Deckers Outdoor, maker of HOKA shoes, is Tuesday's IBD 50 Stocks To Watch pick. This leading outdoor apparel and footwear company reported earnings on Thursday causing its stock to test a key level on the chart.
Deckers Outdoor designs, markets, and distributes outdoor footwear, apparel and accessories and sells through wholesale and direct-to-consumer (DTC) channels. It's footwear and apparel brands include its popular HOKA, UGG and Koolaburra by UGG, Teva and Sanuk.
HOKA Shoes Stock Finds Support At Key Level
The stock steadily climbed off June 2022 lows and tested its 10-week moving average multiple times on its ascent. It now making a second test of the 10-week line since a flat-base breakout in March. The new buy zones goes from 511.90 to about 563.
Shares had a volatile start on Friday as investors combed over the earnings report. The stock swooped lower and tested its 50-day moving average, but then rallied to close down 0.6% in heavy volume. Several analysts raised their price targets on the stock following the report.
The stock has gained over 35% this year so far, and is about 4% off its 52-week high of 562.97 that it hit on July 12.
Deckers' Profit Jumps 45% As HOKA Leads Growth
Deckers reported better-than-expected June-ended fiscal first-quarter 2024 earnings and sales on Thursday. Its 45% earnings growth showed marked improvement over its prior quarters' 38%, 24% and 4% growth, and a 3% decline five quarters ago.
First-quarter sales grew 10% after a modest 8% in the prior quarter, but lagged the 13% rise two quarters ago.
HOKA brand net sales increased 27.4% to $420.5 million, compared to $330.0 million in last year's quarter, while all Deckers' other brands including Ugg, Teva, and Sauk decreased in net sales.
"Deckers begins fiscal year 2024 in a position of strength, accelerating toward our outlook for the full year, which has been raised to reflect HOKA brand momentum," said Dave Powers, president and CEO in the earnings release.
Deckers' saw increased direct-to-consumer (DTC) and international sales in the first quarter. Gross margin improved to 51.3% vs. 48.0% in the prior year's quarter.
Inventory dropped 11.8% over last year's quarter, while cash increased to $1.047 billion from $695.2 million over last year.
CEO Focuses On Strong Areas
For the full-year fiscal 2024, analysts expect 16% EPS growth after 19.1% in fiscal 2023. Wall Street sees earnings rising 15% in 2025.
Deckers raised its full-year 2024 EPS range to $21.75 to $22.25 on 9.7% net sales growth, citing no new risk factors to their forecast.
The company remains focused on its DTC and international sales. Powers added: "Combined with our disciplined brand marketplace management and nimble operating model, this approach underscores our confidence to achieve our increased full-year outlook and drive long-term success for our brands."
Deckers Outdoor ranks No. 2 out of 10 stocks in the apparel-shoes & related manufacturing group. The group ranks a respectable No. 39 out of the 197 IBD industry groups, up from No. 60 four weeks ago.
Mutual funds own a considerable 67% of the outdoor apparel stock, with 1,229 funds owning the HOKA shoes stock in June, up from 984 in March and 892 in December.
The HOKA shoes company holds enviable 98 Composite and EPS Ratings.
Follow Kimberley Koenig for more stock market news on Twitter @IBD_KKoenig.
