Deckers Outdoor

IThe business

Deckers sells shoes under two brands that could hardly be less alike. UGG makes sheepskin boots and slippers for people who want to be warm and comfortable, and the brand has spent decades turning a surfers’ boot into a fashion staple. HOKA makes running shoes with thick, soft soles, designed originally for ultra-runners and now sold to what the company calls world champions, tastemakers and everyday athletes.² In fiscal 2026, which ended on 31 March, UGG was $2.74B of sales and HOKA $2.59B. A third group, mostly the Teva sandal, was $146M.²

The company owns no factories. Independent contractors make every product, mostly in Vietnam and Indonesia, with less than 5% from China or any other single country.² Deckers designs the shoe, buys the materials from suppliers it designates, pays the contractor and ships the result. The sheepskin for UGG comes mainly from Australia and is processed by two tanneries in China.² That asset-light shape is why capital spending was only $85M in fiscal 2026, 1.5% of sales, and why $1.18B of operating cash flow came from a business with $3.7B of total assets.²¹³

How it reaches the customer

Wholesale was 58.6% of fiscal 2026 sales, $3.21B, and direct-to-consumer (DTC), meaning its own websites and stores, was 41.4%, $2.26B.⁶ Wholesale partners are specialty running stores, outdoor and sporting-goods retailers and department stores for HOKA, and fashion retailers and department stores for UGG.² DTC runs websites in 54 countries and 203 stores at the end of March 2026, 141 UGG and 62 HOKA. By 30 September there were 223, 148 UGG and 75 HOKA, so HOKA alone added 13 stores in six months.²³

The split matters because the two channels earn different money. Deckers keeps the retail margin on a DTC sale and gives it to the retailer on a wholesale one. The 10-K says it wants DTC to become a larger share over time, and also that its wholesale channel may be a larger share in some years as it widens HOKA distribution.² In the quarter to September 2026, wholesale grew 5.5% and DTC fell 1.8%, with comparable DTC sales down 6.4%.⁴ The company blames softer traffic and conversion in the US and shoppers waiting for promotions at multi-brand retailers.³

Where it sells

This is the part of the story that changed most in two years. In fiscal 2026 the US was flat, up 0.2% to $3.19B, and the rest of the world grew 26.8% to $2.28B.² International was 41.7% of sales, against 31% in fiscal 2022 C (calculated).²¹⁴ In the quarter to September 2026 the US fell 0.4% and international grew 9.0%.⁴ Most of the company’s growth is now abroad, and it is slowing there too.

HOKA’s curve is the one that built the stock. It was $105M of sales in fiscal 2017 and $2.59B nine years later.¹⁵² It is now 47% of the company, against 8% in fiscal 2018 C (calculated). UGG, meanwhile, was flat for three years from fiscal 2018 to fiscal 2020 at about $1.5B, grew to $1.98B in 2022, fell 2.7% in 2023, and then grew again.^1516147 It is a large brand with a long record, and its record includes pauses.

Where the profit comes from

Read the HOKA margin line. In fiscal 2024 HOKA kept 39.8 cents of profit from each dollar of sales before shared costs. In fiscal 2026 it kept 35.2 cents, 4.6 points less, because gross margin slipped 0.8 points and costs rose: advertising from 9.7% to 10.2% of its sales, payroll from 4.2% to 5.0%, rent from 0.9% to 1.8% as it opened stores, and other selling costs from 2.9% to 4.3% C (calculated).² HOKA grew 43% in two years and its profit grew 27% C (calculated).² That is still excellent. It is also what growth bought, and the next dollar of HOKA growth is not as profitable as the last.

UGG is the profit engine. It earns a margin above 38% and it is 50% of sales, 53% of brand profit C (calculated).² Its edge is not the boot alone. UGG has pushed year-round styles, sneakers and men’s lines to spread a business that used to live in the winter. It still does: the December quarter was $1.96B of the year’s $5.47B of sales and $614M of its $1263M of operating income, 49% of the year’s profit in three months C (calculated).¹⁷²

Tariffs, and the refund

The US charged tariffs on Deckers’ imports under the International Emergency Economic Powers Act. Deckers paid about $119M of them. In February 2026 the Supreme Court struck those tariffs down, a trade court ordered refunds in March, and customs began a phased refund process in April.³ By the end of September Deckers had filed claims for about $106M and was assessing $13M more.³ Through 8 October it had received $87.9M of net refunds, plus $4.7M of interest.³ Net, because Deckers shared some of the cost of the tariffs with its manufacturers, and shares the refund back with them.³

Accounting matters here. Deckers books a refund when it is received, not before, and had booked no receivable for refunds not yet received at 30 September.³ So $46.0M landed in the quarter to September, as a cut to cost of sales, which lifted both the gross margin and the operating margin by about 3.1 points in that quarter.⁴ The other $41.9M arrives in the December quarter. For the full year, management says the refunds add about 1.5 points to the margin and $0.52 to earnings per share.⁴ I come back to this in Section VI, because it is the center of the dispute about this stock.

