Consumer Discretionary Select Sector

S&P 500

The Cannibal

Comparable Companies - DECK

The report covers the period from 2025-01-16 to 2026-01-16, containing 1 discretionary insider purchase and 19 discretionary insider sales. Short interest as of 2025-12-31 is 4,035,685 shares, representing 2.8% of float with 1.5 days to cover. Primary institutional filers include FMR LLC and BlackRock, Inc.

DIRECTOR

CHIEF SUPPLY CHAIN OFFICER

Securities are acquired and held in the ordinary course of business and were not acquired and are not held for the purpose of or with the effect of changing or influencing the control of the issuer.

Chief Executive Officer, President & Director

Chief Financial Officer

President of Fashion Lifestyle

Chief Administrative Officer & General Counsel

President of HOKA

Chair of the Board

Director

Retired as Chief Executive Officer and President, but continued to serve as a director.

Former Chief Executive Officer and President

Stefano Caroti

Steven J. Fasching

Anne Spangenberg

Thomas Garcia

Robin Spring-Green

Cynthia L. Davis

David A. Burwick

Nelson C. Chan

Juan R. Figuereo

Patrick J. Grismer

Maha S. Ibrahim

Victor Luis

Lauri M. Shanahan

Bonita C. Stewart

Stefano Caroti brings a wealth of experience from leadership roles at major footwear and apparel companies, including PUMA and NIKE, Inc., where he was responsible for global commercial operations and regional business management. His tenure at Deckers Outdoor Corporation, initially as Chief Commercial Officer and now as CEO, has coincided with significant revenue and operating income growth, indicating a strong ability to drive performance in his current role. His background suggests a strategic approach to brand management and commercial execution, crucial for navigating the competitive landscape of the outdoor and lifestyle apparel market.

Steven J. Fasching's career at Deckers Outdoor Corporation has been focused on strategic financial planning and investor relations, culminating in his role as CFO. His extensive experience in managing financial strategy for multi-billion dollar organizations suggests a strong foundation for overseeing the company's financial health and capital allocation. His tenure has spanned periods of significant growth and strategic initiatives, indicating a consistent contribution to the company's financial management and investor communication.

Anne Spangenberg's career demonstrates a consistent progression in brand leadership within the footwear industry, with significant experience at both NIKE, Inc. and Deckers Outdoor Corporation. Her roles, particularly her leadership of the UGG brand in North America and globally, highlight her ability to manage and grow established brands. Her background in product merchandising suggests a deep understanding of market trends and consumer needs, which is invaluable for her current role leading the Fashion Lifestyle segment.

Thomas Garcia's career is marked by a strong foundation in corporate law, honed through his partnership at O'Melveny & Myers LLP, followed by progressive legal and administrative leadership roles at Deckers Outdoor Corporation. As General Counsel and Chief Administrative Officer, he is instrumental in navigating the company's legal and operational complexities, including corporate governance and securities matters. His experience in M&A and capital markets transactions provides a valuable perspective for strategic decision-making.

Robin Spring-Green brings a deep understanding of the athletic footwear and apparel market, cultivated over two decades, including 17 years at NIKE, Inc. where she rose to Global Vice President of Men's Running and Fitness. Her transition to Deckers Outdoor Corporation as President of HOKA signifies a strategic move to leverage her expertise in leading and growing a high-performance brand. Her background suggests a strong capability in driving growth and operational excellence within complex global businesses.

Cynthia L. Davis's extensive career in the retail and consumer products sectors, including senior leadership roles at Starbucks and Gap Inc., provides a robust foundation for her current position as Chair of the Board at Deckers Outdoor Corporation. Her experience in brand marketing, merchandising, and retail operations, coupled with her directorships at Kennametal Inc. and Brinker International, Inc., equips her with a comprehensive understanding of corporate governance and strategic oversight. Her leadership as Chair is likely to be informed by a deep appreciation for brand value and consumer engagement.

David A. Burwick's extensive background in marketing, sales, and general management, including his tenure as CEO of Peet's Coffee & Tea and senior roles at major consumer brands like Revlon, Newell Brands, Walmart, and PepsiCo, provides him with a broad perspective on consumer markets and retail operations. This experience is highly relevant to Deckers Outdoor Corporation's business, particularly in areas of brand strategy, international expansion, and supply chain management, making him a valuable director.

