.

Deckers’ Financial Strength on Strong Cash Reserves

The company’s strong financial position, characterized by a debt-free balance sheet, substantial cash reserves and disciplined capital allocation, enhances investor confidence. Cash and cash equivalents stood at $2.24 billion as of Dec. 31, 2024. In the quarter, Deckers repurchased about 275 thousand shares for $44.7 million. As of Dec. 31, 2024, the company had $640.7 million remaining under its share repurchase authorization. DECK’s ability to generate significant cash flow supports ongoing share repurchases and other growth initiatives.

DECK Provides Optimistic FY25 View

Deckers' strong expansion strategy has played a key role in driving the company's growth. Total revenues are expected to increase 15% year over year to $4.9 billion, with HOKA growing 24% and UGG rising 10%. This marks an upward revision from the previous forecast of $4.8 billion in net sales.

The gross margin is anticipated to reach or slightly exceed 57%, improving from the earlier mentioned 55-55.5%. Management has also raised its fiscal 2025 earnings outlook to $5.75-$5.80 per share, whereas it reported $4.86 in the prior year. Its earlier guidance was pegged at $5.15-$5.25 per share.

Estimate Revisions Favor Deckers Stock

Analysts have responded positively to Deckers’ prospects, which has been reflected in upward revisions in the Zacks Consensus Estimate for EPS. In the past 30 days, analysts have increased estimates for the current fiscal year by 21 cents. The consensus estimate for earnings is pegged at $5.89 per share. The consensus estimate for earnings for the next fiscal year has been raised 11 cents to $6.60 per share. These estimates indicate expected year-over-year growth rates of 21.2% and 12.1%, respectively.

The Zacks Consensus Estimate for the current and next fiscal years’ sales is pegged at $4.96 billion and $5.46 billion, indicating year-over-year growth of 15.6% and 10.1%, respectively.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

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Is DECK a Smart Investment or Overpriced at Current Levels?

In a competitive landscape that includes Boot Barn Holdings, Inc. BOOT, Urban Outfitters Inc. URBN and Skechers U.S.A., Inc. SKX, Deckers stands out as a compelling investment opportunity. Although it trades at a premium, its elevated price-to-sales ratio reflects strong market confidence bolstered by positive earnings estimate revisions.

Investors may find this Zacks Rank #1 (Strong Buy) stock attractive due to its strong brand momentum, expanding DTC and and international growth strategy. The company’s focus on product innovation, strategic market expansion and omnichannel enhancements positions it for long-term success. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report

Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report

Boot Barn Holdings, Inc. (BOOT) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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