Deckers(US:DECK) Guohai Securities·2024-05-21 00:32Investment Rating and Core Views - The report initiates coverage with a "Buy" rating, forecasting FY2024-2026 revenue of $4.15B/$4.69B/$5.19B, representing YoY growth of +14.4%/+13.0%/+10.7%, and net income of $691M/$777M/$865M, with YoY growth of +33.7%/+12.4%/+11.3% [2] - The long-term outlook is positive due to the company's brand matrix growth and future development prospects [2] Financial Projections and Valuation - The company's FY2024-2026 PE ratios are projected at 33X/30X/27X based on the closing price of $888.56 on May 17, 2024 [2] - FY2024-2026 gross margins are expected to be 54.4%/54.5%/54.8%, with UGG and HOKA revenue growth rates projected at 14.4%/6.8%/4.5% and 20.8%/22.2%/18.7%, respectively [16] Brand Performance and Strategy - UGG leverages fashion collaborations to create popular items, successfully attracting trend-conscious consumers and solidifying its leadership in the global fashion market [5] - HOKA has gained recognition through endorsements from marathon champions and elite teams, becoming the most used brand at the 2022 UTMB event [6] - UGG's international direct stores exhibit high ATV and conversion rates, while HOKA is in the early stages of international expansion with localized products [13] Product and Market Analysis - UGG's product line covers six major scenarios, including rain, snow, extreme cold, indoor, casual, and summer, alleviating product homogeneity and boosting brand popularity [187] - HOKA's performance running shoes offer superior cushioning and support, with a focus on lightweight, thick-soled designs that provide excellent shock absorption and stability [47][169] Operational Efficiency and Channel Strategy - The company has improved operational efficiency through DTC expansion, increasing the DTC revenue share from 34% in FY2015 to 43.3% in FY2024 Q1-Q3 [12] - Future plans aim for a 50% DTC and wholesale revenue split, with continued emphasis on DTC channel growth [12] Industry and Market Trends - The global footwear market has shown recovery since 2021, with retail sales reaching $384.05B in 2023, and a projected CAGR of over 5% from 2023 to 2028 [119][120] - The outdoor sports market is expanding, driven by emerging platforms and increased participation among younger demographics, with a CAGR of 11.9% from 2020-2022 and 4.7% from 2023-2025E [145] Consumer Insights - UGG's primary consumer base consists of young and middle-aged women, while HOKA's audience is more evenly distributed across genders, with a focus on middle-aged consumers [112][115] - HOKA's consumer base is growing, with 59% of owners under 35 and a higher likelihood of purchase among women and middle-aged consumers [177] Marketing and Branding - UGG has successfully reversed its brand image through celebrity endorsements and collaborations, becoming a staple in streetwear and fashion [166][189] - HOKA focuses on community marketing, organizing running events and providing personalized services to enhance customer loyalty and brand experience [196][222]