Nelson C. Chan's extensive financial background, including his roles as CFO for Revlon and NII Holdings, Inc., and his current involvement with the audit committee of Krispy Kreme, Inc., provides him with deep expertise in financial literacy, risk oversight, and corporate governance. This experience is highly valuable for Deckers Outdoor Corporation, particularly in his capacity as a director and member of the Audit & Risk Management Committee, ensuring robust financial stewardship and compliance.

Juan R. Figuereo's extensive experience as a CFO for public companies like Revlon and NII Holdings, Inc., combined with his current roles as a director and audit committee chair at Western Alliance Bancorporation and previously at Diversey, Inc., underscores his deep expertise in financial management, public company governance, and risk oversight. His leadership on audit committees is particularly relevant to Deckers Outdoor Corporation, ensuring strong financial accountability and strategic financial planning.

Patrick J. Grismer's extensive career in corporate finance, including his role as CFO of Starbucks Corporation, and his current directorships at Krispy Kreme, Inc., provide him with significant financial acumen and board governance experience. His background as a retired corporate executive, coupled with his service on audit committees, positions him to offer valuable oversight on financial matters and strategic direction for Deckers Outdoor Corporation.

Maha S. Ibrahim's role as a General Partner at Canaan Partners, a venture capital firm, provides her with a unique perspective on identifying and nurturing growth-stage companies. Her experience in evaluating business models, market potential, and management teams is highly relevant to Deckers Outdoor Corporation's strategic direction and potential investments. Her background in venture capital suggests a forward-looking approach to innovation and market expansion.

Victor Luis's leadership experience as CEO of Coach, Inc., and his prior roles in the luxury goods sector, provide him with a deep understanding of brand building, global market dynamics, and strategic growth. His tenure at Coach involved significant brand transformation and expansion, demonstrating his ability to navigate complex business environments and drive performance. This experience is highly relevant to Deckers Outdoor Corporation's continued growth and brand development.

Lauri M. Shanahan's extensive experience in senior leadership roles within the retail and consumer products sectors, particularly her tenure as Chief Administrative Officer and Chief Legal Officer at Gap Inc., provides her with a deep understanding of corporate operations, legal compliance, and strategic management. Her current directorships at Treasury Wine Estates Limited and CAVA Group, Inc. further enhance her board-level expertise. Her background is highly relevant to Deckers Outdoor Corporation's governance and operational strategies.

Bonita C. Stewart's extensive experience in technology, media, and telecommunications, including senior leadership roles at Google and Apple, provides her with a strong understanding of digital strategy, global partnerships, and technological innovation. Her background in these rapidly evolving sectors is highly relevant to Deckers Outdoor Corporation's digital transformation efforts and its engagement with technology-driven consumer trends. Her expertise in cybersecurity and technology infrastructure is also a key asset for board-level risk oversight.

Dave Powers' tenure as CEO and President of Deckers Outdoor Corporation was marked by significant company growth and strategic development. Although he has transitioned from his executive roles, his continued presence as a director allows the company to benefit from his deep institutional knowledge and leadership experience. His contributions during his leadership period have laid a strong foundation for the company's ongoing success.

NIKE designs, develops, markets, and sells athletic footwear, apparel, equipment, accessories, and services worldwide. The company sells products through NIKE Direct operations (retail stores and digital platforms) and wholesale accounts.

Designs, develops, and markets athletic footwear, apparel, equipment, accessories, and services.

Designs, markets, and sells casual footwear, apparel, and accessories.

Birkenstock is a premium lifestyle brand rooted in function, quality, and tradition, manufacturing footwear with a focus on foot health and the 'Naturgewolltes Gehen' concept.

Sales through owned e-commerce and retail stores.

Sales through third-party retailers and distributors.

Skechers designs, develops, and markets a diverse range of footwear, apparel, and accessories, focusing on comfort, style, innovation, and quality at a reasonable price.

Sales to domestic and international retailers and distributors.

Sales through owned retail stores and e-commerce.

