Their shoes are certainly different styles, but the businesses of Deckers Outdoor (DECK 0.13%) and Crocs (CROX +0.72%) aren't wildly different from each other. Each company sells shoes, both directly and through wholesale channels. But the similarities extend further.
Crocs reported financial results for the fourth quarter of 2024 on Feb. 13, so its finalized numbers aren't reflected on the chart below. But for 2024, Crocs had revenue of over $4.1 billion. For its part, Deckers has another quarter to go in its fiscal 2025, but for the full fiscal year, it expects net sales of $4.9 billion. Therefore, Deckers and Crocs are similar in scale.
Deckers and Crocs are also similar in regards to profitability. For 2024, Crocs had an operating margin of about 25%, which is stellar. But Deckers isn't far behind: It expects a full-year operating margin of 22% for its fiscal 2025.
DECK Revenue (TTM) data by YCharts.
As of this writing, shares of Deckers and Crocs are each down about 30% from their 52-week highs. That being the case, which of these two shoe stocks is the better buy today?
The case for Deckers
In the investing world, growth isn't the only important thing to think about. But its importance can't really be overstated. Studies have shown that revenue growth is consistently the biggest factor for stocks that outperform the S&P 500 (^GSPC +1.05%). And Deckers has had better growth than Crocs.
NYSE: DECK
Key Data Points
In fact, growth has all but disappeared for Crocs. Its 2024 revenue of $4.1 billion was only up 3.5% from 2023, due to the ongoing headwind of slumping sales for its other brand, Heydude. And for 2025, management only expects to grow revenue by 2.5%, at best.
By contrast, Deckers has been growing. Through the first three quarters of its fiscal 2025, revenue is up 19% from the comparable period of its fiscal 2024. And for the full year, management expects to post 15% growth, boosted by ongoing robust growth rates for its two biggest brands: Ugg and Hoka.
Another thing in Deckers' favor is its balance sheet. To be clear, the balance sheet for Crocs is very manageable, as I'll explain. But Crocs does still have over $1.3 billion in borrowings, whereas Deckers is debt-free. In short, Deckers has more financial flexibility.
The case for Crocs
As much as it looks like Deckers stock could be a good investment, I feel Crocs stock is the better buy today, even after it jumped 24% following its quarterly report. And I don't think it's even close, as I'll explain.
NASDAQ: CROX
Key Data Points
There are some faint signals suggesting Deckers' growth is about to slow. According to management's guidance, it expects fiscal fourth-quarter revenue of around $940 million. That would actually be down from the revenue of $960 million that it had in the fiscal fourth quarter of 2024. Moreover, its guidance implies a lower Q4 gross margin. This could mean that it plans to mark down prices to stimulate sales. But it still expects to struggle with growth.
In this light, Crocs' outlook of 2% growth doesn't look so bad.
In other words, the growth rates for Deckers and Crocs could be converging. And I've already noted that the operating margin is about the same, giving neither company a clear advantage. But from an investment perspective, Crocs stock is far cheaper, trading at less than 8 times earnings (keep in mind that the chart below isn't updated to reflect Crocs' Q4 results):
DECK PE Ratio data by YCharts.
Based on management's guidance, Crocs should earn $1 billion in operating income in 2025. By comparison, its market cap is only $6 billion. Based on the money it already has and the profits it expects, it could potentially pay off its debt entirely in 2025 if it chooses; I doubt it will, but the point is that the debt isn't an issue.
Crocs will likely pay some of it down. After all, it repaid $323 million in 2024. But more likely it will return a ton of cash to shareholders with stock buybacks. Right now it's authorized to repurchase $1.3 billion worth, which could now buy a stunning 21% of its shares. If management decides to be aggressive at its currently cheap stock price, this could boost shareholder value in a hurry.
As you can see, Crocs' business is stable and its profit margins remain stellar. And at its current valuation, it's simply too cheap to ignore. Compared to Deckers stock, I believe that Crocs stock is a far more compelling buy today.