IIThe moat

A durable advantage is something a rival with money and talent can’t copy in a reasonable time. For a shoe company the candidates are the brand, the way the product is rationed, the technology in it and the cost to make it. I look at each, and at the evidence that it is getting wider or narrower.

The honest summary is that Deckers has one strong, scarce thing, which is the attention of consumers for two brands, and everything else is a way of keeping it. That attention can’t be locked up. A patent can’t stop a shopper from preferring somebody else’s shoe next year. What Deckers has done well is to manage supply so that its shoes are rarely on sale, which keeps the brand feeling scarce and keeps the margin up. That is a habit of the management, not a legal right.

Evidence it is widening

• Gross margin rose from 46.7% in fiscal 2017 to 57.7% in 2026, through a pandemic, a supply-chain crisis and a tariff shock C (calculated).¹³
• HOKA grew from $105M to $2.59B in nine years.¹⁵²
• UGG became a year-round brand in part. Its sales rose from $1.93B in fiscal 2023 to $2.74B in 2026, 12% a year C (calculated).⁷²
• Its own websites and stores are 41% of sales, and it launched a US HOKA loyalty programme in fiscal 2026.²⁶

Evidence it is narrowing

• HOKA’s sales growth fell from 15.9% in fiscal 2026 to 7.3% in the first half of fiscal 2027, and management now guides to high single digits for the year, down from low double digits in July.²³¹⁸⁴
• HOKA’s margin before shared costs fell from 39.8% to 35.2% in two years, as it spent more to keep growing.²
• Comparable DTC sales fell 6.4% in the September quarter, after rising 6.8% in the June quarter, and the company says the athletic category became more promotional.¹⁸⁴³
• On, a direct rival in running, reported a 65.4% gross margin and 21.6% constant-currency growth in its June quarter. A competitor with a higher margin and faster growth is the clearest sign that HOKA’s position isn’t guaranteed.⁹
• UGG’s sales were flat for three years before and fell in fiscal 2023. A boot is not a franchise like a credit card.¹⁵¹⁶⁷

On balance the advantage is real and medium-width. It has been wider than it is now, if I judge by how fast HOKA grows and what it costs to keep growing it. It is wider than a typical fashion brand, because the company has run two brands at an operating margin of 21.6% or better for three years.¹⁹² The market is arguing about whether that is a position or a moment.

IIIThe competitive advantage

The best test of an advantage is a comparison with the people trying to take it. Deckers’ two main rivals in athletic footwear are far larger, Nike, or faster-growing and more profitable on gross margin, On. I can’t measure market share from filings, so I compare what they report. The periods differ, so read the table as a sketch.

Three things stand out. First, Deckers earns far more of each sales dollar than Nike, 18.7 cents of net income to 6.7. Nike is about eight times as large, but the gap shows how profitable a tightly run premium brand can be. Second, the growth sits with On, not with Deckers: On grew 21.6% in constant currency, while HOKA grew 6.8% in the same period.⁹⁴ Third, On earns a gross margin of 65.4%, higher than HOKA’s 59.9% in the quarter, which already includes a boost from the tariff refunds.⁹³ On’s margin is a sign that it can charge more for similar shoes, and it carries more DTC, which is where margins are highest.

I don’t read this as a verdict on HOKA. Running is a large category, and several brands can grow in it for years. What it does say is that HOKA no longer has the field to itself. HOKA grew 15.9% in fiscal 2026 and 7.3% in the first half of fiscal 2027. Its growth is now slower than a rival’s, its margin is falling, and the company is spending more to keep the pace.²³⁹

Where Deckers wins

• Pricing. It sells at full price more than most, which is how it earns 58 cents of gross profit on each dollar of sales. Units rose 6.2% in fiscal 2026 and sales rose 9.8%.²
• Two brands that rarely overlap. UGG is warm, casual and seasonal; HOKA is technical and year-round. A weak winter hurts UGG far more than HOKA.²
• Cash and cost. A company with $1.2B of cash, no debt and capital spending of 1.5% of sales can ride out a bad season that would break a weaker rival.²³

