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Deckers Brands (NYSE:DECK) delivered a blockbuster holiday quarter, with revenue soaring 17% to a record $1.83 billion, surpassing Wall Street's expectations. Fueled by relentless demand for UGG and HOKA, the company also expanded margins to 60.3%, showcasing pricing power despite a deal-heavy season. With direct-to-consumer sales jumping nearly 18% and international revenue climbing 28.5%, Deckers remains on a multi-year growth trajectory. The company responded by raising its full-year revenue guidance to 15%, marking its fifth consecutive year of double-digit expansion.
Yet, the market was unimpressed. Despite the earnings beat, DECK shares plunged 16.5% in the morning as investors deemed the company's updated guidance conservative. Concerns over lower UGG inventory in Q4 and potential markdowns for HOKA ahead of new launches added to the cautious sentiment. Analysts pointed to a mismatch between Deckers' recent outperformance and its cautious forward outlook, sparking doubts about sustaining its momentum.
Deckers is also making strategic shifts, winding down its Koolaburra brand just months after offloading Sanuk. By doubling down on UGG and HOKA, it aims to cement its leadership in high-margin footwear. While the stock stumbled, Deckers' fundamentals remain robust, with zero debt and a hefty $2.24 billion cash pile. As fiscal 2025 unfolds, the company faces the challenge of proving its conservative guidance wrong while maintaining its winning streak in the competitive footwear landscape.
This article first appeared on GuruFocus.