Ralph Lauren is a global leader in the design, marketing, and distribution of premium lifestyle products, including apparel, footwear, accessories, home furnishings, and fragrances.

Sales to department stores and specialty retailers.

Principal facilities operational as of March 31, 2025 include: Moreno Valley, California (Warehouse and Distribution Center, leased, 1,530,944 sq ft); Mooresville, Indiana (Warehouse and Distribution Center, leased, 507,600 sq ft); Mooresville, Indiana (Warehouse and Distribution Center, leased, 1,015,902 sq ft); Goleta, California (Corporate Headquarters, owned, 185,094 sq ft).

Deckers Outdoor Corporation is led by a management team with deep industry experience and a clear focus on brand execution and operational efficiency, evidenced by exceptional ROIC (78.8%) and free cash flow generation. The current CEO, Stefano Caroti, has a strong internal track record of driving growth and profitability. However, the capital allocation strategy reveals significant weaknesses: while the company is aggressively shrinking its share count, the timing of buybacks has been poor, with substantial repurchases occurring at elevated valuations (e.g., $162/share) prior to a stock decline, which has destroyed per-share value. Furthermore, the incentive structure is misaligned for a Mature Compounder, relying on generic revenue and operating income targets rather than long-term value creation metrics like ROIC or FCF per share. The board is competent and independent but lacks specific capital allocation expertise, which contributes to the suboptimal execution of the buyback program. Overall, the team is capable of operational excellence but requires improved discipline in capital allocation and incentive alignment to fully maximize shareholder value.

Climate change, natural disasters, public health issues, or other events beyond our control, as well as related regulations, have adversely affected, and could in the future adversely affect, our business. We could incur significant capital expenditures and other costs to improve the climate-related resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate the effects of climate change, including compliance with evolving, and at times inconsistent, laws and regulations. We could also experience increased costs for energy, production, transportation, raw and other materials, as well as higher insurance premiums and deductibles, which could adversely affect our operations.

As of March 31, 2025, we employed approximately 5,500 employees, reflecting an increase of 14.6% compared to March 31, 2024, in North America, Europe, and Asia. This includes approximately 2,000 employees in our retail stores but excludes temporary and seasonal employees.

We require our independent manufacturers and designated suppliers to adopt our Ethical Supply Chain Supplier Code of Conduct (Supplier Code of Conduct), which requires them to comply with all local laws and regulations governing human rights, working conditions, anti-corruption, restricted substances, and environmental compliance, including animal welfare and conflict minerals, before we are willing to conduct business with them. While we require our independent manufacturers and suppliers to adhere to environmental, labor, ethical, health, safety, and other business standards and conduct periodic audits of their operations, we do not directly control their practices. Noncompliance with applicable laws or standards could lead to product recalls, regulatory penalties, the seizure or forfeiture of our products, or reputational harm.

We require our independent manufacturers and designated suppliers to adopt our Ethical Supply Chain Supplier Code of Conduct (Supplier Code of Conduct), which requires them to comply with all local laws and regulations governing human rights, working conditions, anti-corruption, restricted substances, and environmental compliance, including animal welfare and conflict minerals, before we are willing to conduct business with them. We highly value stakeholder input and have consistently demonstrated our commitment to maintaining open and interactive dialogue on ESG matters with our stakeholders, including non-governmental organizations, employees, stockholders, suppliers, industry groups, communities, and governments, to ensure their views are actively considered in executing our ESG program.

Revenue growth has decelerated from 18% in FY2024 to 16% in FY2025, with Q1 FY2026 showing a 17% increase. Gross margins compressed 110 bps in Q1 FY2026 to 55.8% due to unfavorable channel mix and freight costs, despite price increases.

Management states CapEx is primarily for capacity expansion, specifically expanding the HOKA brand retail store fleet, upgrading warehouses and distribution centers, and IT infrastructure improvements. The P14 Innovation Dossier notes investments in IT infrastructure and system improvements to improve efficiency.

The 10-K notes an impairment to intangible assets of $8.164 million for the Sanuk brand in FY2024, which was subsequently sold. The auditor identified 'Wholesale sales return liability' as a Critical Audit Matter (CAM), but no material asset impairments were noted in FY2025. The asset base is dominated by current assets (Cash, Receivables, Inventory) and Net PP&E.

