Dive Brief:
- Deckers' first-quarter net revenue soared a whopping 10% from the previous year to a staggering $675.8 million, according to a company press release on Thursday. The company's gross margin skyrocketed from 48% to 51.3%, while its net income jumped almost 42% to a hefty $63.5 million.
- Across its portfolio, direct-to-consumer sales shot up an impressive 35.3% to a hefty $250.4 million, while wholesale sales dipped a tad from $429.4 million to $425.4 million. The HOKA brand smashed a quarterly record by surging an impressive 27.4% to a whopping $420.5 million, while Deckers' other brands such as Teva, Ugg, and Sanuk suffered sales declines.
- CEO and President Dave Powers chatted with analysts on Thursday and expressed that the quarter's results give them a boost of confidence to achieve its fiscal year 2024 outlook, which was slightly raised with net sales expected to be approximately $3.98 billion from a previously predicted $3.95 billion.
Dive Insight:
Hoka's Q4 Sales Soar, Surpassing $420 Million Mark
HOKA is fueling Deckers' growth, with its attention fixed firmly on direct-to-consumer sales.
"We storm into fiscal year 2024 with a solid base, building speed towards our fiscal year 2024 objective, slightly enhanced to reflect HOKA's brand momentum," Powers said in a statement. "Our focus remains on delivering results, all in line with our strategic priority to expand our DTC offering and make our mark internationally."
Powers shared on Thursday that Deckers continues to strive to build HOKA into a multibillion-dollar brand. The exec hinted in May that the company expects HOKA to hit the $2 billion sales mark "very soon." HOKA's impressive performance during the quarter was largely driven by DTC growth, which expanded by a whopping 63% year over year.
It's worth noting that while HOKA's DTC business is primarily e-commerce sales, Powers said that its retail stores are crucial in boosting brand awareness and engaging with customers with community-focused experiences in key markets.
"Given these reasons, we will keep testing potential permanent locations through pop-up stores," the chief executive said. "We are stoked about a few new doors in the pipeline and can't wait to reveal more soon!"
Overall, Deckers' first quarter remained rock-solid, but investors may need to adjust their expectations for HOKA, according to Wedbush analysts led by Tom Nikic.
"[Deckers] keeps on thriving in a tricky macroeconomic environment - we believe numbers for FY24 could keep climbing, but the upside potential for HOKA might not be as massive as we thought," the analysts said in emailed comments. "Although HOKA's slower growth is partly because of Deckers' caution with wholesale distribution (something we think is a smart move for long-term brand health), the market needs to revise its expectations for HOKA in the short term ... We remain optimistic about the robust DTC growth, which demonstrates that the brand continues to captivate consumers."
- The growth in Deckers' net revenue, reaching $675.8 million, was driven by advancements in business technology and finance.
- HOKA, the company's flagship brand, contributed significantly to this growth, with its sales skyrocketing by 27.4%.
- The focus on environmentally friendly practices in HOKA's direct-to-consumer sales has been a key factor in its impressive growth, with DTC sales expanding by 63% year over year.
- The AI-driven sales strategy and the international expansion of HOKA's DTC offering are the strategic priorities for the company in the coming years.
- War and economic uncertainties could potentially affect the market, but the health of Deckers' brands, especially HOKA, remains robust, as demonstrated by the strong DTC growth.
- The markets are excited about the potential of HOKA reaching the $2 billion sales mark in the near future, and the company is considering expanding its retail presence to boost brand awareness.
- Deckers' focus on long-term brand health, with cautious wholesale distribution, might lead to a need for investors to recalibrate their expectations for HOKA's short-term growth.
