When you think of some of the best stocks of the last generation, tech giants like those in the "Magnificent Seven" likely come to mind, but you might be surprised to learn that Deckers (DECK +19.46%), the maker of footwear brands like HOKA and UGG, also deserves a place on that list.
Since its IPO in 1993, the sneaker stock is up 9,660%, more than double the gains of Nike during that time.
Deckers owns smaller brands, such as Teva, but Hoka and Ugg have done the heavily lifting here. Management acquired both brands in their infancy and built them into top global footwear brands through savvy design, marketing, and distribution, resulting in monster returns for those who have held the stock long enough.
However, more recently, the stock has struggled. Like other apparel stocks, Deckers has faced dual pressures from tariffs and weak consumer discretionary spending in the U.S. as consumers cope with inflation and a weak labor market.
As a result, Deckers is down 46% over the last year, but the stock soared on its third-quarter earnings report on Friday as the footwear maker surprised Wall Street, easily beating estimates on the top and bottom lines and raising its guidance for the fiscal year, sending the stock up 19%.
Image source: Deckers.
Deckers dazzles
In a difficult environment, Deckers easily topped Wall Street estimates in its third-quarter report, reporting revenue growth of 7.1% to $1.96 billion, which compared to the consensus at $1.87 billion. Hoka sales soared, up 18.5% to $628.9 million, and Ugg was solid as well, climbing 4.9% to $1.31 billion in the seasonally strongest quarter for the sheepskin boot brand.
Margins remained strong with operating income increasing 8.3% to $614.4 million, giving it an operating margin of 31%, and earnings per share rose 11% to $3.33, ahead of expectations at $2.76.
Growth was balanced across wholesale and direct-to-consumer channels, showing an improvement in the e-commerce business, while domestic sales improved from a decline in the previous quarter to 2.7% growth, and international sales were up 15%. The weakest parts of Deckers' business significantly improved, which is a bright sign for the future.
Overall, customers responded to newness in its product line, including its line of Quill ballet sneakers and slip-ons from Ugg.
The strong results led management to raise guidance for the fiscal year, projecting $5.4 billion-$5.425 billion in revenue with Hoka up by a mid-teens percentage and Ugg up by a mid-single-digit percentage.
It also called earnings per share of $6.80-$6.85, up from previous guidance of $6.30-$6.39, which compares to EPS of $6.33 in fiscal 2026.
NYSE: DECK
Key Data Points
Why Deckers could go even higher
Deckers' stock plunged a year ago after the company raised its guidance, but still disappointed the market with its outlook. Since then, while its growth rate has slowed, the sentiment toward the stock has been excessively negative. As the chart below shows, Deckers has breezed past earnings estimates in each of its last four quarters.
| Quarter | Estimated EPS | Actual EPS | Surprise |
|---|---|---|---|
| Q4 2025 | $0.61 | $1.00 | 65.1% |
| Q1 2026 | $0.68 | $0.93 | 36.6% |
| Q2 2026 | $1.58 | $1.82 | 15.1% |
| Q3 2026 | $2.76 | $3.33 | 20.5% |
Data source: Yahoo! Finance
As you can see, Deckers has made a habit of crushing the analyst consensus as the company has beaten estimates by 26% over the last four quarters.
That pattern seems likely to continue as analysts are now calling for EPS in the current quarter to fall from $1 to $0.82 despite double-digit growth from Hoka.
Additionally, Deckers remains very reasonably priced, trading at a price-to-earnings ratio of 17, especially given its track record of growth and the S&P 500's P/E ratio of around 28.
Looking ahead to fiscal 2027, the strong Q3 results bode well for a solid year and possibly an acceleration in growth. Additionally, the company will benefit from the $110 million headwind it faced from tariffs rolling off in the comparison, and the successful new product launches like Quill should pay off into next year as well.
Overall, Deckers is executing effectively in a challenging environment, and the stock trades at a sharp discount to the broad market. It looks like a smart buy.
