Deckers Outdoor is the IBD Stock Of The Day as footwear brands are off to a running start in the new year.
Goleta, Calif.-based Deckers Outdoor produces a variety of lifestyle, running and comfort shoes. Its portfolio includes the Ugg, Teva and Sanuk brands as well as the increasingly popular Hoka running shoes.
Shoe Stocks Find Their Stride
Footwear stocks are cruising to start the year. Crocs has had a bit of a wild run as it handily beat Q4 earnings on Feb. 16. CROX stock is up 26% over the past three months but only up about 14% year to date. Skechers has made less progress, climbing only 6.3% so far this year as earnings declined in the past three quarters.
Switzerland-based On Holdings saw sales leap 55% in 2022, pointing the stock toward a $5 billion valuation.
Meanwhile, RBC Capital noted last week that sentiment around Nike has turned less negative in recent months, due to China reopening and progress on excess inventories.
In a Feb. 6 research note, BTIG analyst Janine Stichter assumed coverage of Deckers with a buy rating and a 515 price target. She wrote that the Ugg brand's strong execution and resonance with younger consumers should support Deckers' solid, steady growth. Meanwhile, Hoka's continued expansion should continue at a robust pace.
Stichter noted that Hoka generated $1.3 billion in revenue over the last 12 months, suggesting a long runway for the brand. She considers Hoka as "being diversified across product category and geography." Stichter added that "strong brands will fare best" in the current environment, which fits Deckers' description "to a tee."
Deckers Outdoor Earnings
Deckers Outdoor cleared estimates for its Q3 results on Feb. 2 as earnings jumped 24% to $10.48 per share. Revenue growth slowed for the third quarter in a row, climbing 13% to $1.345 billion.
Meanwhile, Hoka sales catapulted 90.8% to $352.1 million. And with spring around the corner, Ugg sales dipped 1.6% to $930.4 million.
For fiscal 2023, Deckers Outdoor forecasts up to 13.8% earnings growth to a range of $18 to $18.50 per share on 11%-12% revenue growth.
"The consistent strength of Deckers results thus far in fiscal year 2023, despite macroeconomic and currency headwinds, are the result of our brand marketplace management actions and dedication to long-term strategic priorities," CEO Dave Powers said in the release. "We believe UGG and HOKA are two of the healthiest, well positioned brands in their respective markets, and with the strength of our operating model, Deckers is poised for continued success going forward."
DECK Stock
DECK stock is actionable after bouncing from its 50-day moving average and retaking its 21-day exponential moving average. It's arguably breaking a tight downward-sloping trendline after rising from its 10-day line on Tuesday.
Based on the weekly chart in MarketSmith, DECK stock will have a flat base at the end of the week with a 433.41 buy point. The nascent base already looks like a handle on a huge consolidation going back to late 2021.
Deckers Outdoor ranks second in the Apparel-Shoes & Related Manufacturing group, according to IBD Stock Checkup. It trails No. 1-ranked Crocs.
DECK stock's relative strength line is near highs. The stock has a 93 RS Rating as it outperforms a majority of its peers in the S&P 500. Shares have a 94 EPS Rating out of a best-possible 99. It has a 96 Composite Rating, which combines a number of technical indicators into one score.
DECK stock rose more than 3% on Tuesday. Shares are up 5% in 2023 but have vaulted nearly 55% over the past year.
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