Nike and Target: Can They Sustain Recent Momentum?

Nike and Target have faced inventory and sales challenges, with Target's discretionary merchandise facing significant pressure post-COVID. Both stocks have rebounded in recent months, but the near-term EPS outlook remains bearish. Investors may benefit from waiting until positive revisions begin rolling in before considering these stocks.

Deckers Brands (NYSE: DECK) reported robust fiscal Q1 2026 results, with revenue up 17% year-over-year (YoY) to $964.5 million and earnings per share (EPS) up 24% to $0.93, handily beating market expectations [1]. The company's stock price surged 8% immediately following the earnings release, reflecting strong performance from its core brands, HOKA and UGG.

Key highlights from the earnings report include:

- Inventory and Buybacks: Inventories rose to $849.4 million, up from $753.3 million YoY, but this increase is not concerning given the sales momentum. Deckers repurchased 1.7 million shares for $183 million, with $2.4 billion left on the buyback, indicating capital confidence [1].

- Wholesale Sales: Wholesale sales jumped 26.7% to $652.4 million, contributing to the top-line surprise. However, direct-to-consumer (DTC) sales rose just 0.5%, with comparable DTC down 2.2%, raising questions about DTC leverage and margin implications in future quarters [1].

- UGG Performance: UGG delivered a strong out-of-season quarter with revenue up 18.9% YoY to $265.1 million, signaling promising fall/winter demand. This performance reflects successful segmentation strategies and brand refresh efforts [1].

- HOKA Growth: HOKA revenue soared nearly 20% YoY to $653.1 million, now representing over two-thirds of Deckers' total sales. International expansion was a major driver, with overseas revenue up nearly 50% [1].

- Guidance: Deckers guided for Q2 FY2026 revenue of $1.38 billion to $1.42 billion and EPS of $1.50 to $1.55, implying YoY growth despite macro uncertainty. The company's "powerful operating model" and strategic execution were highlighted by CEO Stefano Caroti [1].

Despite the strong earnings report, shares have sold off hard in the past two quarters, down over 20% both times, reflecting elevated expectations and sensitivity to forward commentary, especially around margins and HOKA momentum [1].

Investors should closely watch key areas such as HOKA growth and category expansion, UGG resilience post-winter, gross margin trajectory, DTC vs. wholesale channel mix, and inventory and cost discipline in Deckers' earnings call [1].

References:
[1] https://247wallst.com/investing/2025/07/24/earnings-live-coverage-of-deckers-deck-1st-qtr/