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Here's Why Deckers (DECK) Looks Like a Solid Pick for 2021

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Strength in the company’s brands, direct-to-consumer platform and positive impacts of the solid execution of its strategies are working in favor of Deckers Outdoor Corporation (DECK - Free Report) . The company’s focus on expanding brand assortments, introducing more innovative line of products, targeting consumers digitally and optimizing omni-channel distribution are additional tailwinds. Impressively, the Goleta, CA-based company’s shares have surged a whopping 80.2% over the course of a year and outpaced the industry’s 38.7% rally.

Let’s Delve Deep

In keeping with the changing trends, Deckers is constantly developing its e-commerce portal to capture incremental sales. The company has made substantial investments to strengthen its online presence and improve shopping experience for its customers. It is focused on opening smaller concept omni-channel outlets and expanding programs such as Retail Inventory Online; Infinite UGG; Buy Online, Return In Store; and Click and Collect to enhance customers’ shopping experience.

Encouragingly, the company’s direct-to-consumer business was robust throughout the second quarter of fiscal 2021. In fact, all of its five brands saw exceptional growth online in the fiscal second quarter, thus increasing the mix of direct-to-consumer revenue to 28% from 18% last year. The total global direct-to-consumer revenue jumped 74.2% in fiscal second quarter, backed by robust customer acquisition online and a sequential growth in retail performance. From a comparable-sales view, direct-to-consumer surged 86% year over year.

Deckers also remains focused on product innovations and launches. The company is making marketing investments to build brand awareness of HOKA ONE ONE and UGG Men’s and UGG Women’s non-core category. Globally, HOKA customer acquisition and retention online surged 81% and 92%, respectively, in the fiscal second quarter. Notably, HOKA is fueling the company’s direct-to-consumer business across the globe.
 
Apparently, international HOKA direct-to-consumer has grown more than 150% in the first half of the fiscal. Management said that HOKA is likely to reach $500 million by this fiscal end. Over the long term, it is expected to reach the $1-billion mark.

Wrapping Up

While the aforementioned factors boost optimism, Deckers is not spared of challenges. With respect to the pandemic, the company has been evolving its operations. Management anticipates few retail store closures across EMEA for at least some point in fiscal third quarter owing to the volatile pandemic-induced conditions. Moreover, management expects operational headwinds like capacity constraints, including higher levels of e-commerce shipments in peak wholesale-volume periods, and elevated costs with respect to warehouse employee safety and payroll cost.

Nonetheless, Deckers’ restructuring efforts to realign brands, optimize retail-store fleet, and consolidate management and operations, bode well for long-term growth. Strength in the company’s HOKA label and direct-to-consumer channel including e-commerce will continue boosting this Zacks Rank #2 (Buy) company.

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