Deckers Outdoor's Crossroads: Can HOKA Stay on Top Amid Slowing Growth and Rising Tariffs?

The fitness footwear market is a battleground, and Deckers Outdoor's HOKA brand—once a rocket ship of growth—now faces headwinds that threaten its dominance. As Q1 2025 results reveal a sharp deceleration in sales momentum and tariff pressures loom, investors must weigh whether this slowdown is a temporary stumble or the start of a longer decline. Let's dissect the numbers and determine if HOKA's allure can endure.

The Growth Slowdown: From Breakout to Reality Check

HOKA's Q4 FY2025 net sales rose just 10% to $586.1 million, a stark contrast to its earlier blistering pace—34.7% growth in Q1 2025 and 23.7% in Q3. The culprit? A U.S. DTC sales slump, driven by macroeconomic anxiety, aggressive promotions on older models, and stalled new customer acquisition. Meanwhile, wholesale channels surged 12.3%, fueled by expanded distribution and the Bondi 9's strong performance.

This shift is critical: wholesale sales, while boosting top-line growth, carry lower margins than DTC. With gross margins already dipping to 56.7% in Q4 (down slightly from 56.2% a year earlier), the margin squeeze could intensify if HOKA leans further into wholesale.

Tariff Pressures: A Manufacturing Headache

Deckers cited U.S. trade policies as a key risk, even though only 5% of its foreign production comes from China. Analysts are perplexed why the company didn't factor in reduced Vietnam tariffs (now at 10%) into its Q1 FY2026 guidance. Competitors like Amer Sports have already adjusted, suggesting Deckers might be underestimating tariff-related cost pressures. If true, this could further pinch margins, especially as HOKA's U.S. DTC recovery remains fragile.

The Competitive Threat: On the Rise, HOKA on the Rocks?

Rivals like On Holding are nipping at HOKA's heels. On reported 40% Q1 2025 growth, leveraging its Swiss heritage and tech-driven designs to attract price-sensitive buyers. HOKA's reliance on promotions and wholesale expansion signals a defensive stance, which risks diluting its premium positioning.

Valuation: A Discounted Champion or a Fallen Giant?

Deckers' stock has fallen sharply, now trading at a P/E ratio of just 15x forward earnings—well below the 22x average of athletic footwear peers. This discount reflects fears of a prolonged slowdown, but it also creates a compelling entry point if HOKA can stabilize its U.S. DTC performance and capitalize on its 50% brand awareness in the U.S. (up from 25% a year ago). International markets, where DTC sales remain robust, offer a buffer against domestic weakness.

The Bottom Line: Buy the Dip or Bail?

HOKA's slowdown isn't irreversible, but the path forward is fraught with risks. Investors should demand two things:
1. DTC Recovery in the U.S.: A rebound in new customer acquisition and a shift away from promotions.
2. Tariff Transparency: Clear guidance on how Deckers will mitigate rising costs.

For now, the stock's valuation and HOKA's enduring brand equity make it a “hold” with a cautious “buy” bias for long-term investors. The near-term risks are real, but HOKA's global footprint and innovation pipeline (like the Bondi 9) suggest it can still outrun the pack—if it acts fast.

Action to Take: Monitor Q2 FY2026 DTC metrics and gross margin trends closely. If HOKA shows signs of stabilization, the current valuation offers a rare opportunity to buy a premium brand at a discount. But investors must stay vigilant—this race isn't over yet.

This analysis balances the urgency of near-term risks with the potential of HOKA's long-term appeal. The decision hinges on whether Deckers can pivot its strategy before the competition overtakes it.