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DECK Looks Overvalued at 2.67X: Time to Buy, Hold or Sell the Stock?
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Key Takeaways
Tariffs, wholesale mix shifts and elevated inventory are weighing on DECK's near-term margins.
HOKA and UGG both exceeded growth targets in Q1, fueled by innovation and expansion.
International revenues jumped 49.7% y/y in Q1, with strong gains in Europe, APAC and China.
Deckers Outdoor Corporation (DECK - Free Report) is trading at a price-to-sales (P/S) multiple above the Zacks Retail-Apparel and Shoes industry average. DECK’s forward 12-month P/S ratio sits at 2.67, higher than the industry’s average of 1.64.
DECK Looks Expensive From Valuation Standpoint
Image Source: Zacks Investment Research
This premium positioning is especially notable when compared with peers such as Boot Barn Holdings, Inc. (BOOT - Free Report) , which has a forward 12-month P/S of 2.22; Under Armour, Inc. (UAA - Free Report) at 0.43; and Crocs, Inc. (CROX - Free Report) at 0.99.
DECK is trading at a premium despite the recent decrease in its stock price. The company has witnessed a significant decline over the past three months, with its shares plummeting 22.3%, underperforming the industry's drop of 2.1%.
The drop reflects margin pressures from a shift toward lower-margin wholesale sales, higher costs from tariffs and freight, and softer U.S. direct-to-consumer (DTC) trends for HOKA. Elevated inventory levels have further dampened sentiment, raising concerns over potential markdowns and near-term earnings softness. The company also trailed the Retail-Wholesale sector’s rally of 3.5% and the S&P 500's growth of 9.3% during the same period.
Deckers’ Past 3 Months’ Performance
Image Source: Zacks Investment Research
The DECK stock has underperformed its peers in the past three months, including Boot Barn, and Under Armour. During the said time frame, shares of Boot Barn have gained 22.2%, while Under Armour and Crocs have declined 18.3% and 36.3%, respectively.
Image Source: Zacks Investment Research
Closing at $100.47 in yesterday’s trading session, Deckers’ stock stands 55.1% below its 52-week high of $223.98 attained on Jan. 30, 2025. DECK is trading below its 50 and 200-day simple moving averages of $104.82 and $143.82, respectively, signaling bearish sentiment in maintaining the recent performance levels.
DECK Trades Below 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
What’s Weighing on Deckers’ Performance?
DECK is contending with multiple operational and macroeconomic headwinds that are expected to challenge profitability through fiscal 2026. A primary concern is the anticipated $185 million in unmitigated tariff costs, largely tied to a potential increase in Vietnam import duties from 10% to 20%. Management’s staggered price increases and partial cost-sharing with suppliers will not fully offset this impact, resulting in a persistent gross margin pressure throughout the year.
The company’s gross margin fell 110 basis points year over year to 55.8% in the first quarter of fiscal 2026, reflecting an unfavorable channel mix with wholesale growing faster than DTC, increased promotional activity and elevated freight costs. We expect the gross margin to contract 220 basis points year over year to 55.7% in fiscal 2026. In the fiscal second quarter, we expect the gross margin to shrink 220 basis points year over year.
Weakness in HOKA’s U.S. DTC business is limiting profitability. Although international DTC sales remain strong, domestic performance continues to lag due to sluggish online demand, limited store presence and a consumer shift toward in-store wholesale shopping. Management’s strategy to address these headwinds through loyalty program improvements, store expansion and more disciplined product launches will take time to produce meaningful results, keeping near-term recovery uncertain.
An elevated inventory position adds another layer of risk. Inventory at the end of the fiscal first quarter totaled $849 million, up 13% from a year earlier. While some of this reflects warehousing transitions in EMEA and strategic stock positioning, excess inventory may trigger higher markdowns if consumer demand softens or product introductions fail to resonate.
Finally, selling, general and administrative expenses are trending higher. SG&A rose 11% year over year in the fiscal first quarter to $373 million, fueled by higher marketing spend, EMEA warehouse transition costs and retail expansion-related rent. Moreover, a short-term increase in the SG&A expense-to-revenue ratio is expected as the company leverages its unique position to invest in its brands for long-term growth. We expect SG&A expenses to deleverage 40 bps in the fiscal 2026, with the operating margin expected to contract 250 bps.
Does DECK Still Have Potential?
Deckers is strengthening its brand portfolio with innovative product launches and optimized distribution strategies, positioning itself for long-term growth. The rising popularity of UGG and HOKA, along with a balanced product mix and expanding global presence, sets the company up to seize significant growth opportunities.
