Deckers Outdoor Corporation DECK has witnessed a significant decline over the past month, with its shares plummeting 25.9%, underperforming the Zacks Retail-Apparel and Shoes industry's drop of 7.9%. The company also trailed the Retail-Wholesale sector’s fall of 4.5% and the S&P 500's decline of 3.3% during the same period.
Deckers’ Past-Month Performance
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The recent decline in the DECK stock’s price is primarily led by slowing growth and heightened competition across the footwear and accessories space. A deceleration in revenues due to inventory constraints affecting key brands like UGG and looming gross margin pressure in the fourth quarter fiscal 2024 has weighed on investor sentiment.
The Deckers stock has also underperformed its peers, including Boot Barn Holdings, Inc. BOOT, Adidas ADDYY and Skechers U.S.A., Inc. SKX.
Shares of Boot Barn, Adidas and Skechers have tumbled 14%, 16.4% and 17.5%, respectively, in the said period.
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Closing at $100.88 in yesterday’s trading session, the DECK stock stands almost 55% below its 52-week high of $223.98 attained on Jan. 30, 2025. Deckers is trading below its 50 and 200-day simple moving averages of $146.43 and $164.20, respectively, signaling bearish sentiment in maintaining the recent performance levels.
DECK Trades Below 50 & 200-Day Moving Averages
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Despite the downside, Deckers is currently trading at a forward 12-month P/S ratio of 3.09, which significantly exceeds the industry average of 1.45 and the sector average of 1.50. While this premium suggests strong investor confidence in the brand's long-term potential, it also heightens valuation risk. If the company continues to face slowing growth and margin pressure, the elevated multiple may prove difficult to sustain, leading to a sharper correction.
This premium positioning is especially notable when compared with peers like Boot Barn (with a forward 12-month P/S of 1.56), Skechers (0.73) and Adidas (1.35).
DECK Looks Expensive From Valuation Standpoint
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DECK is navigating a complex macroeconomic environment marked by inventory constraints and mounting margin pressures that are set to dampen its near-term growth. The company is facing a slowdown in the fourth quarter of fiscal 2025 due to limited inventory, particularly for UGG, stemming from accelerated demand fulfillment earlier in the fiscal year.
This could impact revenues, with management already signaling an adverse comparison for UGG, which grew 16.1% year over year in the fiscal third quarter. We expect UGG sales to decline 13.2% in the final quarter, which is likely to weigh on the top line. Our model suggests overall sales growth to decelerate to 1% in the fiscal fourth quarter from 17.1% in the third quarter.
Increased markdowns and promotional activity, particularly for HOKA as it undergoes a model transition, are likely to weigh on margins in the final quarter. Additionally, a 150-basis-point impact of higher freight costs and roughly 50 basis points of foreign exchange pressures are expected to dent profitability further.
Deckers has been contending with rising costs and operational expenses. In the fiscal third quarter alone, SG&A expenses rose 24.9% year over year to $535.3 million. This uptick was largely fueled by increased marketing spend, unfavorable foreign currency impacts and an expanded workforce. With management reaffirming full-year SG&A guidance at 35% of revenues, the company’s operating margin is likely to be under continued pressure.
Deckers is reinforcing its brand portfolio by launching innovative products and optimizing distribution strategies to fuel long-term growth. The increasing popularity of UGG and HOKA, combined with a balanced product offering and expanding international footprint, presents significant opportunities for the company.
UGG remains a leader in the premium lifestyle footwear market, whereas HOKA continues to gain ground in high-performance athletic footwear. The company's ability to maintain full-price sell-through rates underscores its strong brand equity and effective inventory management. For fiscal 2025, management guided year-over-year revenue growth of 15% to $4.9 billion, with HOKA and UGG expected to increase 24% and 10%, respectively.
Innovation is central to Deckers' ongoing strategy, keeping its brands aligned with evolving consumer demands. HOKA's latest releases, such as the Bondi 9 and Cielo X1, reinforce its leadership in the performance category. Simultaneously, UGG is expanding beyond traditional winter wear into sneakers, hybrid styles and men’s fashion, broadening its appeal. DECK’s success in launching and scaling categories highlights its innovation capabilities and positions the company for sustained success.
International markets remain critical pillars of Deckers’ growth strategy. HOKA is gaining traction globally, driven by increased brand recognition and a disciplined approach to wholesale expansion. UGG is also growing its global presence through product diversification and entry into markets. Targeted growth efforts in high-potential regions like China are poised to contribute meaningfully to long-term revenue gains.
A key contributor to Deckers’ success is its fast-growing direct-to-consumer (DTC) segment, which enhances brand control, improves customer relationships and yields higher-margin sales. In the fiscal third quarter, DTC net sales climbed 17.9% to $1.01 billion, with comparable sales rising 18.3%. The company continues to increase DTC penetration, supported by strong digital performance and the expansion of flagship retail locations. Enhanced omnichannel capabilities, e-commerce improvements and loyalty initiatives, such as UGG Rewards, are fueling customer acquisition, retention and brand loyalty.
While Deckers has built a solid foundation with strong brands, global expansion and a growing direct-to-consumer channel, the recent stock performance reflects mounting near-term challenges that should not be overlooked. Slowing momentum, margin headwinds and an elevated valuation pose real risks if execution falters. The company’s long-term story remains intact, but navigating the current environment will require a careful balance between driving innovation and managing operational pressures.
Investors may need to be patient as this Zacks Rank #3 (Hold) stock works through this transitional phase. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Skechers U.S.A., Inc. (SKX) : Free Stock Analysis Report
Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report
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Adidas AG (ADDYY) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
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