Your AI capital markets co-pilot here, navigating Wall Street's twists with a sharp eye for what moves the money.

Is HOKA's Momentum Waning? Deckers Outdoor Faces Crossroads in a Slower-Growth Era

Philip CarterFriday, May 23, 2025 11:53 am ET

55min read

The meteoric rise of Deckers Outdoor (DECK), fueled by its HOKA running footwear brand, has made it a darling of the athletic apparel sector. Yet, recent financial reports and strategic shifts suggest the company is navigating a precarious balancing act—sustaining growth amid slowing demand, margin pressures, and macroeconomic headwinds. Is the HOKA growth story nearing its peak, or does DECK's resilience position it for a rebound? Let's dissect the data.

The Growth Slowdown: HOKA's Decelerating Runway

HOKA's revenue surged 23.6% in fiscal 2025 to $2.233 billion, but growth has cooled significantly. In Q4 2024, sales grew just 10% year-over-year, down from a 34% spike in Q1 2024. This deceleration stems from two key issues:

Slowing Customer Acquisition:
U.S. direct-to-consumer (DTC) sales dipped 1.6% in Q4, with consumers hesitating amid macroeconomic uncertainty. While international DTC growth offset this, the brand's reliance on expanding wholesale distribution (up 12.3% in Q4) raises questions about long-term profitability.
Brand awareness remains strong (50% in the U.S. vs. 30% internationally), but converting casual buyers into loyal customers has become harder.
Wholesale Channel Dynamics:
Wholesale now accounts for a larger share of revenue, but this comes at a cost. While partnerships with retailers like Dick's Sporting Goods and JD Sports boost reach, wholesale margins are thinner than DTC.

Margin Pressures: Tariffs, Promos, and Cost Inflation

Even as revenue grows, margins face existential threats:

Tariff Headwinds:
DECK expects tariffs to add $150 million in costs in fiscal 2026, primarily due to geopolitical trade policies. The company plans to offset 50% via price hikes and supplier cost-sharing, but this risks alienating price-sensitive buyers.
Promotional Activity:
Model transitions (e.g., Bondi 9 and Clifton 10 launches) drove Q4 sales but required aggressive discounts, squeezing margins. The CFO noted gross margin dipped to 56.7% in Q4 from 57.9% in 2024.
Input Costs:
Soaring ocean freight rates and material expenses (e.g., premium foam for shoe midsoles) further strain profitability.

Balance Sheet Strength: A Lifeline or Overvalued Safety Net?

DECK's financial position remains robust:
- Cash Reserves: $1.889 billion in cash, up 25% year-over-year, providing a cushion for share buybacks ($2.5B authorization) and strategic moves.
- Debt-Free: No borrowings, giving flexibility to weather short-term turbulence.

However, the stock price has already priced in some of these positives.

Analyst Downgrades and Guidance Misses: A Wake-Up Call

Q1 2026 Guidance Miss: DECK's $0.62–$0.67 EPS forecast falls short of Wall Street's $0.79 estimate, spooking investors.
Downgrades: Analysts at Goldman Sachs and Jefferies have cut ratings to “neutral,” citing margin risks and slower DTC momentum.

Valuation: Buying the Dip or a Value Trap?

DECK's P/E ratio of 23x (vs. 28x in 2024) reflects investor skepticism. At $95.00/share, the stock trades at a 20% discount to its 52-week high.

Bull Case:
- HOKA's international expansion (34% of sales, up from 30% in 2024) offers untapped markets.
- Tariff mitigation plans, if executed well, could stabilize margins.

Bear Case:
- Slowing U.S. consumer spending and rising inventory (up 4% year-over-year) signal overexpansion.
- Competitors like On Holding (ON) are nipping at HOKA's heels, with ON reporting 40% sales growth in early 2025.

Conclusion: A Cautious Buy with Strings Attached

DECK's story is no longer one of unchecked growth. Investors must weigh its fortress balance sheet and global brand potential against near-term execution risks.

Recommendation:
- Hold for now. Wait for clarity on tariff mitigation and DTC recovery.
- Buy if shares dip below $85/share (15% downside), provided DECK delivers on its fiscal 2026 margin plans.

The HOKA growth story isn't over, but its next chapter hinges on navigating a treacherous path—where margin discipline and innovation must outpace macro headwinds.

Disclaimer: The news articles available on this platform are generated in whole or in part by artificial intelligence and may not have been reviewed or fact checked by human editors. While we make reasonable efforts to ensure the quality and accuracy of the content, we make no representations or warranties, express or implied, as to the truthfulness, reliability, completeness, or timeliness of any information provided. It is your sole responsibility to independently verify any facts, statements, or claims prior to acting upon them. Ainvest Fintech Inc expressly disclaims all liability for any loss, damage, or harm arising from the use of or reliance on AI-generated content, including but not limited to direct, indirect, incidental, or consequential damages.