Deckers' DTC Business, Omni-Channel Expansion Bode Well

Deckers Outdoor Corporation DECK is well-positioned for sustained growth through strategic initiatives, robust Direct-to-Consumer (DTC) and wholesale channels, and a clear focus on expanding its key brands, UGG and HOKA. The company's commitment to customizing its product development, marketing efforts and omni-channel distribution to align with consumer preferences has yielded substantial results, improved the immediate operational performance and advanced the brand's long-term strategic objectives.

In the fourth quarter of 2024, DTC net sales advanced 21% year over year to $415.2 million, whereas DTC comparable net sales jumped 20.5%. This remarkable growth underscores Deckers' success in engaging directly with consumers through various channels. We foresee 17.9% growth in DTC revenues in fiscal 2025.

Deckers' focus on product innovation is evident in successful launches of the latest styles and collections, reflecting a deep understanding of consumer preferences and market trends. The company's efforts to engage consumers through brand activations, collaborations and social listening initiatives highlight its commitment to building meaningful connections and driving brand loyalty.

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Wholesale Channel: A Key Component

Deckers' wholesale business is a crucial component of its revenue stream, contributing significantly to the company's overall growth trajectory. Despite market fluctuations, the wholesale segment has demonstrated a commendable performance, particularly in key regions, such as the United States and Europe. In the fourth quarter, wholesale revenues increased 21.4% year over year to $544.6 million, reflecting the channel's robustness and ability to drive incremental sales.

This success underscores the strength of Deckers' brand portfolio and its ability to forge enduring partnerships with retailers. The wholesale channel serves as a vital avenue for expanding the company's market reach and enhancing brand visibility on a global scale. With a robust wholesale network and strategic collaborations, Deckers continues to capitalize on emerging opportunities, driving incremental revenue growth and solidifying its position as a leading player in the footwear industry. We expect a 5.2% increase in Wholesale revenues in fiscal 2025.

Zacks Rank & Estimate Revision

Deckers has exhibited a decent run on the bourses in the past six months. The stock has outpaced the Zacks Retail-Apparel and Shoes industry, owing to its focus on profitable markets, product innovation, store expansion and enhancing e-commerce capabilities. In the said period, shares of this Zacks Rank #3 (Hold) company have jumped 43.4% compared with the industry's growth of 15.8%.

The positive sentiment surrounding Deckers' is reflected in the upward revisions of the Zacks Consensus Estimate for earnings per share. Over the past 30 days, analysts have increased earnings estimates for the current fiscal year by 16 cents. The consensus estimate is pegged at $30.59 per share. The estimate for the next fiscal year has also been raised by 19 cents to $34.37 per share.

A Path Ahead

Deckers expects a 10% increase in fiscal 2025 net sales, reaching $4.7 billion. HOKA is projected to grow 20%, driven by consumer gains in the DTC channel, strategic partner expansion and international market growth. UGG is expected to increase in mid-single digits, driven by international expansion and maintaining a healthy U.S. market.

Fiscal 2025 earnings are forecast to be $29.50-$30.00 per share, whereas it reported $29.16 last year. Capital expenditure is expected to be $115-$125 million, focusing on supply chain, warehouse capabilities, IT projects and retail updates. For the first quarter of fiscal 2025, Deckers expects revenue growth in the high teens and the gross margin slightly above the full fiscal year guided rate. We anticipate net sales to increase 10.7% year over year with earnings of $30.00 per share in fiscal 2025.

Key Picks

Some better-ranked stocks in the retail space are The Gap, Inc. GPS, Abercrombie & Fitch Co. ANF and Canada Goose GOOS.

Gap is a premier international specialty retailer, which offers a diverse range of clothing, accessories and personal care products. It currently sports a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for Gap's fiscal 2024 earnings and sales indicates growth of 21.7% and 0.2%, respectively, from fiscal 2023 reported figures. GPS has a trailing four-quarter average earnings surprise of 202.7%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It flaunts a Zacks Rank of 1 at present. ANF delivered a 28.9% earnings surprise in the last quarter.

The consensus estimate for Abercrombie's fiscal 2024 earnings and sales indicates growth of 47.3% and 10.4%, respectively, from the fiscal 2023 levels. ANF has a trailing four-quarter average earnings surprise of 210.3%.

Canada Goose is a global outerwear brand. It currently sports a Zacks Rank of 1.

The Zacks Consensus Estimate for Canada Goose's fiscal 2025 earnings and sales indicates growth of 13.7% and 5.2% from the year-ago actual. GOOS has a trailing four-quarter average earnings surprise of 70.9%.

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