Deckers' Overvalued Run Ends Ahead of Earnings: Time to Exit?

The clock is ticking for investors in Deckers Outdoor Corp (DECK). With its May 22 earnings report looming and a Forward P/E ratio of 18.15—a 25% premium to its Footwear & Accessories subindustry average of 15.39—the disconnect between valuation and fundamentals has never been clearer. This overvaluation comes as analysts anticipate a 32.5% year-over-year decline in EPS, signaling a critical inflection point for the stock.

Valuation vs. Reality: A Growing Chasm

Deckers’ premium multiple rests on a shaky foundation. While its Forward P/E of 18.15 places it above both its footwear peers and broader apparel retailers (which average 13.78), the company’s recent performance tells a starkly different story. Revenue growth has slowed to a crawl, and margin pressures from rising supply chain costs and inventory overhangs are undermining profitability.

This chart reveals how DECK’s stock has outperformed its sector over the past year despite deteriorating fundamentals—a divergence that is unlikely to persist post-earnings.

The Earnings Downgrade: A 32.5% EPS Collapse

Analysts now project a 32.5% year-over-year drop in EPS for the quarter ending May 2025, driven by weaker-than-expected sales of UGG boots and Teva sandals. This marks a sharp reversal from the 20% EPS growth projected at the start of the year. With inventory levels at multiyear highs—up 18% year-over-year—Deckers risks discounting its products to clear excess stock, further squeezing margins.

The steady downward revision of earnings targets underscores the growing skepticism among analysts about Deckers’ ability to sustain its pricing power.

Margin Headwinds and the Sell Signal

Margin contraction is the silent killer here. Deckers’ gross margin has fallen from 48.5% in 2022 to an estimated 44% in 2025, as input costs rise and competitors like Crocs (CROX) undercut pricing. With a Zacks Rank of #4 (Sell)—a rating reserved for stocks with the highest risk of underperformance—the market is already pricing in disappointment.

Peer Comparison: Why DECK’s Valuation Doesn’t Hold Up

While Deckers trades at 18.15x forward earnings, its peers are far cheaper:
- Crocs (CROX): 7.56x (with stronger recent sales momentum)
- Skechers (SKX): 16.60x (better inventory management)
- Boot Barn (BOOT): 16.36x (growing market share in outdoor apparel)

Investors are clearly voting with their wallets: DECK’s premium is unwarranted in a sector where cheaper alternatives offer better growth profiles.

Why Sell Now?

The May 22 earnings report is a catalyst for a reckoning. Even a minor miss on EPS or guidance could trigger a sharp selloff, especially as over 60% of institutional investors hold DECK as a “buy” or “overweight.” With valuation stretched, fundamentals weakening, and peers trading at far more reasonable multiples, the risk-reward calculus is skewed heavily against holding this stock.

Final Call: Deckers’ overvaluation and deteriorating fundamentals make it a high-risk hold ahead of its earnings. Investors would be wise to exit now—before the market’s verdict swings decisively against them.

Disclosure: This analysis is for informational purposes only and does not constitute investment advice.