In the fiscal first quarter, both HOKA and UGG exceeded their growth targets, with HOKA rising 19.8% to $653.1 million and UGG growing 18.9% to $265.1 million. These results reflect the brands’ resonance across performance and lifestyle segments, underpinned by steady product innovation, wholesale expansion and deepening global consumer engagement. For the second quarter of fiscal 2026, HOKA is projected to grow 10%, while UGG is expected to increase in the mid-single digits.
International markets remain a powerful growth driver for Deckers, with companywide international revenues rising 49.7% year over year in the fiscal first quarter. HOKA saw record wholesale reorders in Europe and strong momentum in the APAC region, including growth in China through mono-brand partner stores and owned retail. UGG also benefited from international demand, with EMEA and China delivering the largest year-over-year gains. We expect revenues from international regions to increase 20.6% in fiscal 2026.
Innovation and brand storytelling are central to Deckers’ growth strategy. HOKA continues to invest in design, product development and category expansion, with launches such as Arahi 8, Mafate 5 and Rocket X 3, and the upcoming Mach 7 and Speedgoat updates. UGG is reinforcing its leadership in premium lifestyle footwear through product introductions like the PeakMod clog and updated colorways and silhouettes across core franchises, supporting year-round relevance.
Deckers’ omni-channel and wholesale strategies are driving scalable growth while preserving premium positioning. In the fiscal first quarter, wholesale net sales rose 26.7% to $652.4 million, led by HOKA’s 30% increase in global wholesale revenues. Growth was fueled by record reorders in EMEA, strong performance in China, and deeper relationships with partners such as JD Group, Intersport and Sport Chek. Wholesale growth significantly outpaced physical store expansion, reflecting higher productivity per door.
While wholesale was the primary growth driver, DTC increased modestly, supported by international momentum and selective retail expansion in global cities like Berlin and Milan to enhance brand experiences. We expect a 14% increase in Wholesale revenues in fiscal 2026.
How to Play Deckers’ Stock?
While DECK continues to deliver strong brand performance, international growth and consistent product innovation, its recent stock performance reflects meaningful near-term headwinds. Margin pressures from tariffs and a wholesale-heavy mix, softer U.S. HOKA DTC trends, and an elevated valuation create risks if operational improvements take longer to materialize. The long-term growth story remains compelling, but the path forward may be uneven in the short run.
Investors may need to be patient as this Zacks Rank #3 (Hold) stock navigates current challenges while positioning for sustained growth ahead.
Image: Bigstock
DECK Looks Overvalued at 2.67X: Time to Buy, Hold or Sell the Stock?
Key Takeaways
Deckers Outdoor Corporation (DECK - Free Report) is trading at a price-to-sales (P/S) multiple above the Zacks Retail-Apparel and Shoes industry average. DECK’s forward 12-month P/S ratio sits at 2.67, higher than the industry’s average of 1.64.
DECK Looks Expensive From Valuation Standpoint
Image Source: Zacks Investment Research
This premium positioning is especially notable when compared with peers such as Boot Barn Holdings, Inc. (BOOT - Free Report) , which has a forward 12-month P/S of 2.22; Under Armour, Inc. (UAA - Free Report) at 0.43; and Crocs, Inc. (CROX - Free Report) at 0.99.
DECK is trading at a premium despite the recent decrease in its stock price. The company has witnessed a significant decline over the past three months, with its shares plummeting 22.3%, underperforming the industry's drop of 2.1%.
The drop reflects margin pressures from a shift toward lower-margin wholesale sales, higher costs from tariffs and freight, and softer U.S. direct-to-consumer (DTC) trends for HOKA. Elevated inventory levels have further dampened sentiment, raising concerns over potential markdowns and near-term earnings softness. The company also trailed the Retail-Wholesale sector’s rally of 3.5% and the S&P 500's growth of 9.3% during the same period.
Deckers’ Past 3 Months’ Performance
Image Source: Zacks Investment Research
The DECK stock has underperformed its peers in the past three months, including Boot Barn, and Under Armour. During the said time frame, shares of Boot Barn have gained 22.2%, while Under Armour and Crocs have declined 18.3% and 36.3%, respectively.
Image Source: Zacks Investment Research
Closing at $100.47 in yesterday’s trading session, Deckers’ stock stands 55.1% below its 52-week high of $223.98 attained on Jan. 30, 2025. DECK is trading below its 50 and 200-day simple moving averages of $104.82 and $143.82, respectively, signaling bearish sentiment in maintaining the recent performance levels.
DECK Trades Below 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
What’s Weighing on Deckers’ Performance?
