Deckers Brands (DECK +8%) saw a significant rise today after reporting impressive Q1 results. The footwear company posted a substantial EPS beat, with revenue climbing 22.1% year-over-year to $825.3 million, surpassing analyst expectations. This quarter marks the final one for CEO Dave Powers, who will retire on August 1. Stefano Caroti, the Chief Commercial Officer, will step in as the new CEO.
- There were concerns due to Nike's (NKE, Financial) recent revenue miss and lowered FY25 outlook. Despite Q1 being DECK's smallest revenue quarter, the company needed to demonstrate resilience against similar issues, which it did successfully.
- DECK has often been seen as reliant on its Ugg brand. However, Hoka, known for running shoes, is emerging as a significant second brand, balancing DECK's seasonality. Hoka is now DECK's second-largest and fastest-growing brand. Other brands like Teva, Sanuk, and Koolaburra showed more modest growth.
- Hoka drove Q1 revenue growth, with sales up 30% year-over-year to a record $545 million. The brand benefited from a diverse product assortment and strong demand for new launches. Popular styles like the Clifton and Bondi saw healthy growth, while new styles like the Skyward X and Cielo X1 added incremental volume.
- UGG sales increased by 14% year-over-year to $223 million. The brand saw continued consumer demand, reflecting progress in generating year-round interest. The Tasman franchise and the expanded Golden Collection contributed to this growth.
- Gross margin improved to 56.9% from 51.3% last year, driven by a favorable brand/product mix, higher full-price selling, especially for UGG, and lower freight rates.
Overall, investors seem relieved. While many footwear stocks have struggled following Nike's disappointing results, DECK's strong performance suggests it isn't facing the same challenges. Hoka continues to impress with record-breaking quarters, and Ugg is showing growth outside of the winter season. With an internal transition to the new CEO, significant changes are not anticipated. Additionally, DECK's recent 6-for-1 stock split will take effect on September 17, pending shareholder approval.