Deckers Outdoor Corporation DECK appears strong on the back of its robust omni-channel expansion endeavors, HOKA ONE ONE brand, and impressive customer-centric product and marketing strategies. The company’s focus on expanding brand assortments, introducing a more innovative line of products and restructuring initiatives are added positives. Impressively, the Goleta, CA-based company’s shares have surged a whopping 61.9% over the course of a year and outshone its industry’s 34.5% rally.
Let’s Delve Deep
Resonating quite well with the changing trends, Deckers is constantly developing its e-commerce portal to capture incremental sales. The company has made substantial investments to strengthen its online presence and improve shopping experience. Apparently, the company’s direct-to-consumer business was robust throughout the first quarter of fiscal 2021 on strong consumer demand for the online brands. In fact, 49% of net sales came from the direct-to-consumer channel, heavily skewed toward e-commerce. We note that direct-to-consumer net sales jumped 74.2% driven by online growth in both the UGG and HOKA ONE ONE brands.
The sturdy HOKA ONE ONE brand, which forms part of the company’s Performance Lifestyle group, registered net sales growth of 37.1% in fiscal first quarter. However, the Teva and Sanuk labels under the same group remain soft, with sales declining 7.9% and 29.2%, respectively, in the same quarter. Nevertheless, the HOKA ONE ONE brand is benefiting from both the wholesale and direct-to-consumer channels. In fact, the brand’s direct-to-consumer platform witnessed triple-digit revenue growth due to a rise in customer acquisition year over year. Also, the expansion of the brand internationally bodes well.
Recently, HOKA ONE ONE has made a four-year agreement with the running team Northern Arizona Elite to support the club’s athletes and infrastructure. Going ahead, management will continue making investments and increasing awareness for the brand to boost global growth. Moreover, the company is focusing on expanding its product categories according to the customer-purchasing trends that differ with weather. With people largely staying at and working from home owing to the coronavirus pandemic, demand for casual and comfortable shoes to wear indoors has increased. In this regard, the company’s Fluff and Oh Yeah styles resonate well with customers.
Bottom Line
While these aforementioned factors boost optimism, Deckers is not spared of challenges. We note that the company has been grappling with sluggishness across its Sanuk brand. Management, at its last earnings call, anticipated operational headwinds like capacity constraints with increased levels of e-commerce shipments in peak wholesale-volume periods, coupled with higher costs in relation to warehouse employees’ safety and payroll expenses. However, to address these issues, the company has been phasing certain wholesale shipments earlier than in prior years. This might impact the timing of revenues between upcoming quarters.
On the positive side, Deckers’ restructuring efforts to realign brands, optimize retail-store fleet, and consolidate management and operations, bode well for long-term growth. Strength in the company’s HOKA ONE ONE label and direct-to-consumer channel including e-commerce, will continue helping this Zacks Rank #1 (Strong Buy) company sail through these tough times. You can see the complete list of today’s Zacks #1 Rank stocks here.
