Deckers stock collapsed due to weak demand for UGG boots. Is it time to sell?

Shoe maker Deckers Outdoor's stock plummeted 15% in trading on Friday, hitting a two-year low. Investors reacted sharply to the quarterly report of the owner of Hoka and UGG footwear brands, which was published on Thursday evening: the company gave a revenue forecast below analysts' expectations, citing the impact of duties. After that, more than a dozen analysts revised their targets on the shoe maker's shares, but none of those who advised buying the securities retracted their recommendation.

Deckers shares collapsed 15.2% to $87 in trading on Friday, October 24, after posting a weak full-year sales forecast on Thursday evening. That marked the lowest price for the company's securities since October 2023.

Reporting quarterly results, Deckers said its revenue for the current fiscal year ending in Ma 2026 will be about $5.35 billion, with the consensus forecast at $5.45 billion, Reuters cited LSEG as saying. The company explained that it expects more cautious consumer behavior in the second half of the year as the effects of duties and price increases start to be felt more strongly in the U.S. The company said it expects the impact of duties and price increases to be felt in the second half of the year.

Deckers' revenue for the second quarter of fiscal 2026, ended Sept. 30, rose 9.1% year-over-year to $1.43 billion, slightly beating analysts' estimates. Earnings per share came in at $1.82, against Wall Street expectations of $1.58.

- An important negative factor for Deckers Outdoor shares could be weak direct sales of UGG footwear, which are down 10 percent year-to-date, Jefferies analyst Ashley Helgans warned in a note to clients on Thursday night, Reuters wrote. "Reduced brand inertia could lead to even more promotions, a key element of a negative scenario as operating margins return to average levels," she wrote. Meanwhile, Helgans emphasized that the Hoka brand has strengthened its position in the U.S. running shoe market. The analyst lowered her Deckers stock target from $107 to $102, up 17.2% from Friday's closing price. She maintained a neutral rating for the stock, meaning she recommends neither selling it nor increasing the position.

- "The [Deckers] results and outlook are disappointing and we are increasingly concerned about the UGG business," said Truist analyst Joseph Civello, quoted by Barron's. He, unlike Helgans, conceded that the peak in sales growth for both fur boots and Hoka sneakers has passed, and that increasing competition amid tight consumer budgets points to the risk of further declines in demand. Civello reiterated a buy recommendation for Deckers shares, but sharply cut his target price from $145 to $105. That's the biggest downgrade among Wall Street analysts. The new benchmark, however, suggests a 20% upside potential.

- "In FY 2027, [Deckers] duties will continue to exert pressure in our view, but we also expect partial compensation through new price increases - given that consumers have so far shown a willingness to accept higher prices," Raymond James analysts said in a note, cited by Barron's. They still recommend investing in the company and have revised the target from $137 to $115, too.

- "The lower revenue outlook reflects [Deckers'] management's cautious view on U.S. consumer spending amid duty-induced price increases," agreed Bloomberg Intelligence analyst Abigail Gilmartin. That said, she estimates the company's calculations could be "overly conservative" if the current inertia of both brands continues and new product launches continue to support demand. Gilmartin said Hoka still has the potential to grow into a multi-billion-dollar brand, while for UGG, product line expansion and a more balanced seasonal assortment remain key to long-term growth.

After the publication of the forecast, 14 analysts downgraded their targets on Deckers shares, and one analyst upgraded them, according to MarketScreener data. At the same time none of those who recommended these securities to purchase, did not refuse from the rating. In total, 14 analysts out of 28 who track the company's performance advised to increase their position in Deckers, MarketWatch shows . A month ago, there were 12 such recommendations. Another 12 analysts are neutral, and only two suggest selling these shares.

This article was AI-translated and verified by a human editor