The high ROIC is driven by the capital-light nature of the brand-led business model. Reinvestment is focused on high-return initiatives like retail expansion and marketing, which generate high incremental returns. The P14 Innovation Dossier notes investments in IT and supply chain that support operational efficiency.

Marcato Capital Management

Red Mountain Capital Partners

P/FCF

Extensive experience in matters related to premium branding, retail, and risk oversight. Public company directorships include Kennametal Inc. and Brinker International, Inc.

Cynthia (Cindy) L. Davis

International experience, supply chain management, sales and marketing, retail, and mergers and acquisitions. Served as executive vice president of several global marketers including Revlon and Newell Brands, and held senior management positions at Walmart, Inc. and PepsiCo, Inc.

Extensive leadership experiences in the footwear and apparel industry. Over 30 years of industry experience in general management, sales, retail, product, marketing, business strategy and brand management. Previously held senior executive positions at PUMA and NIKE, Inc.

High level of financial literacy, supply chain management, compliance and risk oversight, and mergers and acquisitions. Served as chief financial officer of several public companies and as chair of the audit committee of Panera Brands and member of the audit committee of Krispy Kreme, Inc.

Extensive financial and public company experience. Served as executive vice president and chief financial officer of Revlon and NII Holdings, Inc. Currently serves as chair of the audit committee of Western Alliance Bancorporation.

Retired corporate executive following a 36-year career in corporate finance. Director of Krispy Kreme, Inc. and member of the audit committee.

General partner of Canaan Partners, an early stage venture capital firm. Public company directorships: None.

Corporate executive experience. Former Chief Executive Officer of Coach, Inc.

Over 26 years of senior-level experience in retail, consumer products and hospitality. Public company directorships include Treasury Wine Estates Limited and CAVA Group, Inc.

Extensive experience in technology infrastructure and cybersecurity, sales, marketing and engineering. Former executive at Google and Apple.

Dave Powers

All Directors and Executive Officers as a Group (16 persons)

FMR, LLC

The Vanguard Group, Inc.

BlackRock, Inc.

• Chief Executive Officer: 6x Annual Base Salary
• Other NEOs: 3x Annual Base Salary
• Directors: 5x Annual Board Cash Retainer
NEOs are required to hold a number of shares of our common stock determined as a multiple of the NEO's base salary as of the beginning of each calendar year. Unless and until an NEO reaches the required ownership level, the NEO must retain at least 75% of the equity awards, after payment of any applicable exercise price and tax withholdings, that are acquired through our equity compensation program. Directors are required to hold a number of shares of our common stock determined as a multiple of the base annual board cash retainer within five years of joining our Board. In addition, each director must hold shares of our common stock within one year of joining our Board.

Deckers Outdoor Corporation is a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high-performance activities. The company markets its products primarily under five proprietary brands: UGG, HOKA, Teva, AHNU, and Koolaburra. The company's brands compete across the fashion and casual lifestyle, performance, running, and outdoor markets. Independent third-party contractors manufacture all of the company's products.

The UGG brand is a global lifestyle brand known for its iconic footwear and apparel, primarily focused on the fashion and casual lifestyle market.

The HOKA brand is a high-performance running and outdoor footwear brand focused on continuous product innovation and technical features.

The Other brands segment primarily consists of the Teva, AHNU, and Koolaburra brands. Koolaburra is being phased out. Teva is a sandal and outdoor brand. AHNU focuses on performance technology with timeless style.

Held WACC at 10.9% and exit multiple at 14.0x EBITDA, solved for perpetual growth rate required to justify current $100.69 price.

Balance Sheet - Supplemental

Balance Sheet

Cash Flow Statement - Supplemental

Cash Flow Statement

Income Statement - Supplemental

Income Statement

Ratios

Valuation

Historical Ratios & Multiples - DECK

The footwear industry is facing headwinds from shifting trade policies and cautious consumer spending. However, premium brands like Deckers are outperforming the broader sector. While Nike's revenue declined 5%, Deckers grew 12.6%, indicating that brand heat is trumping macro malaise.

