Deckers Outdoor (DECK): Is the Selloff a Buying Opportunity?

The selloff in Deckers Outdoor (DECK) has pushed its valuation to multiyear lows, creating a compelling case for long-term investors. Despite near-term concerns about slowing growth at its HOKA brand and lingering macroeconomic headwinds, the stock's current metrics suggest it may be pricing in more pessimism than is warranted. Let's break down the case for DECK as a value-driven opportunity.

Valuation: A P/E Ratio at Multiyear Discounts

Deckers' trailing P/E ratio has plunged to 16.4x as of July 2025, down sharply from 23.9x at the end of 2023 and well below its 5-year average of 22.27x. This drop reflects both a decline in its stock price and improving earnings: TTM EPS rose to $6.33 in fiscal 2025, up from $5.71 in late 2024. Historically, DECK's P/E has swung wildly—reaching a peak of 332x in 2017 and hitting a trough of 10x in 2015—but the current level sits at 64% of its 10-year average of 31.8x.

When compared to peers, DECK's valuation looks even more attractive. While Nike trades at 24.2x and Columbia Sportswear at 15.6x, DECK's P/E is in line with Skechers (15.0x) but with stronger brand equity and cash reserves. The key question: Is this a sign of undervaluation, or does it reflect legitimate risks?

Financial Resilience: A Cash Fortressed Balance Sheet

Deckers' financial health is rock-solid. As of March 2025, it held $1.89 billion in cash, up 26% from the prior year, with no debt on its balance sheet. This liquidity buffer positions the company to weather macro challenges—such as rising tariffs or supply chain disruptions—without needing external financing.

The company has also been a disciplined capital allocator. In fiscal 2025, it spent $567 million on share repurchases, reducing its outstanding shares and boosting EPS. With a remaining $2.5 billion buyback authorization as of May 2025, management clearly believes in DECK's long-term value.

Growth Potential: Beyond HOKA's Slowdown

Critics point to HOKA's decelerating growth as a red flag. The brand, once a 50%+ grower, now faces tougher comparisons and a saturated running shoe market. However, DECK's portfolio isn't one-trick pony:

1. UGG Dominance: UGG remains a cash cow, with winter sales consistently driving profits. Its “ugly Christmas sweater”-style boots have become a cultural staple, and the brand's 2025 holiday campaign generated record revenue.
2. Teva and Sanuk: These brands, targeting adventure and casual wear, have shown resilience. Teva's 2025 sales grew 8% as consumers shifted toward outdoor activities.
3. Innovation Pipeline: DECK has invested in sustainable materials and tech-driven products, such as HOKA's “carbon-neutral” line and UGG's vegan boot collection.

Historically, DECK has shown a knack for bouncing back after downturns. Its 2015-2017 trough—when the P/E hit 10x—ended with a 400%+ stock surge over five years. Today's valuation feels similarly primed for a rebound if management can stabilize growth.

Near-Term Risks: Tariffs and Overstocked Inventories

Bearish arguments focus on two issues:
1. Tariff Exposure: ~25% of DECK's sales come from China, making it vulnerable to retaliatory tariffs. However, the company has mitigated this risk by diversifying suppliers to Vietnam and Mexico.
2. Inventory Levels: Inventories rose to $778 million by September 2024, up 7% year-on-year. While this could pressure margins if demand slows, the increase aligns with DECK's strategy to stockpile ahead of peak seasons.

Conclusion: A Value Play with Margin of Safety

Deckers' current valuation, combined with its fortress balance sheet and diversified brand portfolio, suggests the selloff has overdiscounted its risks. The stock trades at 16.4x forward earnings—well below its historical norms—and offers a margin of safety for investors willing to look past short-term headwinds.

Investment Takeaway: DECK is a buy for long-term investors seeking a blend of value and growth. The stock's 30%+ decline from its 2023 highs has created a rare entry point. Monitor for signs of stabilization in HOKA's growth and UGG's holiday performance, but for now, the math leans bullish.