The success of the running brand Hoka is bringing major growth to parent company Deckers Outdoor Corp’s stock, sending shares higher.
The company’s revenue increased 20% to $1.31 billion and earnings per share increased 39% to $1.59, driven mostly by a jump in Hoka sales. Net income went up 35.7%, to 242.32 million. The company boosted its forecast for expected sales next year to 12% from 10%, it said in a Thursday release.
“Hoka has had tremendous growth,” said David Swartz, a senior equity analyst for Morningstar. “And certainly investors like that – that’s why Deckers is getting this kind of valuation.”
Deckers’s stock jumped more than 10% since the release of its earnings.
The results show how Deckers has been able to capitalize on the running shoe trend to drive growth. Some companies have failed to ride this wave, while other companies are seizing the moment. Nike and Adidas – long dominant in athletic footwear – are losing footing to brands like Asics, On, and Hoka. Thursday’s earnings report solidifies Deckers (Hoka’s parent company) as one of the big winners of the boom in running shoes.
Deckers is composed of two main brands – Hoka and Ugg. Each brand takes up about 45% of the company.
Hoka grew much faster than Ugg last quarter. The running brand grew 35%, bringing $570.9 million last quarter, whereas the boots brand grew 13%, bringing in $689.9 million. Hoka is succeeding because of loyalty with runners and because that has led to popularity as a lifestyle shoe, according to Swartz.
Ugg, on the other hand, is not sportswear – it’s mainly a fashion brand. It’s susceptible to the fickle nature of style trends. Ugg had a phenomenal year last year, but its growth has decelerated so far in 2024, according to Anna Andreeva, a senior consumer equity research analyst at Piper Sandler. Last year at this time, the company reported 28% in sales growth in Ugg, more than double what it reported this quarter.
Deckers has not been able to keep pace with On, one of its main competitors and another upstart in the athletic footwear space. Since the start of the year, On’s stock has grown 88%, while Deckers’s has grown 55%. This is largely because Ugg is almost half of Deckers’s business. On only makes sportswear and is not weighed down by a fashion brand like Deckers is.
“Less than half of Deckers’s business is Hoka”, said Rick Patel, managing director of equity research at Raymond James. “At Deckers, you’re more exposed to slower growing parts of the business, like Ugg. That is why the company as a whole will grow at a slower clip than On Running, which is entirely a sportswear company.”
On’s stock rose more than 8% in the day following Deckers’s earnings release. Investors’ faith in small running shoe companies might have been furthered by Deckers’s reported growth. A rising tide lifts all boats, if you will.
Investors also don’t seem to care that Deckers is being weighed down by Ugg. They see that Hoka is expanding with wholesalers and expanding internationally, and they see potential for growth.