Where it loses

• Scale in running. Nike has $46.4B of sales against Deckers’ $5.5B, and On is growing faster from a smaller base.⁸⁹²
• Direct reach. DTC is 41% of Deckers’ sales and was 45.7% of On’s quarter. Comparable DTC sales fell 6.4% at Deckers in the September quarter.⁴⁹
• Dependence on wholesale shelves. One customer was 18.5% of receivables at March 2026, and retailers choose what to put in front of the shopper.²

IVManagement

I start with how they are paid, because pay shows what the board wants done. Stefano Caroti has been chief executive since August 2024 and a director since September 2024. Steve Fasching has been chief financial officer since July 2018, Anne Spangenberg has led UGG since July 2022, Robin Spring-Green has led HOKA since February 2024, and Thomas Garcia has been chief administrative and legal officer since February 2021.¹⁰ The chair, Cindy Davis, is independent, and Caroti is the only director who is not.¹⁰

What they are paid to do

The annual cash bonus is based on consolidated operating income and revenue, plus brand-level operating income and revenue for the two brand presidents. The long-term plan pays out in stock on consolidated pre-tax income and revenue over three years, with a modifier for total shareholder return against peers. About 60% of the equity awarded in fiscal 2026 vests on performance and the rest over time.¹⁰ Pay is set against the median of a peer group.¹⁰

That design pays for growth in dollars of revenue and profit. It does not pay for return on capital, for cash, or for per-share results: pre-tax income ignores buybacks, which is a good feature, because it means the repurchase programme doesn’t inflate pay. But it also means a dollar of revenue earned at a lower margin still counts. In fiscal 2026 revenue rose 9.8% and operating income 7.1%, operating margin fell half a point, and the consolidated part of the bonus paid 173% of target. The three-year plan that ended in March 2026 vested at 200% of target.²¹⁰ I can’t tell how hard the targets were, because I did not test them against the plan’s disclosed ranges.

How much of their own money is in

The whole group owns about $45M of stock at today’s price, 0.4% of the company.¹⁰ Caroti’s holding is worth about $15M, a little more than a year of his pay. That is the usual pattern for a US company of this size, and it is a thin stake. The company bans hedging and pledging.¹⁰ I read the 64 Forms 4 filed from October 2025 to October 2026. Most were stock awards and share withholding for taxes. There were five small sales, of 347 to 4,682 shares, and no purchase on the open market.¹¹ A cheap stock does not seem to tempt the people who run it, or they are barred from trading around results; I can’t tell which.

What they did with capital over a full cycle

The record has three parts. The first is buybacks. Deckers spent $3.96B on repurchases from fiscal 2017 to the first half of fiscal 2027, and the diluted share count fell from 194M to about 134M, down 31% C (calculated).¹³³ By my arithmetic from yearly average prices the cumulative buyback retired about 67M shares at an average of about $59, and those shares would cost $5.5B at the Q4 2026 close E (estimate).¹¹³ Over the whole decade, buying back stock worked.

The second part is the recent pace, which is less flattering. In fiscal 2026 Deckers bought $1.08B of stock at an average of $102.43, and in the first half of fiscal 2027 $637M at $98.77.⁶³ That is about $1.71B for 16.9M shares, worth $1.39B at today’s price, a paper loss of 19% C (calculated). Buying more as the price fell was the right instinct if the stock is worth more than $100, and my base value says it is. If it is worth less, as the market suggests, it cost money. Authorization was raised by $3.5B in May and $4.4B remained at 30 September, and the October outlook assumes $1.0B for the year.³⁴

The third is the brand portfolio. Deckers took a $114M impairment on Sanuk in fiscal 2017, sold the brand in August 2024, and wound down Koolaburra and AHNU in fiscal 2025 and 2026.¹⁵² The Other brands, mainly Teva, are 2.7% of sales.² Management has been willing to close brands that did not work. That is a good habit, though it costs money, and it leaves a company that rests on two brands and a small third.

Governance

Shareholders are not rubber stamps. At the annual meeting on 14 September 2026, Lauri Shanahan, a director for more than ten years, received 15.4M votes against and 94.4M for, about 86% support, the weakest of any nominee, and on 22 October the company said she will retire on 1 December.²⁰²¹ Say on pay got 98.6M for and 11.2M against, about 90%, and the audit firm KPMG drew 11.1M against.²⁰ These aren’t large protests. The 8-K does not say why holders voted against her. The board is replacing her with Rati Sahi Levesque.²¹ The auditor’s opinion on internal controls was clean for fiscal 2026.²

My overall read is a competent, stable team that has delivered two years of record results under a new chief executive and has been plain about the tariff refund: the October release states its effect on margin and on EPS. The things I would watch are the pay design that rewards revenue growth at falling margins, the thin stock ownership, and a buyback that has been bought largely above where the stock is now.

