DECK - Deckers Outdoor: Excessive Investor Optimism Can Trigger A Selloff As Growth Slows
2024-06-06 00:18:23 ET
Summary
- Deckers Outdoor has outperformed the S&P 500 and Nasdaq 100 YTD, as revenue and earnings grew 18% and 42% YoY respectively in FY24.
- Product innovation in HOKA and UGG remained robust, coupled with targeted brand campaigns to acquire and retain customers as it expanded its DTC channel while expanding internationally.
- The company is expected to see revenue grow slower in FY25 at 10%, with UGG projected to grow in mid-single digits, along with margin contraction to 19.5%.
- However, investor optimism remains highly elevated when comparing it to the S&P 500 and its competitors, making it prone to short-term correction, especially as customer spending weakens.
Introduction & Investment Thesis
Deckers Outdoor ( DECK ) is a casual lifestyle and performance-driven footwear, apparel, and accessories company that operates across its five proprietary brands that include UGG, HOKA, Teva, Sanuk, and Koolaburra. The company has massively outperformed the S&P 500 and Nasdaq 100 YTD. I initiated a “hold” rating on the stock on April 14th, and my thesis was predicated on my belief that although Deckers Outdoor has a long-term growth story given its culture of product innovation and building memorable brand moments and experiences to engage its users, its valuation did not provide any upside. Since the time of my writing, the stock has climbed 31%, outperforming the S&P 500, which is up just 4%....
Deckers Outdoor: Excessive Investor Optimism Can Trigger A Selloff As Growth Slows