Can Deckers Sustain Operating Margin Momentum Amid Tariff Pressures?

Core Insights - Deckers Outdoor Corporation (DECK) reported a fourth-quarter operating income of $173.9 million for fiscal 2025, marking a 20.6% year-over-year increase, with an operating margin of 17%, up 200 basis points from the previous year [1][10] - The company achieved a gross margin of 56.7%, a 50 basis point increase, driven by higher full-price sales in the UGG brand and a favorable product mix [2][10] - For fiscal 2025, DECK's operating income reached $1.18 billion, up from $927.5 million, with an operating margin of 23.6%, reflecting a 200 basis point increase year-over-year [4] Financial Performance - Selling, general and administrative (SG&A) expenses totaled $405.8 million, representing 39.7% of revenues, which is a 150 basis point improvement compared to the prior-year quarter [3] - The operating margin for fiscal 2025 was primarily driven by strong gross margin performance, which expanded by 230 basis points year-over-year to 57.9% [4] Competitive Landscape - Adidas reported an operating profit of €610 million in the first quarter of 2025, an 82% increase year-over-year, with an operating margin of 9.9% [7] - Urban Outfitters recorded an operating income of $128.2 million in the first quarter of fiscal 2026, a 71.8% increase from the previous year, with an operating margin of 9.6% [8] Valuation and Estimates - DECK trades at a forward price-to-earnings ratio of 16.45X, slightly below the industry average of 17.40X [11] - The Zacks Consensus Estimate for DECK's fiscal 2026 earnings indicates a year-over-year decline of 4.4%, while fiscal 2027 estimates suggest a 9.1% increase [12]