VFinancials

Deckers’ accounts are plain. There is one class of stock, no debt, no large acquisitions, and operating leases that sit on the balance sheet at $540M but are paid through operating costs.³ The auditor, KPMG, gave a clean opinion on the accounts and on internal control for fiscal 2026.² Fiscal years end on 31 March, so fiscal 2026 ended in March 2026 and the latest 10-Q covers the first half of fiscal 2027. The six-for-one stock split of September 2024 is applied to every per-share figure.¹³

Ten years ago the company made 46.7 cents of gross profit on each dollar of sales and lost its profit on write-downs. It now makes 57.7 and kept 23 cents of operating profit in fiscal 2026. The path wasn’t smooth: operating margin was 17.9% and 18.0% in fiscal 2022 and 2023, then 21.6% in 2024 and 23.6% in 2025.¹³ The margin in fiscal 2026, 23.1%, was already tariff-burdened. Management said gross margin fell 20 basis points in the year mainly because of tariffs on domestic goods and a slightly worse channel mix.²

Cash has followed profit. Net income rose from $6M in fiscal 2017 to $1.02B in fiscal 2026. Owner cash, meaning operating cash flow less capital spending and the stock pay that I treat as a real cost, went from $149M to $1.05B.¹³ In between come years when inventory built up and cash lagged, fiscal 2022 at $95M the worst, and years when it came back.¹³ Over the decade the two lines add to similar totals, which is what I want to see in a business with inventory risk.

The year in quarters

The fiscal 2027 story is easier to see quarter by quarter. Compare each with the same quarter a year before, since the business is seasonal.

The pattern is not what the headline says. The margin fell 300 basis points in the March quarter and 191 in the June quarter. In the September quarter it rose 349 points as reported, but without the refund the rise was 38. Before the refund, then, the business was giving back margin, and the quarter of September was merely flat to slightly better.¹⁷⁶¹⁸⁴ I count a basis point as one hundredth of a percentage point.

What management said, and how it moved

Management gave a first outlook for fiscal 2027 in May, raised the EPS range in July, and raised it again in October. The October raise is where the care is needed.

Read the last two columns together. In July management expected $5.86B to $5.91B of sales and EPS of $7.35 to $7.50. In October it expected $5.70B to $5.725B and EPS of $7.80 to $7.95, which looks like a raise of 45 cents.¹⁸⁴ But $0.52 of that is tariff refunds. Without them the range is $7.28 to $7.43, seven cents below July at both ends C (calculated).⁴ Sales growth for the year halved, from 7% to 8% to 4% to 5%, and the HOKA and UGG growth rates each came down a notch.¹⁸⁴ The operating margin without refunds stayed about 21.5%, so the profit cut came from sales and not from cost.

The second half is where the pressure shows. To reach 23% for the year, with $545M of operating income in the first half, the second half needs about $769M of operating income on $3,212M of sales, a 23.9% margin. Take out the $41.9M of refunds due in the December quarter and the underlying margin is 22.6% C (calculated).⁴ In the second half of fiscal 2026 the margin was 25.1% C (calculated).²³ So the outlook assumes the margin on a like-for-like basis falls about 2.4 points year on year in the half that earns most of the profit. Outlooks are not forecasts, and Deckers raised its EPS range in each of the last two quarters. But on the company’s own numbers, the second half is a year-on-year fall in underlying margin.

The balance sheet, and what to watch in it

Inventory looks healthy: 3% above a year ago on sales 3.5% higher. Receivables do not. They were 25% higher than a year before, against wholesale sales up 5.5%, which stretches the days outstanding from about 48 to about 57 C (calculated).³¹²⁴ The 10-Q also says a switch of European third-party logistics partner disrupted shipments in a peak period and led to higher reserves for customer chargebacks.³ That might explain some of it: goods shipped late in the quarter sit unpaid at quarter-end. It does not prove it. Operating cash flow for the half was minus $9M against plus $44M a year earlier, and receivables swallowed $367M against $223M.³ I can’t judge this from the 10-Q. It is an item I want to see reversed by March, and it sits in my table of things to track.

Cash fell from $1.91B in March to $1.21B in September because the company bought back $637M of stock and built seasonal inventory. It has no borrowings and in August extended a $500M revolving credit facility to 2031, with the net leverage covenant raised to 4.0 times.³⁵ That facility is not drawn. It is a cushion for the working capital swing, and the swing is large: operating cash flow was minus $9M in the first half of this year and plus $44M in the first half of last year, and the second half carries the year: $1.14B of the $1.18B in fiscal 2026 C (calculated).³²

VIValuation

Start with what would go wrong

Before any numbers, I ask what would most likely make this a poor investment from here, and work back from that. For Deckers the three most likely ways are these, in the order I think most likely.

