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DECK Stock Declines 26% in a Month: Buy the Dip or Stay Away?
DECKDeckers(DECK) ZACKS·2025-04-04 16:55

Company Performance - Deckers Outdoor Corporation (DECK) has experienced a significant decline in its stock price, dropping 25.9% over the past month, which is worse than the Zacks Retail-Apparel and Shoes industry's decline of 7.9% and the S&P 500's decline of 3.3% [1][4] - The stock closed at 100.88,nearly55100.88, nearly 55% below its 52-week high of 223.98 reached on January 30, 2025, and is trading below its 50 and 200-day moving averages, indicating bearish sentiment [6][9] Revenue and Growth Challenges - The decline in DECK's stock price is attributed to slowing growth and increased competition in the footwear and accessories market, with revenue deceleration due to inventory constraints affecting key brands like UGG [4][13] - Management anticipates a 13.2% decline in UGG sales in the fourth quarter, contrasting with a 16.1% year-over-year growth in the third quarter, leading to an expected overall sales growth deceleration to 1% in the fourth quarter from 17.1% in the third quarter [14][16] Cost and Margin Pressures - SG&A expenses rose 24.9% year-over-year to 535.3millioninthefiscalthirdquarter,drivenbyincreasedmarketingspendandanexpandedworkforce,whichisexpectedtopressurethecompany′soperatingmargin[17]−Increasedmarkdownsandpromotionalactivities,particularlyforHOKA,alongwithhigherfreightcostsandforeignexchangepressures,areanticipatedtofurtherimpactprofitability[16][17]ValuationMetrics−DECKiscurrentlytradingataforward12−monthP/Sratioof3.09,significantlyhigherthantheindustryaverageof1.45andthesectoraverageof1.50,indicatingstronginvestorconfidencebutalsoheighteningvaluationrisk[9][10]−Comparedtopeers,BootBarnhasaforwardP/Sof1.56,Skechersat0.73,andAdidasat1.35,highlightingDECK′spremiumpositioning[10]Long−termGrowthPotential−Deckersisfocusingonbrandportfolioreinforcementthroughinnovativeproductlaunchesandoptimizeddistributionstrategies,withmanagementguidingfora15535.3 million in the fiscal third quarter, driven by increased marketing spend and an expanded workforce, which is expected to pressure the company's operating margin [17] - Increased markdowns and promotional activities, particularly for HOKA, along with higher freight costs and foreign exchange pressures, are anticipated to further impact profitability [16][17] Valuation Metrics - DECK is currently trading at a forward 12-month P/S ratio of 3.09, significantly higher than the industry average of 1.45 and the sector average of 1.50, indicating strong investor confidence but also heightening valuation risk [9][10] - Compared to peers, Boot Barn has a forward P/S of 1.56, Skechers at 0.73, and Adidas at 1.35, highlighting DECK's premium positioning [10] Long-term Growth Potential - Deckers is focusing on brand portfolio reinforcement through innovative product launches and optimized distribution strategies, with management guiding for a 15% year-over-year revenue growth to 4.9 billion for fiscal 2025 [18][19] - The company is expanding its international presence, particularly in high-potential markets like China, which is expected to contribute to long-term revenue growth [21] Direct-to-Consumer Segment - The direct-to-consumer (DTC) segment is a key growth driver, with DTC net sales increasing 17.9% to $1.01 billion in the fiscal third quarter, supported by strong digital performance and the expansion of flagship retail locations [22] - Enhanced omnichannel capabilities and loyalty initiatives are fueling customer acquisition and brand loyalty, positioning the company for sustained success [22]