GOLETA, CA – July 26, 2025 – Deckers Outdoor Corporation (NYSE: DECK), the innovative force behind beloved brands like UGG and HOKA, has once again proven its mettle in the dynamic global footwear market. The company’s Q1 FY2026 earnings, reported on July 24, 2025, delivered a resounding beat on both revenue and earnings per share, sending a clear signal of robust brand demand and strategic execution. This stellar performance has not only fueled an immediate surge in share price but has also prompted one prominent valuation model, the McGrew Growth Valuation Method, to label DECK a “Screaming Buy.”
Deckers reported net sales of $964.5 million for the first fiscal quarter, a significant 16.9% increase year-over-year, comfortably exceeding analyst expectations of approximately $900 million. This impressive top-line growth was mirrored by an equally strong bottom-line performance, with diluted EPS climbing 24% to $0.93, far surpassing the consensus estimate of $0.68. The market responded with immediate enthusiasm, with DECK’s stock surging over 11% to $116.85 on July 25, 2025, reflecting widespread market approval.
“HOKA and UGG outperformed our first quarter expectations, with robust growth delivering solid results to begin fiscal year 2026,” stated Stefano Caroti, President and Chief Executive Officer of Deckers Outdoor Corporation. Caroti acknowledged the “elevated uncertainty in the global trade environment” but reiterated strong confidence in the brands and the “significant long-term opportunities ahead.”
A Tale of Two Brands: HOKA and UGG Propel Growth
The narrative of Deckers’ success continues to be driven by the exceptional performance of its flagship brands. HOKA, the performance-running juggernaut known for its maximalist cushioning, saw its net sales increase by a remarkable 19.8% to $653.1 million. This makes Q1 FY2026 HOKA’s largest quarter in history, driven by strong sell-throughs and consistent growth across all channels. UGG, the iconic lifestyle brand, also demonstrated impressive resilience and appeal, with net sales growing 18.9% to $265.1 million.
Crucially, international markets proved to be a significant catalyst for both brands. Deckers’ international sales soared by an astounding 49.7% to $463.3 million, effectively offsetting a slight decrease in domestic sales. HOKA’s EMEA (Europe, Middle East, and Africa) and APAC (Asia-Pacific) regions reported record wholesale reorders, while UGG witnessed skyrocketing sales in China and Europe. This geographic diversification underscores Deckers’ ability to tap into evolving global consumer preferences and build strong brand loyalty beyond its traditional markets.
Financial Fortitude and Operational Excellence
Beyond the headline figures, Deckers’ financial metrics reveal a company operating with remarkable efficiency and financial health. The gross margin, while experiencing a slight year-over-year contraction to 55.8% from 56.9%, still outperformed analyst estimates. This minor dip was attributed to factors such as adverse channel mix (wholesale growing faster than direct-to-consumer), higher promotions, and elevated freight rates, partially mitigated by a positive product mix and favorable foreign currency movements. Despite this, operating income rose significantly by 24.5% to $165.3 million, and the operating margin also improved.
The company’s balance sheet remains robust, with $1.720 billion in cash and cash equivalents as of June 30, 2025, and no outstanding borrowings. This strong liquidity position provides Deckers with ample flexibility for future growth initiatives, including further international expansion and enhancements to its direct-to-consumer (DTC) channels. Furthermore, the company’s aggressive capital allocation strategy, demonstrated by the repurchase of approximately 1.7 million shares for $183.0 million during the quarter and $2.4 billion remaining under its stock repurchase authorization, signals management’s confidence in the company’s intrinsic value and future cash flows.
Analyst Community Reacts with Overwhelming Optimism
The analyst community has largely embraced Deckers’ Q1 results, with many firms reiterating or upgrading their ratings and raising price targets. The prevailing sentiment is overwhelmingly positive, characterized by “Strong Buy” and “Buy” recommendations.
- TD Cowen notably increased its price target to $154 from $147, maintaining a “Buy” rating and commending Deckers as “one of the highest quality businesses and financial models in the sector.”
- Raymond James also raised its price target to $137, reaffirming a “Strong Buy.”
- Baird set a new price target of $150.
- Other notable price target adjustments include Needham at $128 and Telsey Advisory Group at $120.
