Can Deckers Offset Tariff Costs Through Pricing & Sourcing Shifts?

Core Insights - Deckers Outdoor Corporation (DECK) anticipates a significant impact on its business due to recent U.S. trade policy changes, particularly higher tariffs, expecting an increase of up to $150 million in cost of goods sold for fiscal 2026 [1][10] Group 1: Business Impact - Less than 5% of Deckers' footwear production comes from China, with most production based in Southeast Asia, primarily Vietnam, which reduces but does not eliminate exposure to tariff impacts [2] - The company plans selective and staggered price increases in the U.S. and is negotiating cost-sharing agreements with manufacturing partners, but these measures will only partially offset the added costs [3] - Deckers expects its gross margin, which was a record 57.9% in the previous year, to decline in fiscal 2026 due to tariffs, increased promotional activity, higher material costs, and rising freight charges [4] Group 2: Financial Position and Strategy - Despite the challenges posed by tariffs, Deckers maintains a strong balance sheet with $1.9 billion in cash and no debt, focusing on long-term growth through brand investment, international expansion, and operational efficiency [5] - Shares of Deckers have declined by 48.7% year to date, compared to the industry's decline of 14.8% [9] - The forward price-to-earnings ratio for DECK is 16.83X, slightly below the industry's average of 17.60X, with a Value Score of D [12] Group 3: Earnings Estimates - 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 [14] - Recent earnings estimates for fiscal 2026 and 2027 have been revised downward over the past 30 days [14]