1. Both brands cool together and the margin falls back. Fashion demand turns on little. UGG sales were flat for three years to fiscal 2020 and fell 2.7% in fiscal 2023.¹⁵¹⁶⁷ HOKA has slowed from 15.9% to 7.3% and faces a rival growing at 21.6%.²³⁹ If sales stall and the operating margin returns to 16%, where it stood in fiscal 2019 and 2020, my bear case value is $69 a share E (estimate).¹³ If the damage is worse, with sales down a few percent a year for three years and the margin at 12%, about where it was in fiscal 2018 (11.7%), the value is about $50 E (estimate). The bear case is not the floor.
2. Tariffs and sourcing squeeze the margin. Nearly everything is made in Vietnam and Indonesia, so one change in trade policy hits the whole company.² Deckers paid about $119M of tariffs that were later struck down, 2.2% of fiscal 2026 sales C (calculated).³² The 10-Q says it does not expect to offset fully the incremental tariff costs it faces this year.³ I can’t see the size of those costs in the filings. Each point of steady-state operating margin is worth about $4.8 a share in my model E (estimate).
3. The reported numbers flatter the cash, and the buybacks could pay too much. The refunds add 1.5 points to the margin this year, and receivables are growing more than four times faster than wholesale sales.⁴³¹² The company is also spending $1.7B on stock at around $100 a share while the market pays $82. If the stock is worth less than $100, that money is gone.⁶³

I can’t put honest odds on the second and third. I can show what the first does, and I do below.

Owner cash: what an owner can really take out

Reported profit is a poor guide to what an owner can take out. I start from the last twelve months to 30 September 2026 and ask four things. Did the business generate the cash? What did it have to spend to stand still? How much of the pay went in stock? And how much is a one-off?

Owner cash is about $924M, 87% of reported net income. The gap is stock pay, a refund that won’t repeat, and the interest earned on a cash pile that I count separately. Capital spending is close to depreciation, so the business needs little to stand still. Most of the money it spends to grow, on stores and on lease commitments, shows up as rent and staff in the operating costs and not as capex.³ At today’s price that is a yield of 8.4% on the market value, or 9.5% on the value net of cash C (calculated).

Two screens, one company

Deckers came to me from a screen for shares that look cheap. Two earlier passes disagreed about it. One said the price already assumes a decline of about 5% a year in owner cash for ten years. The other put it on a watch list because it failed a margin test. I re-derived both from the filings.

Where my numbers differ from the first screen: its margin base of 23.6% includes the refund; without it the last twelve months were 22.8%. Its cash base of $1,007M includes $38M of one-off refund and $44M of interest on the cash pile, which I count separately as cash, so using both would double-count. I take $924M. Where I differ from the second: its base was close to mine, so it didn’t depend on the margin. I trust my numbers over both, and the differences are small, about 8% of the starting cash.

The two screens agree on the facts and differ on the verdict. The refunds are real, but they are small in value. Together they are $88M before tax, about $0.52 a share after tax, or 0.6% of the price C (calculated).⁴ They flatter the margin by 1.5 points this year, and that is why the margin matters more than the cash. The right question is not whether the cash is flattered. It is what margin the business keeps.

So test the margin directly. If sales never grew again for ten years, then grew 3% after, and the margin held at 21%, the business would be worth $90 a share E (estimate). The price of $81.99 equals no growth at all for ten years and an operating margin of 18.6% E (estimate). That is 2.9 points below today’s underlying 21.5%, and it needs both brands to stop growing and to give up about an eighth of their margin. That is possible, but it is a lot to ask in one go. Neither screen proves that Deckers is cheap. Both show that the price needs a fade, and they differ on how likely one is.

What the price implies

The stock is down 63% from its closing high of $223.11 on 30 January 2025, and it has traded between $77.51 and $120.94 in the last year.¹²³ A decline like that is a sign that holders changed their minds about something. The multiple tells you what: the price is 10.9 times trailing earnings, below any year-end multiple of the last ten years.

Over ten years the price rose 9.4 times from the end of October 2016 while earnings per share went from $0.03, in a year of write-downs, to $7.02.¹¹³ The multiple was 14 to 25 times at most year-ends, and 32 times at the top, in March 2024.¹¹³ Now it is 11. For the multiple to be 11 on a business with an 18.7% net margin, someone expects those earnings to fall.

Reverse DCF: what the price needs

On those inputs, the price needs sales to shrink about 2.0% a year for ten years, from $5.71B to about $4.8B by fiscal 2036, with the margin held at 21% C (calculated). The last ten years gave 13.2% a year and the last five 16.5% C (calculated).¹³ Management’s framework in May was high single digits a year through fiscal 2030, and in October it cut this year’s growth to 4% to 5%.⁶⁴ The market is saying that the business has peaked.