The median price target among analysts has risen to a range of $128-$134, underscoring the collective confidence in Deckers’ continued growth trajectory. Analysts consistently highlight the strength of the HOKA and UGG brands, their ability to capture market share, and the long-term potential offered by international expansion.
The McGrew Growth Valuation: A “Screaming Buy” Unveiled
Perhaps the most compelling endorsement of Deckers’ current standing comes from an in-depth valuation analysis, specifically the McGrew Growth Valuation Method, which has identified DECK as a “Screaming Buy.”
This method, designed to assess a company’s intrinsic value based on its growth potential, projects a significant upside for Deckers. While a more conservative Buffett-Inspired Valuation Method places Deckers as a “Hold” with an intrinsic value of $123.55 (compared to the last closing price of $116.85), the McGrew Growth Valuation Method paints a far more bullish picture, assigning an intrinsic value per share of $218.37. Even with a substantial 40% margin of safety applied to account for inherent market risks, the price with this margin of safety ($131.02) remains above the current market price, solidifying the “Screaming Buy” recommendation.
The McGrew Growth method employs a projected initial free cash flow (FCF) growth rate of 14.1% (based on the 5-year FCF CAGR), which gradually declines to 6% over 10 years, with a terminal value at 2.5% perpetual growth and an 8% discount rate. This robust model, when applied to Deckers’ strong financial performance, underscores the significant long-term value potential inherent in the company.
Key financial metrics supporting this optimistic valuation include:
- Trailing 12-month Return on Equity (ROE): 38.4%, demonstrating highly efficient use of shareholder capital.
- Trailing 12-month Return on Invested Capital (ROIC): 32.1%, indicating excellent returns on all capital deployed.
- Gross Profit Margin (TTM): 57.9%, showcasing strong pricing power and cost management.
- Net Profit Margin (TTM): 19.4%, highlighting impressive profitability.
- Debt-to-Equity Ratio: A remarkably low 0.11, indicating a virtually debt-free balance sheet.
- 5-year CAGR for Revenue Growth: 16.0%.
- 5-year CAGR for Earnings Growth: 29.5%.
Durable Competitive Advantages and Favorable Industry Trends
Deckers’ qualitative factors further solidify its compelling investment case. The company possesses a durable competitive advantage rooted in strong brand loyalty and intangible assets. UGG’s status as a cultural icon and HOKA’s innovative performance in athletic footwear create deep emotional connections with consumers, reducing churn and fostering repeat business. Evidence of this includes HOKA’s consistent market share gains in running footwear and UGG’s sustained sales in casual categories, as noted in various industry analyses.
The company’s asset-light model, with outsourced manufacturing and capital expenditures consistently around 2% of revenue, demonstrates low capital requirements for growth. This efficient operational structure frees up significant free cash flow for strategic reinvestment and shareholder returns, as evidenced by the recent increase in share repurchase authorization.
The broader footwear industry trends also play into Deckers’ strengths. Consumers are increasingly prioritizing comfort, performance, and sustainability, areas where both HOKA and UGG excel. The sector’s inherent resilience, driven by consistent demand for essential and lifestyle footwear despite economic pressures, further supports Deckers’ long-term prospects. While competition is intense from giants like Nike and Adidas, Deckers’ focused niche strengths, innovation, and robust DTC channels provide a distinct edge.
Navigating the Future
Despite the positive outlook, management remains cautiously optimistic, acknowledging ongoing uncertainties in the global trade environment, including potential impacts from tariffs. However, the company’s strategy of leaning on the “fundamental strengths of our powerful operating model” and continued execution of its growth strategy is expected to mitigate these challenges. Deckers’ proactive approach to managing its brand marketplaces and maintaining an adaptable operating model reinforces its ability to meet full-year expectations.
Deckers Outdoor Corporation’s Q1 FY2026 earnings report paints a vibrant picture of a company firing on all cylinders. Its powerful brand portfolio, exemplified by the stellar growth of HOKA and UGG in international markets, combined with robust financial health and a clear strategic vision, has garnered widespread analyst praise. The compelling “Screaming Buy” valuation from the McGrew Growth Method serves as a potent testament to Deckers’ significant untapped potential and its promising trajectory in the global footwear landscape. Investors, while always mindful of broader economic and trade developments, have ample reason to view Deckers Outdoor as a standout opportunity in the current market.