24/7 Wall Street Insights
- Deckers Outdoor (NYSE: DECK) has taken its focus in footwear on a tear in 2024, up +54.6% since the beginning of January to pricing at the time of this writing.
- The popularity of Deckers Outdoor HOKA and UGG brands have continued to grow by double digits over the past few quarters.
- With its stock price reaching a high of $1,100 of late, Deckers Outdoor may be poised to announce a forward stock split sometime in 2024.
- For investors seeking dividends, click here for a free report on two high dividend stocks.
DJ Khaled is one of the most popular and successful music producers and record executives in the music business today. His hit records with Drake, Lil Wayne, Chance the Rapper, Snoop Dogg, Rihanna, Rick Ross, John Legend, and Jay-Z are loved by millions around the world. Despite all of the awards and music industry accolades, DJ Khaled has one milestone most likely to qualify him for the Guinness Book of World Records. It is his 10,000+ sneaker collection, worth over $8 million, or 10% of his net worth.
Footwear has long been a huge business. The average person in the US is estimated to own as many as 12 pairs of shoes, including boots, sneakers, etc. The first homegrown IPO deal by the infamous Stratton Oakmont, led by Leonardo DiCaprio’s Jordan Belfort in The Wolf of Wall Street, was for shoe designer Steve Madden Ltd. (NASDAQ: SHOO).
Deckers Outdoor has come a very long way from its 1973 origins selling flip-flop sandals at California craft fairs. In the past 24 months, the stock has gone from $269 to $1,044, a nearly fourfold price appreciation. 24/7 Wall Street has published past articles on Deckers Outdoor.
From Decker Sandals to Teva and NASDAQ
Prior to serving as CEO for enterprise resource software company QAD Inc., Deckers Outdoor was founded by Karl Lopker, along with college classmate Doug Otto, in 1973. After attending University of California, Santa Barbara, the two launched a cottage industry, designing and selling flip-flops at various fairs along the Pacific West Coast. The flip-flops utilized a unique striped layered sole construction. Lopker and Otto chose the name “Decker” for their company, after hearing Hawaiian locals call their sandals “deckas” due to their resemblance to stacks of wood.
As the company grew, Lopker saw in 1979 a need for manufacturing management software, and turned to his girlfriend and future wife, Pamela, for help. A fellow University of California Santa Barbara alum, Pamela Meyer was a software prodigy who had been writing software for the radar defense systems of a Naval defense contractor. The resulting software, which tracked sales, inventory and shipments, became the forerunner of MFG/PRO, one of the first software products designed specifically for manufacturers. Lopker would go on to sell his Deckers stake to Otto and join Pamela, whom he married in 1981, as CEO of QAD, Inc. in 1982.
During the mid-1980s, armed with its customized efficiency boosting software, Deckers scored a major deal with Teva for production and distribution. Founded by geophysicist Mark Thatcher, Teva sandals were originally designed for water sports. By 1984, Teva sandals had developed a fashion minded cult following. With Deckers handling mass production, the Teva sandal straps were redesigned with ankle and side straps for better wearability, and the brand took off for mass marketing. This would fuel the company’s fortunes to grow sufficiently to achieve a public NASDAQ listing in 1993. Deckers would subsequently buy out all of Teva’s patents and intellecual property in its entirely in 2002.
UGG and The Oprah Effect
In 1995, Deckers purchased UGG Holdings. The comfortably unique sheepskin and wool designed UGG boots brand has gone on to become Deckers Outdoor’s largest revenue source. Founded in 1978 by Australian surfer Brian Smith, UGG had a burgeoning loyal following that exploded in 2003 when UGG was featured on Oprah Winfrey’s “My Favorite Things” segment on an episode from her TV show. UGG became a “must-have” fashion brand overnight, and it continues to sell huge numbers to this day. Deckers Outdoor has since expanded the UGG brand to include sneakers, slippers, shoes, and socks.
Hoka and The Leap To Competitive Running Sports
Entering the second decade of the 21st century, Deckers Outdoor had made a name for itself in the leisure and fashion footwear segments. Its next acquisition, Hoka, put the company on the map for athletics – specifically, in competitive running and track and field sports.
Founded in France, Hoka’s distinctive oversized outsole was designed for faster downhill running. Its maximum cushion, low weight, and solid stability swiftly found favor among marathoners and cross country racers. Since Deckers Outdoor acquired Hoka in 2013, the company has also designed and marketed additional lines. These include: racing sneakers, trail running sneakers, training shoes for sprinters, spiked track and field competitor shoes, and general training shoes for other athletes. Additionally, Hoka has released a line of orthopedic and hiking shoes to its catalog.
Rounding Out The Team
Deckers Outdoor also owns the Sanuk, AHNU and Koolabura casual footwear brands. If UGG and Hoka are the equivalent to the Dallas Mavericks’ superstars Luka Dončić and Kyrie Irving, Sanuk, AHNU and Koolabura are the important players that round out the team.
- Sanuk was founded in 1997. Its sandals and hemp shoes are endorsed by skiers, snowboarders, yogis, and surfers, such as Lauren Hill and Ben Gravy.
- AHNU is the Deckers Outdoor everyday fashionable sneaker brand for men and women.
- Koolabura was originally a high-end UGG competitor with manufacturing from Vietnam. After losing a lawsuit over use of the UGG name in its marketing, Koolabura was eventually acquired by Deckers Outdoor. Koolabura is now a subsidiary of UGG and is its de facto budget brand. For example, Koolabura boots look similar to UGG, but instead of wool, they are lined with faux synthetic fur.
Why Deckers Outlook Is Primed For a Stock Split
With a nearly 400% gain in just the last 24 months, Deckers Outlook stock sits close to $1,100 per share. There are several reasons to believe a forward stock split may be on the table for 2024.
Based on its latest fiscal Q4 2024 report released in May, 2024, there is strong bullish sentiment that the gain will continue, as analysts’ prognostications were blown away by the following:.
- Deckers Outdoor’s sales reported $959.8 million, a net 21.2% sales increase.
- Hoka sales were up 34% to $533 million. Analysts had predicted a -14% decline.
- UGG sales were up almost 15% to $361.3 million. Analysts predicted a -5.4% decline.
- Wholesale sales were up 21.4% and Direct-to-consumer sales increased 21%.
- Deckers Outdoor EPS was $4.95, obliterating the analyst target of $2.89.
- On May 21st, Deckers stock was at $910.74. Barclays lowered its 12-month price target for Deckers from $1,110 to $1,026. Within 3 days, Deckers stock closed above $1,030 and has continued to rise.
As for a stock split:
- Deckers Outdoor has had only one previous stock split, which was a 3-for-1 back in 2010.
- Deckers Outdoor has a calculated Return on Equity of 34%, vs the industry average of 15%.
- The company’s trailing 5 year annual Net Income Growth is 19%, vs the industry average of 12.5%.
- Deckers’ last year earnings growth was 36.7%, vs -17.2% industry average.
- Given that Deckers Outdoor pays no dividend, profits are reinvested into the company. This practice boosts its earnings ratios and fuels justification for increased institutional stock buying.
- Since Deckers Outdoor products are all sold to end-user retail consumers, its Hoka and UGG brands have extremely loyal followings. A stock price reduction to a more retail friendly $100 per share via a 10-for-1 forward stock split could likely spur a bump in individual investor buying.
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