The table is the most honest way to show what I can’t know, which is the right discount rate. Anyone who requires 9% sees a price that assumes a steady decline. Anyone who requires 12% sees a price that assumes modest growth and no more. The truth about this stock is in the range of the table, not in a single row.

The discount rate

I discount at 10%. The capital asset pricing model with the 4.94% ten-year Treasury and a 4.20% implied equity risk premium gives 9.0% on Deckers’ beta against the market over 119 months, 9.7% over 60 and 11.0% over 36 C (calculated).^2224251 The shorter the window, the riskier the stock looks. I take 10%, between the five- and three-year results, because a fashion brand can fade faster than its beta shows. On my other pages I use 8.5% to 9.5%. At 9.0%, my base is $132, and at 11%, $103 E (estimate).

Read across the second table. At a 15% margin with no growth, the business is worth $69 a share, less than the price. At 17% with half my growth it is $86, about the price. The price lives in the lower left of the table, and my base lives in the middle. The decision comes down to which margin and which growth you believe, and I can narrow them but not remove them.

Three cases

My base case is Deckers carrying on, but slower. HOKA grows 9% in fiscal 2028, below the low double digits in management’s framework, and fades to 3%. UGG grows 4% and fades to 2%. Sales reach $8.3B in fiscal 2036, 4.3% a year from fiscal 2026 against 16.5% a year in the last five E (estimate). The margin is 21.0%, lower than fiscal 2026’s 23.1% and in line with the outlook for this year without refunds. Management’s own framework is high-single-digit growth through fiscal 2030 and an operating margin in the low 20s.⁶ My base gives it about half the growth and about the margin.

The bull case has Deckers meet that framework and then some: HOKA 12% in fiscal 2028, UGG 6%, a margin that rises to 24% as DTC and international grow, which is the 23.6% of fiscal 2025 plus a bit E (estimate). The bear case is the fade: HOKA stalls, UGG shrinks for four years, and the margin drops to 16%, where it was in fiscal 2019 and 2020. That case is worth $69, and the price is 19% above it. This is a business with a cash cushion and low capital needs, so even the fade doesn’t cut the value by half. The stress case does.

The case for the market being right

The price reflects a debate, and the market’s side of it is serious. Here is the case, as strongly as I can put it.

• The growth is slowing in both brands at once. HOKA from 15.9% to 7.3%, UGG from 8.2% to 3.9%, in the first half of fiscal 2027.²³ The company cut its full-year sales outlook by about $170M in October.¹⁸⁴
• The profit growth came before the costs. HOKA’s margin before shared costs fell 4.6 points in two years. Marketing, staff and stores are being added to defend growth, and they don’t go away if growth does.²
• The recent record is flattered. The headline EPS outlook rose in October while the underlying one fell by seven cents. The margin fell 300 basis points in the March quarter and 191 in the June quarter, with no refund in either.⁶¹⁸
• A rival is taking the growth. On grew 21.6% in constant currency with a higher gross margin.⁹
• It has faded before. Operating income went from $224M in fiscal 2015 to a loss of $2M in fiscal 2017, the year of the Sanuk write-down.¹⁵

If these are right, the best use of this table is the bear column. I give the market side real weight, which is why my required return is 10% and why my margin-of-safety price is as low as it is.

What I can’t judge

Some inputs I can’t know, and I would rather say so than pretend. I can’t see how large the tariff costs are now, since the filings give only the 2025 and 2026 IEEPA figures and say that incremental costs remain. I don’t know whether the extra refunds, up to the $119M gross paid, will arrive; the company assumes none beyond what it has received, and the value is small either way, at most a few dollars a share. I can’t tell whether the receivables are timing or something worse. I don’t know whether HOKA is a franchise like a major running brand or a fashion phase. I have no reliable market-share data. And I can’t know what multiple the market will pay in 2036, so I show several.

A buyer who gets my base cash flows and sells in 2036 at nine times earnings earns about 14% a year. A buyer who gets the bear cash flows and sells at nine times earns about 5%. The range of outcomes, from my bear to my base, is wide, but most of it sits above the Treasury yield of 4.94%. That is the argument for the price. The argument against is that my bear is a modest fade and not a collapse.

