Shares of Deckers (DECK +3.85%) were moving lower today. The culprit was an analyst downgrade, as one Wall Street watcher lowered its rating on the fast-growing owner of Hoka and UGG.
Deckers shares were down 6% as of 12:08 p.m. ET on the news.
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Seaport sours on Deckers
Seaport Research lowered its rating on Deckers from buy to neutral this morning, seeing less upside potential in the stock after recent gains and as momentum for Hoka and UGG moderates.
Citing Google Trends data, the research firm said interest in Hoka and UGG wasn't as strong during the back-to-school season, and that other running shoe brands like Asics and Brooks are beginning to take back market share.
Seaport didn't give a price target on the downgrade.
NYSE: DECK
Key Data Points
Is Deckers in trouble?
Consumer products like shoe brands are notorious for being trendy, and it will be difficult for Deckers to sustain its momentum in Hoka, which now makes up more than half of the company's sales over the long term. Hoka's growth rate has slowed but remains strong.
Hoka sales jumped 59% to $1.41 billion in fiscal 2023, which ended March 31, 2023, and 28% in fiscal 2024. In its fiscal first quarter, that growth rate improved to 30% to $545 million, potentially showing some stability.
However, Nike said it's regaining momentum in the running category in its recent earnings report, and other brands are likely responding to Hoka's dramatic growth in recent years.
Deckers stock looks reasonably valued at a price-to-earnings ratio of 30, but maintaining strong performance in the Hoka brand will be the biggest key to its success. At this point, it's unclear if the data points Seaport is referencing are significant enough to change that momentum, but investors should keep an eye on Hoka's growth rate.
