Deckers Outdoor's (DECK) Hoka and Ugg brands remain strong, while the company's gross margin shows it is protecting brand image in a promotional market rather than chasing low-quality sales, UBS said in a note Friday.
The company reported Thursday fiscal Q2 earnings of $2.31 per diluted share, up from $1.82 a year earlier and above FactSet estimate of $1.79. Revenue for the quarter was $1.48 billion, below the consensus of $1.51 billion.
UBS said the margin discipline should serve Deckers well once pricing in athletic footwear becomes more rational. The brokerage said both brands retain multiple growth drivers, including international expansion, direct-to-consumer stores and new product categories, and that inventory remains well controlled despite lower sales guidance.
The bank said it expects Deckers' sales growth to recover over the next six to 12 months, which should improve sentiment that it believes has deteriorated because of slowing US growth. It said the current share price reflects little expected growth.
The brokerage raised its fiscal 2027 earnings per share estimate 7% to $8.00, mainly on tariff refunds received under the International Emergency Economic Powers Act. It trimmed fiscal 2028 and 2029 estimates by about 1% on softer recent trends in Hoka and Ugg, particularly in US direct-to-consumer sales.
UBS reiterated its buy rating and cut its price target to $137 per share from $140.
Price: 80.39, Change: -4.89, Percent Change: -5.74