Multiply it out

My base needs several things at once. HOKA growth averaging 7% or more for five years: I would give that 40%. UGG sales not falling in a normal year: 75%. Operating margin staying at or above 20%: 55%. No lasting tariff or sourcing shock beyond today’s: 75%. Wholesale partners keep the shelf space: 85%. Multiplied, that is about 11% E (estimate). They overlap, since good HOKA growth helps the margin and the shelf space, so the true figure is higher, perhaps a fifth. Missing one doesn’t ruin the case either, since the price sits well below the base. That is the useful point. The price doesn’t need my base to come true. It is matched by no growth for ten years and an 18.6% margin. So the odds that my base is exactly right are low, about a tenth to a fifth, and that is why I show a range.

Quality and price are two questions

How good is the business? Good, but not a certainty. An 18.7% net margin, no debt, capital needs of 1.5% of sales and two brands in demand are rare. Against that, its sales record has pauses, it rents the attention of shoppers, and its profit comes in one quarter. How good is the price? It is 29% below my base value and 19% above my bear value, so it sits inside my range, nearer the bear. Those are two different answers. A good business can be a poor purchase at the wrong price, and a so-so one a good purchase at the right one. This looks like a good but unproven business at a price below my base and above my bear, which is another way of saying it is a debate and not an obvious mistake.

It helps to compare it with the next best use of the same dollar. A ten-year Treasury pays 4.94% with no risk to the dollars promised.²² Deckers returns about 13.5% a year on my base and 8.4% on my bear, with all the risk of a share E (estimate). On this site, LVMH, the closest brand business, is priced 3% above my base value on that page, with a price that needs 5.8% cash growth a year; Adyen is priced 22% below its base and needs 8.4% cash growth a year. Those pages use rates of 8.5% for LVMH and 10.5% for Adyen, either side of my 10% here, so the rate does not explain the gap. At 9% my base would be $132. Deckers’ price asks less of the future than theirs does. Whether its business can deliver even that is the debate.

The margin of safety

My margin-of-safety price is $69, 40% below my base value. It is 40% and not the 30% I use for steadier businesses, because the range here is wider and the margin less predictable. At $69, my bear case returns about 10.0% a year, close to the 10% I require, and the base returns about 16.0% C (calculated). The stock last closed below $69 in March 2023. The price is 19% above it.¹

Where this could be in 5 and 10 years

The cases above value Deckers today. This asks what each would be worth later, after cash has gone out. Interest on the cash is left out, so the figures lean low.

My base is $131 in five years and $146 in ten. Five years needs sales near $7.1B, a 21% operating margin and about $1.1B a year of owner cash, with HOKA growth easing from 9% toward 3% and UGG from 4% toward 2%. For ten years it needs $8.3B of sales and the same margin, and a buyer in 2036 who pays about 13 times operating profit after tax, which is what 3% growth and a 25% return on new capital are worth at 10% C (calculated). Value rises only 12% from year 5 to year 10 because $47 a share is paid out in those years.

The cases differ on two numbers. Operating margin ends at 16%, 21% or 24%, and sales grow 0.3%, 4.3% or 5.9% a year. In the bear, HOKA stalls, UGG shrinks for four years and sales stay near $5.6B, so value sits at $66 to $68 and the return is the cash alone, 5.9% a year. In the bull, HOKA grows 12% fading to 4% and sales reach $9.7B. At a 9% required return my base is $168 in year 10, at 11% $129 E (estimate).

The most likely way my base is wrong is the margin. The first half ran at 19.9% without refunds and the outlook is 21.5%. Each point is worth about $6 a share at year 5 and $6.50 at year 10, so a 19% margin gives $119 and $133 E (estimate).

A reader’s guide. These are estimates of value, not forecasts of the share price. The market can sit above or below value for years; it has already moved 63% from the January 2025 high.

VIIThe case for the price

What most people miss

First, the quarter that grabbed the headlines was better than it looks underneath, in one respect. In the September quarter the operating margin was 26.3%, but without the $46.0M refund it was 23.2%, up from 22.8% a year before, even though a change of European logistics partner disrupted shipments in the quarter C (calculated).⁴³ The base business did not slip in that quarter. Second, the shrinking of the share count is faster than the growth: shares outstanding fell from 150.2M in March 2025 to 133.7M in September 2026, down 11% in eighteen months, and $9.03 a share of the price, 11%, is cash C (calculated).²⁶³ Third, Deckers is much less a US business than it was: international sales were 42% of the total in fiscal 2026, against 31% in fiscal 2022, and they grew 26.8% in the year C (calculated).²¹⁴

