Shares of shoe company Deckers Outdoor (DECK 0.69%) are down about 37% in 2025, as of this writing, giving it the third worst performance for a constituent of the S&P 500. It only trails Moderna and UnitedHealth Group so far this year.
The underperformance extends beyond this year. Deckers stock was added to the S&P 500 in March 2024. Since it was added to the index, shares are down by 15%. By contrast, the S&P 500 is up about 15% during that time, which is an above-average gain for a 52-week span. In other words, market conditions are good, but Deckers stock is down. Why?
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I think it's worth noting that the valuation for Deckers stock skyrocketed to an all-time high of 7 times sales in 2024. Historically, it's traded closer to 2 times sales. Its sales have soared in recent years, particularly with the success of its Ugg and Hoka brands. So the excitement was understandable. But there was valuation risk.
The valuation quickly came back down as global trade conditions got more complicated. Consider that in the fiscal third quarter of 2025, its most recent quarter, Deckers generated 36% of its net sales in international markets. And international sales are growing much faster than domestic sales. On top of this, the company manufactures almost all of its shoes in China and Vietnam. When it comes to both its cost structure and international sales, tariffs add a layer of uncertainty.
But did the market overreact with the sell-off for Deckers stock, making this a "buy the dip" opportunity?
Should investors buy the Deckers dip?
When investors use the term "buy the dip," it usually implies some sort of extreme bargain valuation that needs to be exploited quickly. In this case, Deckers stock still trades at a valuation that's well above its long-term average, which is something to be mindful of. Moreover, there are far better deals out there in the shoe space, such as the bargain valuation for Crocs stock.
DECK PS Ratio data by YCharts.
Furthermore, investors should be interested in growth opportunities. For its part, Deckers expects to grow its net sales by 15% for its fiscal 2025. That's good. But there's far better shoe growth with On Holdings, which expects to grow at least 28% this year.
So whether it comes to growth or value, there are better options for each. That said, Deckers might actually be a favorable mix of growth and value today.
In other words, Deckers stock has looked cheaper in the past, and its growth has also been hotter at times. But assuming it can maintain growth and preserve its profit margins, this stock could get back to outperforming the S&P 500. How realistic are those two things?
Can Deckers grow and profit?
Deckers has generated almost $5 billion in trailing-12-month net sales. That's a huge business. But according to a 2023 report from Transparency Market Research, the global market for running shoes alone is almost $50 billion and growing at a 5% annual pace. This suggests a growth opportunity. But Deckers doesn't only sell running shoes -- it sells shoes for other occasions as well.
Deckers' sales have more than doubled over the last five years, and they're still growing at the aforementioned 15% rate. Assuming modest deceleration over the next five years, the company's sales wouldn't necessarily double, but they could still be up meaningfully.
Profit margins can be harder to forecast for Deckers right now; it's still unclear how its costs will be impacted with tariffs and whether its sales will stagnate in certain markets, further putting pressure on profits. That said, tariffs were a factor during President Trump's first term, and the company nevertheless found ways to expand its gross margin during that time.
DECK Gross Profit Margin data by YCharts.
To put it together, the size of the growing shoe market is reason to hope that Deckers can keep growing its business. And the company's past ability to navigate a complicated global economy gives reason to hope that it can navigate this time around as well.
Considering its favorable mix of growth and value as well as its potential to keep growing and profiting, I think Deckers stock could be a cautious buy today. It's not necessarily a no-brainer, but there's reason to think it can do well.
And as a closing thought, Deckers has a stellar balance sheet with $2.2 billion in cash and equivalents along with no debt. In uncertain times, this financial position can give investors an added sense of safety. Regardless of what happens, Deckers should have the resources to make it through to the other side.
