Deckers (DECK) Stock Slump: Near-Term Storm or Long-Term Opportunity?

Deckers Outdoor Corporation (NYSE: DECK) shares plunged 12.9% on May 23, 2025, after the company reported mixed Q1 2025 results and cautious guidance. While revenue grew 6.5% to $1.02 billion, surpassing estimates, the Q2 outlook—projecting revenue $18.9 million below expectations and EPS 18% lower—sparked investor skepticism. Is this a buying opportunity for the long-term growth story of UGG and HOKA, or a red flag for structural challenges? Let's dissect the catalysts.

The Near-Term Storm: Guidance Misses and Inventory Risks

The immediate catalyst for the selloff lies in Deckers' Q2 2026 guidance, which fell short of expectations. The company cited macroeconomic uncertainty and rising tariffs, particularly for its Asia-sourced products. This comes amid a 4.4% YoY inventory increase to $495.2 million as of March 31, 2025, raising concerns about overstocking or supply chain bottlenecks. Tariffs are projected to add $150 million in costs for FY2026, squeezing margins if not offset by price hikes or efficiency gains.

UGG's seasonality further complicates near-term visibility. While UGG contributed $2.53 billion to FY2025 sales (+13%), its Q4 DTC comparable sales dipped 1.6%—a red flag given its winter-centric appeal. A slowdown in holiday demand could amplify inventory risks, especially if consumers shift to cheaper alternatives.

The Long-Term Horizon: HOKA's Growth and Brand Resilience

Beneath the noise, Deckers' fundamentals remain robust. Its $1.89 billion cash pile and zero debt provide a safety net, while its brands are cash cows. HOKA, the high-margin performance footwear brand, grew 23.6% to $2.23 billion in FY2025, proving its appeal beyond niche runners. Management's focus on expanding HOKA into broader athletic segments—a $20 billion market—could fuel future growth.

E-commerce trends also favor Deckers. Direct-to-consumer (DTC) sales now account for 68% of revenue, up from 61% in 2021, signaling a strong digital strategy. UGG's shift from seasonal retailer to year-round lifestyle brand, driven by expanded product lines like sandals and apparel, adds resilience.

Key Data Points for Investors

• Margin Expansion: Gross margin hit 57.9% (vs. 55.6% in 2024), with operating margins improving to 23.6%. This underscores operational discipline.
• Share Repurchases: A $2.5 billion buyback authorization signals confidence. The company spent $84 million in Q1 alone, reducing shares outstanding by 0.5%.
• Long-Term CAGR: Revenue grew at a 19% CAGR over five years, with EPS expanding at 32%, indicating scalability.

The Verdict: Buy the Dip or Bail?

The selloff presents a compelling entry point for long-term investors. While near-term risks like tariffs and UGG seasonality are valid, they're outweighed by:

1. HOKA's secular growth: The brand's 24% FY2025 growth in a booming athletic market positions it for sustained expansion.
2. Strong financials: A fortress balance sheet and free cash flow (estimated $600 million annually) buffer against short-term headwinds.
3. Valuation: At $109.99 post-selloff, DECK trades at 17.3x FY2025 EPS, below its five-year average of 21x. This discounts the HOKA story and UGG's diversification.

The red flags—inventory risks and guidance—demand monitoring, but they're not existential threats. The lack of full-year guidance is concerning, but Deckers' history of executing through uncertainty (e.g., navigating China's manufacturing dominance) suggests adaptability.

Final Recommendation

Buy DECK for the long term, but stay vigilant. The stock's dip reflects near-term caution, not failure. With HOKA's potential, UGG's reinvention, and a balance sheet to weather volatility, this is a rare opportunity to own a growth story at a discount. Set a stop-loss at $100 to protect against further tariff-related shocks, but hold for the long haul. The storm will pass—HOKA's rise is just beginning.