DECK is contending with multiple operational and macroeconomic headwinds that are expected to challenge profitability through fiscal 2026. A primary concern is the anticipated $185 million in unmitigated tariff costs, largely tied to a potential increase in Vietnam import duties from 10% to 20%. Management’s staggered price increases and partial cost-sharing with suppliers will not fully offset this impact, resulting in a persistent gross margin pressure throughout the year.
The company’s gross margin fell 110 basis points year over year to 55.8% in the first quarter of fiscal 2026, reflecting an unfavorable channel mix with wholesale growing faster than DTC, increased promotional activity and elevated freight costs. We expect the gross margin to contract 220 basis points year over year to 55.7% in fiscal 2026. In the fiscal second quarter, we expect the gross margin to shrink 220 basis points year over year.
Weakness in HOKA’s U.S. DTC business is limiting profitability. Although international DTC sales remain strong, domestic performance continues to lag due to sluggish online demand, limited store presence and a consumer shift toward in-store wholesale shopping. Management’s strategy to address these headwinds through loyalty program improvements, store expansion and more disciplined product launches will take time to produce meaningful results, keeping near-term recovery uncertain.
An elevated inventory position adds another layer of risk. Inventory at the end of the fiscal first quarter totaled $849 million, up 13% from a year earlier. While some of this reflects warehousing transitions in EMEA and strategic stock positioning, excess inventory may trigger higher markdowns if consumer demand softens or product introductions fail to resonate.
Finally, selling, general and administrative expenses are trending higher. SG&A rose 11% year over year in the fiscal first quarter to $373 million, fueled by higher marketing spend, EMEA warehouse transition costs and retail expansion-related rent. Moreover, a short-term increase in the SG&A expense-to-revenue ratio is expected as the company leverages its unique position to invest in its brands for long-term growth. We expect SG&A expenses to deleverage 40 bps in the fiscal 2026, with the operating margin expected to contract 250 bps.
Does DECK Still Have Potential?
Deckers is strengthening its brand portfolio with innovative product launches and optimized distribution strategies, positioning itself for long-term growth. The rising popularity of UGG and HOKA, along with a balanced product mix and expanding global presence, sets the company up to seize significant growth opportunities.
In the fiscal first quarter, both HOKA and UGG exceeded their growth targets, with HOKA rising 19.8% to $653.1 million and UGG growing 18.9% to $265.1 million. These results reflect the brands’ resonance across performance and lifestyle segments, underpinned by steady product innovation, wholesale expansion and deepening global consumer engagement. For the second quarter of fiscal 2026, HOKA is projected to grow 10%, while UGG is expected to increase in the mid-single digits.
International markets remain a powerful growth driver for Deckers, with companywide international revenues rising 49.7% year over year in the fiscal first quarter. HOKA saw record wholesale reorders in Europe and strong momentum in the APAC region, including growth in China through mono-brand partner stores and owned retail. UGG also benefited from international demand, with EMEA and China delivering the largest year-over-year gains. We expect revenues from international regions to increase 20.6% in fiscal 2026.
Innovation and brand storytelling are central to Deckers’ growth strategy. HOKA continues to invest in design, product development and category expansion, with launches such as Arahi 8, Mafate 5 and Rocket X 3, and the upcoming Mach 7 and Speedgoat updates. UGG is reinforcing its leadership in premium lifestyle footwear through product introductions like the PeakMod clog and updated colorways and silhouettes across core franchises, supporting year-round relevance.
Deckers’ omni-channel and wholesale strategies are driving scalable growth while preserving premium positioning. In the fiscal first quarter, wholesale net sales rose 26.7% to $652.4 million, led by HOKA’s 30% increase in global wholesale revenues. Growth was fueled by record reorders in EMEA, strong performance in China, and deeper relationships with partners such as JD Group, Intersport and Sport Chek. Wholesale growth significantly outpaced physical store expansion, reflecting higher productivity per door.
While wholesale was the primary growth driver, DTC increased modestly, supported by international momentum and selective retail expansion in global cities like Berlin and Milan to enhance brand experiences. We expect a 14% increase in Wholesale revenues in fiscal 2026.
How to Play Deckers’ Stock?
While DECK continues to deliver strong brand performance, international growth and consistent product innovation, its recent stock performance reflects meaningful near-term headwinds. Margin pressures from tariffs and a wholesale-heavy mix, softer U.S. HOKA DTC trends, and an elevated valuation create risks if operational improvements take longer to materialize. The long-term growth story remains compelling, but the path forward may be uneven in the short run.
Investors may need to be patient as this Zacks Rank #3 (Hold) stock navigates current challenges while positioning for sustained growth ahead.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.