Goleta, California - Deckers Outdoor has found its groove, riding a three-year wave of double-digit revenue growth on the backs of two powerhouse brands: Ugg and Hoka. While fashion trends are notoriously fickle, the company remains confident in its star performers, even as it prepares for potential shifts in consumer preferences.
After years of fluctuating popularity, Ugg boots have recaptured the hearts of millennials and Gen Z with fresh offerings like open-toed sandals and slip-on styles. The "Ultra Mini Platform," a chunky-soled spin on the classic shearling-lined boot, has ignited a retail frenzy, driving demand not only in stores but also on secondary markets and social media platforms like TikTok. Ugg sales reached a staggering $1.07 billion in the final quarter of 2023, marking a 15% year-over-year increase.
Acquired by Deckers in 2012, Hoka has transcended its athletic origins to become a casual wear staple. Capitalizing on pandemic-driven trends like hybrid work and relaxed office dress codes, Hoka's colorful, chunky sneakers have found favor with style-conscious consumers beyond the running community. Sales skyrocketed from a meager $3 million in 2012 to a projected $1.8 billion for fiscal year 2024, solidifying Hoka's position as a major contributor to Deckers' success.
The retail landscape is no stranger to fleeting trends, demanding agility and adaptability from businesses like Deckers. While some analysts express concern about the company's dependence on two potentially trend-driven brands, others see this concentration as a positive. "It's rare to have two brands of this scale and growth within one company," observes Janine Stichter, an analyst at BTIG. Ugg and Hoka, while susceptible to some level of trend influence, boast a more predictable contribution to Deckers' revenue compared to the broader footwear market.
Deckers is committed to maintaining consumer interest and attracting new customers through continuous product innovation. Increased spending on marketing and personnel reflects this dedication. Ugg plans to expand its offerings beyond the iconic boot, introducing items like rugged-soled slippers for outdoor wear. Hoka, too, is broadening its appeal, finding favor as everyday footwear beyond the realm of running.
To preserve the brands' "hot and healthy" status, Deckers strategically manages inventory, creating a sense of scarcity that fuels demand and enables sales at full price without heavy reliance on promotions.
While Ugg and Hoka occupy the spotlight, Deckers is actively managing its brand portfolio. The divestment of Sanuk is underway, and the company plans to unveil a new brand in the coming months. This new venture is shrouded in secrecy, but analysts anticipate a premium sneaker priced around $200, with initial production scaled to gauge consumer interest.
Can Deckers maintain its momentum with Ugg and Hoka leading the charge? While the answer remains unwritten, the company's strategic investments, brand management, and commitment to innovation suggest they are prepared to dance to the beat of changing consumer preferences, ensuring they stay in step with success.
