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Can Deckers Sustain Operating Margin Momentum Amid Tariff Pressures?
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Key Takeaways
DECK's Q4 operating income rose 20.6% to $173.9M, with operating margin expanding to 17%.
Gross margin improved to 56.7%, driven by full-price UGG sales and a favorable brand mix.
DECK achieved a 23.6% operating margin for fiscal 2025, up 200 bps from the prior year.
Deckers Outdoor Corporation (DECK - Free Report) reported an operating income of $173.9 million for the fourth quarter of fiscal 2025, reflecting a 20.6% increase year over year. The operating margin rose by 200 basis points (bps) year over year to 17%. This expansion highlights the company’s ongoing success in managing profitability while driving growth across its core brands, HOKA and UGG.
Supporting this operating margin expansion was a 50 bps increase in gross margin, which reached 56.7% during the fourth quarter. This improvement was driven by higher levels of full-price selling within the UGG brand, as well as a favorable product and brand mix. These factors more than offset increased freight costs and headwinds from foreign exchange, further contributing to DECK’s overall profitability.
Deckers also benefited from improved cost efficiency. Selling, general and administrative (SG&A) expenses totaled $405.8 million, representing 39.7% of revenues. This marks a 150-bps improvement over the prior-year quarter, largely attributable to favorable foreign currency exchange remeasurement.
For fiscal 2025, operating income was $1.18 billion, up from $927.5 million. Deckers reported an operating margin of 23.6%, an increase of 200 bps year over year, primarily fueled by strong gross margin performance, which expanded by 230 bps year over year to 57.9%. The improvement reflects a premium product mix, consistent full-price selling across both UGG and HOKA, and disciplined promotional strategies.
Deckers has demonstrated impressive operating margin gains, driven by strong brand mix, full-price selling and cost discipline. However, with management flagging potential headwinds from tariffs and logistics in fiscal 2026, sustaining this momentum will require careful navigation of rising costs without compromising pricing power or efficiency.
DECK’s Margin Performance vs. ADDYY & URBN
Adidas (ADDYY - Free Report) and Urban Outfitters Inc. (URBN - Free Report) are the key footwear companies competing with Deckers in operating margin.
In the first quarter of 2025, Adidas reported an operating profit of €610 million, up 82% from the year-ago period. The operating margin increased by 3.8 percentage points to 9.9%, driven by improved gross margin and strong leverage on overhead costs. Adidas projects its operating profit to increase to a level of €1.7 billion to €1.8 billion in 2025.
In the first quarter of fiscal 2026, Urban Outfitters recorded an operating income of $128.2 million, up 71.8% from $74.6 million in first-quarter fiscal 2025. As a rate of sales, the operating margin increased 340 bps year over year to 9.6%. Urban Outfitters maintains a target of 10% operating margin for fiscal 2026.
DECK’s Price Performance, Valuation & Estimates
Shares of Deckers have lost 49.9% year to date compared with the industry’s decline of 15.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, DECK trades at a forward price-to-earnings ratio of 16.45X, slightly down from the industry’s average of 17.40X. It has a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for DECK’s fiscal 2026 earnings implies a year-over-year decline of 4.4%, whereas the same for fiscal 2027 indicates an uptick of 9.1%. The estimates for fiscal 2026 and 2027 have been southbound in the past 30 days.
Image: Bigstock
Can Deckers Sustain Operating Margin Momentum Amid Tariff Pressures?
Key Takeaways
Deckers Outdoor Corporation (DECK - Free Report) reported an operating income of $173.9 million for the fourth quarter of fiscal 2025, reflecting a 20.6% increase year over year. The operating margin rose by 200 basis points (bps) year over year to 17%. This expansion highlights the company’s ongoing success in managing profitability while driving growth across its core brands, HOKA and UGG.
Supporting this operating margin expansion was a 50 bps increase in gross margin, which reached 56.7% during the fourth quarter. This improvement was driven by higher levels of full-price selling within the UGG brand, as well as a favorable product and brand mix. These factors more than offset increased freight costs and headwinds from foreign exchange, further contributing to DECK’s overall profitability.
Deckers also benefited from improved cost efficiency. Selling, general and administrative (SG&A) expenses totaled $405.8 million, representing 39.7% of revenues. This marks a 150-bps improvement over the prior-year quarter, largely attributable to favorable foreign currency exchange remeasurement.
For fiscal 2025, operating income was $1.18 billion, up from $927.5 million. Deckers reported an operating margin of 23.6%, an increase of 200 bps year over year, primarily fueled by strong gross margin performance, which expanded by 230 bps year over year to 57.9%. The improvement reflects a premium product mix, consistent full-price selling across both UGG and HOKA, and disciplined promotional strategies.
Deckers has demonstrated impressive operating margin gains, driven by strong brand mix, full-price selling and cost discipline. However, with management flagging potential headwinds from tariffs and logistics in fiscal 2026, sustaining this momentum will require careful navigation of rising costs without compromising pricing power or efficiency.
DECK’s Margin Performance vs. ADDYY & URBN
Adidas (ADDYY - Free Report) and Urban Outfitters Inc. (URBN - Free Report) are the key footwear companies competing with Deckers in operating margin.
In the first quarter of 2025, Adidas reported an operating profit of €610 million, up 82% from the year-ago period. The operating margin increased by 3.8 percentage points to 9.9%, driven by improved gross margin and strong leverage on overhead costs. Adidas projects its operating profit to increase to a level of €1.7 billion to €1.8 billion in 2025.
In the first quarter of fiscal 2026, Urban Outfitters recorded an operating income of $128.2 million, up 71.8% from $74.6 million in first-quarter fiscal 2025. As a rate of sales, the operating margin increased 340 bps year over year to 9.6%. Urban Outfitters maintains a target of 10% operating margin for fiscal 2026.
DECK’s Price Performance, Valuation & Estimates
Shares of Deckers have lost 49.9% year to date compared with the industry’s decline of 15.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, DECK trades at a forward price-to-earnings ratio of 16.45X, slightly down from the industry’s average of 17.40X. It has a Value Score of D.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for DECK’s fiscal 2026 earnings implies a year-over-year decline of 4.4%, whereas the same for fiscal 2027 indicates an uptick of 9.1%. The estimates for fiscal 2026 and 2027 have been southbound in the past 30 days.
Image Source: Zacks Investment Research
DECK currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.