Will This Company Hit One Into the Upper Deck(ers)?
As we tiptoe into summer, U.S. stocks are sizzling.
The Dow Jones Industrial Average, Nasdaq, and S&P 500 are at all-time highs.
And a big pat on the back goes to artificial intelligence (AI).
Sure, there are fears it may kill us all one day, upend the apple cart for the Etsy (ETSY) entrepreneurs, or swindle us out of all our money by impersonating Scarlett Johansson.
But if the looming AI apocalypse proves true, there’s one item we’re all going to need… No, not guns. The average American already owns as many as five of those. We’re well stocked on those.
I’m talking rugged footwear.
When running for your life your feets can’t be the ones to fail you.
Now, I know the potential for gain-filled gems outside of AI appears slim.
But some tried and true businesses are flourishing. Particularly those that make a wide range of rugged footwear. And that’s what we’re going to explore today with a fresh pair of trail runners.
A Shoe for Every Season
Deckers Outdoor (DECK) is the maker of outdoor apparel, accessories, and footwear. And its business is racing along!
Its portfolio of brands includes UGG, HOKA, Teva, Sanuk, and Koolaburra, among others.
Most of us are familiar with the wardrobe staple of the Pumpkin Spice Latte crowd, UGGs. Tevas are durable sandals popular with suburbanites and non-conformists. And HOKA are in that class of comically thick-soled, high-end trainers like On Holding (ONON). They’re extremely comfortable and fans boisterously sing their praises. Though, when wearing them you feel three inches taller than normal.
But this stable of stable brands provides a lot of horsepower for Deckers.
Over the past year, shares have doubled.
Over the past five years, shares have gained nearly 500%!
And it’s left competitors Adidas (ADDYY), Columbia Sportswear (COLM), Lululemon (LULU), Nike (NKE), Sketchers (SKX), and Under Armour (UA) eating its dust. The only shares that have kept pace with Deckers have been Crocs (CROX).
But as we’ve seen a mixed bag of earnings results from retailers, can we expect Deckers to keep running?
Hitting One to the Upper Deck(ers)
Tech stocks are notorious for raking in dough but failing to turn a profit. This isn’t the case for Deckers.
In its fiscal year 2024 third quarter, the footwear maker reported a 16% increase in revenue to a record $1.6 billion. UGGs accounted for the majority of sales, totaling $1.072 billion. But the largest growth was seen from HOKA and Sanuk, both posting increases of more than 20%.
For the third quarter, Deckers saw a 44% surge in earnings per share (EPS) to $15.11. That beefy figure is thanks to a small float of a mere 25.4 million shares. For comparison, Nvidia shares trade an average of 49.8 million shares per day on a float of 2.4 billion shares.
But UGG flag-bearer raised its full-year guidance to $4.15 billion, an uptick of 14% over 2023. And said it should see earnings for its fiscal year 2024 to be $26.37 per share.
On this upbeat outlook, Deckers shares jumped 14.1% to what was then a new 52-week and all-time high.
Now, on May 23, after the closing bell, Deckers will report fourth quarter results. Wall Street is looking for $887.55 million in revenue with EPS of $2.89. For 2025, we want to see guidance of $4.71 billion in revenue with earnings of $30.27 per share.
Once again, we’re going to turn to VertEA to provide insights others may miss…
In 2014, Deckers shifted its fiscal year. This meant it was no longer reporting fourth quarter results in February, but now at the end of May. So, we’re going to use data from this stretch.
But let me tell you, this is a beautiful trend to behold…
Since 2015, shares of Deckers have fallen on fourth quarter results once. And that was in 2015.
After that, it’s been eight consecutive years of one-day gains on this earnings release. Not to mention, the average one-day move since 2015 is a fantastic 6.74%.
Generally, I avoid retail in the first quarter. There’s a large step down in sales from the fourth quarter – the holiday shopping season – and investors tend to turn negative on the outlook and punish shares.
My one exception is athleisure and footwear. These tend to do well during this time of year. Everyone needs new shoes and gear for summer vacations and the warmer weather.
For example…
Crocs shares are averaging a one-day move of 3.92% on first quarter results, and they just jumped 7.79% on this report on May 7.
On Holding shares are averaging a one-day move of 3.2% on first quarter results and rallied 18.28% on this report on May 14.
Sketchers shares surged 11.2% on first quarter results on April 25.
Deckers shares have risen on fiscal year fourth quarter results for eight consecutive years. That’s as solid of a trend as they come. And June and July are historically two of the best months for shares.
Not looking for these feets to fail me now,
Matthew
P.S. Thank you Greg for the recommendation! Hope it helps!