The bull case

In plain words: Deckers has built two brands that people pay full price for, and it is early in taking both to the rest of the world. HOKA is a $2.6B brand that opened 13 stores in six months and is still growing outside the US.²³ UGG is fixing its seasonality with year-round styles. The business needs little capital, the cash is returned through buybacks, and the share count is shrinking fast. Management’s version, from the fourth-quarter release on 21 May 2026, is a framework through fiscal 2030: sales up high single digits a year, HOKA up low double digits, UGG up mid single digits, an operating margin in the low 20s, and earnings per share growing at a low double-digit rate with buybacks.⁶ The chief executive said in the October release that he is “confident in the significant global opportunities ahead for both HOKA and UGG.”⁴

If earnings per share grew 11% a year from the middle of this year’s underlying range, they would reach about $10.05 in fiscal 2030 E (estimate). At today’s 11 times earnings that is a price near $111, and at 16 times about $161 E (estimate). I have not found a named investor with a public case on Deckers that I can verify, and I did not check fund holdings for this page, so I cite none. The proxy lists two holders of 5% or more: BlackRock at 10.5% and Vanguard at 7.8%.¹⁰

Against reality

If Deckers does what its framework says, my bull case, the business is worth $152 a share E (estimate), and the price would be a fraction of that. But the framework was written in May. Since then, the company cut this year’s sales growth from 7% to 8% to 4% to 5%, and HOKA’s from low double digits to high single digits.⁶⁴ The October release did not repeat the fiscal 2028 to 2030 framework, and I don’t know if the call did.⁴ So today’s numbers are about half what the case needs: HOKA at 7% against low double digits, total sales at 4% against high single digits, and an underlying margin of 21.5% against a low-20s promise that it just about meets.

That matters less for the price than it does for the bull. The price does not need the bull. It is below my base value of $116, which has half the growth, and above my bear value of $69. So the right reading is this: the case for the price is that Deckers only has to be a decent business, not a great one. The case against it is that the last two quarters were not decent by the company’s own measure.

What a 10x would take. Ten times $81.99 is $820 a share, about $110B of market value on today’s share count C (calculated). At 15 times earnings that needs about $7.3B of net income. At the 18.7% net margin of fiscal 2026 that means about $39B of revenue, 7 times the last twelve months, and nearly as much as Nike’s $46.4B C (calculated).⁸ Even at a generous 20 times earnings it needs $29B of revenue, a growth rate near 18% a year for ten years, against the 13.2% Deckers managed in the last ten C (calculated).¹³ Buybacks would shave some of this. Deckers itself rose 9.4 times in the last ten years, but from a company worth about $1.7B, not $11B C (calculated).¹¹³ From here, tenfold in a decade is close to impossible, and I would not build a case on it.

Where I come down

Two things moved me. The refunds are worth about $0.52 a share once and nothing after that, so they matter for the margin and not for the value, and the price still sits below my base after I take them out. The cut in underlying earnings in October also moved me, and it is why my base margin is 21% and not 23.6%. What did not move me is the plain arithmetic: the price equals no growth for ten years and a margin of 18.6%. What would raise my values is HOKA growth back at low double digits with the margin above 21%, DTC comparable sales turning positive, and receivables growing in step with wholesale sales.

VIIIRisks, and what would change my view

The three ways this goes badly wrong are at the start of Valuation. These are the rest.

• Two countries make nearly everything. Production is predominantly in Vietnam and Indonesia, and a tariff, a port closure or a conflict in the region hits all of it at once.² The 10-K names prolonged conflict in the Middle East as a possible driver of shipping and energy costs.²
• Sheepskin. UGG’s main material comes mostly from Australia and is processed by two tanneries in China. The company buys on fixed contracts but cannot switch quickly.²
• Wholesale shelf space. Wholesale was 58.6% of fiscal 2026 sales, and one customer was 18.5% of receivables.⁶² If a large partner trims orders or stretches payment, Deckers feels it first in receivables and returns.
• Consumer and promotions. The company says traffic and conversion fell in the US, that shoppers waited for promotions, and that these conditions may persist.³
• Logistics. A change of European logistics partner caused a disruption in the September quarter and higher reserves for chargebacks. It may leave residual effects in the near term.³
• Trademark and copies. A claim that the UGG name is generic succeeded in Australia, and the company runs a standing legal programme against counterfeits.²
• Legal. Two purported consumer class actions allege tariff-related pricing and government reimbursements, which Deckers says it will defend.³ The 10-K also flags the OECD’s 15% global minimum tax as a possible increase in its tax bill.²
• Leadership. Caroti has been chief executive for two years, and a board member retires on 1 December.¹⁰²¹

What would raise my base value: the January 2027 quarter, the one that earns half the year’s profit, showing underlying margin near last year’s 31%, HOKA growth at or above 10%, and DTC comparable sales turning positive.¹⁷ What would lower it: a second consecutive cut to sales growth, an underlying margin below 20%, or receivables still outrunning wholesale sales by March.⁴³