On Friday, Barclays has increased the price target for Deckers Outdoor Corporation (NYSE: NYSE:DECK) to $190 from $180, while maintaining an Overweight rating on the stock. The firm notes that Deckers is "operating in the bullseye," with its HOKA brand in the early stages of a global rollout and its UGG brand continuing to innovate and align with current lifestyle footwear trends.
The company's ability to stay on target is attributed to a balanced product offering, which includes the early growth stage performance athletic offering in HOKA, and the mature, high brand awareness fashion casual offering in UGG. Barclays expressed optimism following Deckers' performance in the second fiscal quarter of 2025, which surpassed expectations and led to an increase in the full-year earnings forecast.
In the second fiscal quarter of 2025, Deckers' total sales saw a year-over-year increase of 20%, propelled by strong performance in both wholesale and direct-to-consumer channels. The HOKA brand experienced a significant growth of 34.7% year-over-year, while the UGG brand also posted a healthy increase of 13.0% year-over-year.
The gross margin for Deckers expanded to 55.9%, up 250 basis points from the previous year. This improvement was primarily due to a shift in brand mix towards the higher-margin HOKA brand, higher margin products within brands, and reduced wholesale close-out sales. These positive factors were slightly offset by increased freight costs and the dilutive impact of channel mix changes, as distributors took product earlier.
In other recent news, Deckers Outdoor has been a focus of financial services firm Jefferies, which raised its target for the company to $167, maintaining a Hold rating on the stock. This follows Deckers Outdoor's impressive earnings that surpassed estimates by approximately 30%, paired with a sales beat of 9%.
The company has subsequently updated its sales and earnings per share (EPS) guidance upwards, reflecting cautious optimism, particularly in gross margin percentages.
Deckers Outdoor also reported a 20% year-over-year revenue increase in its second-quarter fiscal 2025, reaching $1.3 billion. The company's gross margins were strong at 55.9%, and diluted earnings per share rose by 39% to $1.59. The HOKA brand played a significant role, surpassing $2 billion in trailing 12-month revenue for the first time, thanks to a 32% increase during the first half of the fiscal year.
Deckers also saw a 13% revenue increase from the UGG brand, largely attributed to successful product initiatives and international growth. In addition, the company executed a six-for-one forward stock split and raised its fiscal 2025 revenue guidance to approximately $4.8 billion.
InvestingPro Insights
The recent analysis by Barclays aligns well with several key metrics and insights from InvestingPro. Deckers Outdoor Corporation's strong performance is reflected in its impressive revenue growth of 20.3% over the last twelve months, with quarterly revenue growth reaching 22.13% in Q1 2025. This robust growth supports Barclays' optimistic outlook on the company's operations and brand strategy.
InvestingPro Tips highlight that Deckers holds more cash than debt on its balance sheet and that its liquid assets exceed short-term obligations, indicating a strong financial position. This financial stability provides the company with the flexibility to continue investing in its growth brands like HOKA and UGG, as mentioned in the article.
The company's profitability is also noteworthy, with a gross profit margin of 56.54% and an operating income margin of 22.51% over the last twelve months. These figures align with the article's mention of expanded gross margins due to the shift towards the higher-margin HOKA brand and improved product mix.
Investors may be interested to know that Deckers has shown a remarkable 85.26% price total return over the past year, reflecting the market's positive reception of the company's performance and strategy. Additionally, nine analysts have revised their earnings upwards for the upcoming period, suggesting continued confidence in Deckers' growth trajectory.
For those seeking more comprehensive insights, InvestingPro offers 13 additional tips for Deckers Outdoor Corporation, providing a deeper understanding of the company's financial health and market position.
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