In This Article:
Deckers Outdoor Corporation DECK has witnessed a significant decline over the past month, with its shares plummeting 25.9%, underperforming the Zacks Retail-Apparel and Shoes industry's drop of 7.9%. The company also trailed the Retail-Wholesale sector’s fall of 4.5% and the S&P 500's decline of 3.3% during the same period.
Deckers’ Past-Month Performance
Image Source: Zacks Investment Research
The recent decline in the DECK stock’s price is primarily led by slowing growth and heightened competition across the footwear and accessories space. A deceleration in revenues due to inventory constraints affecting key brands like UGG and looming gross margin pressure in the fourth quarter fiscal 2024 has weighed on investor sentiment.
The Deckers stock has also underperformed its peers, including Boot Barn Holdings, Inc. BOOT, Adidas ADDYY and Skechers U.S.A., Inc. SKX.
Shares of Boot Barn, Adidas and Skechers have tumbled 14%, 16.4% and 17.5%, respectively, in the said period.
Image Source: Zacks Investment Research
Closing at $100.88 in yesterday’s trading session, the DECK stock stands almost 55% below its 52-week high of $223.98 attained on Jan. 30, 2025. Deckers is trading below its 50 and 200-day simple moving averages of $146.43 and $164.20, respectively, signaling bearish sentiment in maintaining the recent performance levels.
DECK Trades Below 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
Despite the downside, Deckers is currently trading at a forward 12-month P/S ratio of 3.09, which significantly exceeds the industry average of 1.45 and the sector average of 1.50. While this premium suggests strong investor confidence in the brand's long-term potential, it also heightens valuation risk. If the company continues to face slowing growth and margin pressure, the elevated multiple may prove difficult to sustain, leading to a sharper correction.
This premium positioning is especially notable when compared with peers like Boot Barn (with a forward 12-month P/S of 1.56), Skechers (0.73) and Adidas (1.35).
DECK Looks Expensive From Valuation Standpoint
Image Source: Zacks Investment Research
Analyzing Deckers’ Recent Slide
DECK is navigating a complex macroeconomic environment marked by inventory constraints and mounting margin pressures that are set to dampen its near-term growth. The company is facing a slowdown in the fourth quarter of fiscal 2025 due to limited inventory, particularly for UGG, stemming from accelerated demand fulfillment earlier in the fiscal year.
This could impact revenues, with management already signaling an adverse comparison for UGG, which grew 16.1% year over year in the fiscal third quarter. We expect UGG sales to decline 13.2% in the final quarter, which is likely to weigh on the top line. Our model suggests overall sales growth to decelerate to 1% in the fiscal fourth quarter from 17.1% in the third quarter.
Increased markdowns and promotional activity, particularly for HOKA as it undergoes a model transition, are likely to weigh on margins in the final quarter. Additionally, a 150-basis-point impact of higher freight costs and roughly 50 basis points of foreign exchange pressures are expected to dent profitability further.
Deckers has been contending with rising costs and operational expenses. In the fiscal third quarter alone, SG&A expenses rose 24.9% year over year to $535.3 million. This uptick was largely fueled by increased marketing spend, unfavorable foreign currency impacts and an expanded workforce. With management reaffirming full-year SG&A guidance at 35% of revenues, the company’s operating margin is likely to be under continued pressure.