***We are long $DECK.***
Deckers Outdoor, the company behind HOKA running shoes, UGG boots and Teva sandals, is in our view, one of the best businesses in global footwear, and the market is pricing it like one of the worst. The stock is hovering around $80 as of October 8, 2026, down roughly 50% over two years. Over the same period the business kept compounding: in fiscal 2025 (April 2024 to March 2025) revenue grew 16.3% to $4.99 billion and diluted EPS rose 30% to $6.33. In fiscal 2026, revenue grew another 9.8% to a record $5.47 billion, diluted EPS rose 11% to $7.02, and the company bought back $1.08 billion of stock while carrying no debt.
At today’s price, Deckers trades at about 11x management’s fiscal 2027 EPS guidance of $7.35 to $7.50. It earns roughly 41% on total capital and holds about $1.6 billion of cash. We see a growing franchise, while the market seems to treat Deckers as a value trap.
We think the market is extrapolating HOKA’s slowdown into “growth is over.” Here’s why we disagree.
**1. Two brands, bought small, grown big**
* UGG was acquired in 1995 for $14.6M and did $2.74B of sales in FY26 (+8%).
* HOKA was acquired in 2013 with under $3M of sales. It grew from $153M in FY18 to $2.59B in FY26, about 42% a year. Growth has slowed from 50%+ to 16%, but it’s still double digits.
* Total FY26 (ended March 2026): revenue $5.47B (+10%), EPS $7.02 (+11%). FY25 was +16% revenue and +30% EPS.
* UGG isn’t a one-boot brand anymore. The Lowmel and Golden Collection families drove over half of UGG’s FY26 growth, and men’s over 20%.
**2. The growth is now international**
* FY26 international sales grew 27% to $2.28B and are now 42% of revenue. Domestic was flat (+0.2%), partly because Deckers exited the Sanuk and Koolaburra brands.
* International has compounded about 24% a year over five years.
* HOKA is in roughly 50% of targeted US sporting goods doors, 25% of US running specialty, under 20% of relevant European running specialty, and about a third of its China potential.
* The math: if domestic grows 2–4%, international only needs \~14–16% for the company to hit high-single-digit growth. That’s well below its recent pace.
**3. Running itself keeps growing**
* 52.3M Americans ran on roads in 2025, second only to hiking among outdoor activities. Trail running is up 57% since 2019.
* North American ultramarathon finishes went from about 102k in 2021 to a record 153k in 2025.
* Runners replace shoes every 300–500 miles, so this is a repeat purchase.
* HOKA gained about 2 points of US road-running share (Circana) and now has six franchises above $100M in annual sales.
**4. Channels: DTC is building**
* Wholesale is $3.21B (59%, +12%) and DTC is $2.26B (41%, +6%). DTC carries a higher gross margin.
* HOKA’s store count went from 42 to 62 last year (+48%), with 20–25 openings planned per year. That’s the same pace as On (+37%), Birkenstock (+45%) and Amer Sports (\~+40%), while Nike (-4%) and adidas (+5%) are flat to shrinking.
* In Q1 FY27, DTC comps were +6.8%.
**5. Quality vs. peers** (On, Nike, adidas, ASICS, Birkenstock, Crocs, Amer Sports, Steve Madden, Wolverine)
* Gross margin of 57.7% is top tier, behind only On (62.8%), Birkenstock and Crocs. The peer median is \~54%.
* Operating margin was 23.1% in FY26. FY27 is guided to about 21.5% because of tariffs and planned investment.
* Return on total capital of about 41% is the highest in the group.
* The cash conversion cycle of about 44 days is the shortest in the group. Every extra $100M of sales ties up about $12M of cash, versus about $35M at adidas, ASICS or On.
* Marketing runs at about 9% of sales, versus about 10% at Nike and 13–14% at On and adidas. It’s lean for a brand growing this fast.
**6. Balance sheet and capital allocation**
* No debt and $1.6B of cash as of June 2026.
* FY26 buybacks were $1.08B at an average of \~$102. Q1 FY27 added another $338M at \~$104, more than 2% of the company in a single quarter.
* Shares outstanding are down 28% since FY17, and $4.7B of authorization is left, about 40% of the market cap.
* FY27 guidance assumes about 80% of free cash flow goes to buybacks. That was set when the stock was above $100; at \~$82, the same dollars retire about 25% more shares.
**7. Management guides low and beats**
* Actual EPS vs. the first full-year guide: FY24 +10%, FY25 +27%, FY26 +11%.
* Q1 FY27 EPS was $0.94 vs. $0.88 expected, above the top of the company’s own range.
* FY27 guide: revenue $5.86–5.91B (high single digits) and EPS $7.35–7.50, raised after Q1.
* Q1 was +5.7% and Q2 is guided to about +5%, so the full-year guide implies acceleration in H2. Part of this is timing: some HOKA international wholesale shipments shift from H1 to H2.
* CEO Stefano Caroti has been at Deckers since 2015, and his predecessor retired in a planned succession. One critique: incentive pay is tied to operating income and revenue, with no per-share or ROIC metric.
**8. Valuation**
* About 11x FY27 EPS guidance, roughly a 9% earnings yield, and roughly 7x EV/EBIT. That’s the cheapest in the peer group, where the median is \~11.6x.
* Deckers’ expected sales growth sits right at the peer median, yet it trades at about half the multiple of On or Amer Sports.
**9. The return math**
* An \~9% earnings yield returned through buybacks, plus \~8% net income growth, less \~0.5% stock-based dilution, works out to roughly 15% a year at a constant multiple.
* With zero revenue growth, buybacks alone at this price return roughly 8–10% a year. That’s our margin of safety.
* A re-rating is pure upside; it just pulls returns forward.
* Optional upside: deploying $1B of the cash pile at today’s price would add about 7% to EPS on top of guidance. Potential IEEPA tariff refunds, which we estimate at $60–120M net, aren’t in guidance either.
**10. Risks**
* **Brand heat.** Footwear is fickle, and HOKA’s deceleration could keep going.
* **Competition.** On, Nike and adidas are all pushing max-cushion running.
* **Tariffs.** About a 150 bp gross margin hit in Q1, with a higher tariff cost assumption for the rest of FY27.
* **Seasonality.** The holiday quarter is about 36% of sales and 49% of operating income, so one weak winter hurts.
* **Concentration.** Two brands are about 97% of sales.
Our full deep dive with peer charts is linked below. [https://thevaluationdesk1.substack.com/p/the-case-for-deckers-outdoor-nyse?r=bbf11](https://thevaluationdesk1.substack.com/p/the-case-for-deckers-outdoor-nyse?r=bbf11)
*Not Financial Advice.*
