What happened
Shares of Deckers Outdoor (DECK 1.23%), the maker of footwear like Uggs and Hoka One One, saw solid gains last month as the company benefited from a number of bullish analyst notes and posted strong second-quarter results. The company also seemed to gain from a recovery in apparel sales, as well as a sector-wide trend toward comfort and athletic wear, which comprise most of what the company sells.
According to data from S&P Global Market Intelligence, the stock finished last month up 15%. As you can see from the chart below, Deckers racked up gains over the first half of the month.
So what
Deckers kicked off October with strong momentum from a surge at the end of September, though no specific news drove the gains. However, a jump in Crocs shares after the announcement of a new partnership with Justin Bieber may have lifted Deckers. Some investors see the two companies as peers in the current pandemic-driven environment.
Image source: Deckers.
The Uggs maker got some bullish analyst attention on Oct. 12 when Exane BNP Paribas raised its rating from neutral to outperform and gave it a price target of $295. The following week, several analysts raised their price targets on the stock, portending well for its earnings report in the last week of October.
Indeed, Deckers delivered strong results. Revenue rose 15% to $623.5 million, beating estimates at $553.6 million, as sales of Hoka One One, its second-biggest brand, nearly doubled in the period. Direct-to-consumer sales increased 74%, and bottom-line results were impressive as well -- earnings per share jumped 32% to $3.58, crushing expectations at $2.63.
CEO Dave Powers said, "Our brands are operating from a position of strength, and while we continue to navigate the challenges of a global pandemic, the demand for our brands combined with our strong operating model and healthy balance sheet leave Deckers well positioned for the long-term."
The stock actually fell modestly on the release, but that may be more of a reflection of the stock's gains rather than any specific problem in the report.
Now what
Deckers declined to offer guidance for the current quarter, but the results make clear that the company is one of the best positioned in the apparel sector to succeed during the pandemic -- especially due to the success of Hoka, its running shoe brand. Based on the breakout growth of that brand and strong performance on e-commerce, the stock could have more room to run.