Deckers is highly relevant at this moment because the stock has been unfairly punished for macro headwinds, creating a rare opportunity to buy a high-quality compounder at a 40% discount to its historical average multiple.

Successful mitigation of the $150M tariff impact in the FY2026 results. This will validate management's pricing power and brand strength, addressing the primary market concern regarding margin compression.

Re-acceleration of HOKA US DTC growth. A sequential improvement in DTC performance would refute the 'brand peaking' narrative and lead to a multiple re-expansion.

Moat erosion due to intensifying competition in the performance running and lifestyle segments. If HOKA or UGG lose their 'cool factor,' the company will lose its pricing power and high ROIC.

Structural slowdown in consumer spending. As a premium discretionary retailer, Deckers is sensitive to recessionary pressures that could lead to lower volumes and higher promotions.

Liquidation value analysis is not relevant for the company's archetype ('Mature_Compounder') and was not performed.

Cash & Equivalents

Accounts Receivable

Inventory

Tax Assets

Other Current Assets

Net PP&E

Intangibles

Other Non-Current

Accounts Payable

Current Debt

Tax Liabilities

Other Current Liabilities

Non-Current Debt

Other Non-Current Liabilities

Q2 FY2026 revenue increased 9% to $1.43B, EPS $1.82.

Q1 FY2026 revenue increased 17% to $965M, EPS $0.93.

Deckers Brands reported record FY2025 results with revenue growth of 16% to $4.986 billion.

Q3 FY2025 revenue increased 17% to record $1.83B, EPS $3.00.

Deckers Brands reported Q2 FY2025 results with revenue growth of 20.1% to $1.311 billion.

Q3 FY2024 revenue increased 16% to record $1.56B, EPS $15.11.

Deckers Brands reported record FY2024 results with revenue growth of 18% to $4.288 billion.

The Vanguard Group filed Schedule 13G/A reporting ownership in Deckers Outdoor Corp.

Q1 FY2025 revenue increased 22% to $825M, EPS $4.52.

DECKERS BRANDS ANNOUNCES CEO SUCCESSION PLAN

Deckers Brands reported record Q2 FY2024 results with revenue growth of 24.7% to $1.092 billion.

Entered $400M unsecured revolving credit facility.

Deckers Brands reported Q1 FY2023 results with HOKA brand achieving $1 billion revenue milestone on trailing twelve months.

Unavailable

Angela Ogbechie promoted to Chief Supply Chain Officer.

Deckers Brands reported FY2022 results with revenue growth of 24% to $3.150 billion.

Deckers Brands reported Q3 FY2022 revenue growth of 10.2% to record $1.188 billion.

Deckers Brands reported FY2021 results with record revenue growth of 19.4% to $2.546 billion.

BlackRock reported 11.8% ownership stake in Deckers Outdoor Corp.

Deckers Outdoor assumed with a Hold at Jefferies

Deckers Outdoor downgraded to Underweight from Neutral at Piper Sandler

Deckers Outdoor price target lowered to $113 from $141 at Barclays

Deckers Outdoor price target lowered to $113 from $128 at Needham

Stifel Reiterates Deckers Outdoor (DECK) at Hold on Anticipated Upside to F2Q26 Revenue

Deckers Outdoor price target lowered to $157 from $158 at UBS

Deckers Outdoor initiated with an Underperform at Bernstein

Deckers Outdoor price target raised to $115 from $110 at Evercore ISI

Deckers Outdoor price target lowered to $107 from $114 at Jefferies

Deckers is a premier brand compounder currently mispriced as a decelerating retailer. While the market is fixated on a temporary growth slowdown from 18.2% to 12.6% and a $150M tariff headwind, it is ignoring an elite ROIC of 78.8% and a fortress balance sheet with $1.4B in net cash. Our analysis suggests that international expansion and a disciplined scarcity-led distribution model will sustain high-teens earnings growth, justifying a significant re-rating from the current 14.5x P/E toward historical norms of 22.8x.

Executive Summary

Deckers is transitioning from a high-growth story to a high-return compounder, leveraging its elite brand equity to drive 108% free cash flow conversion. The current valuation gap is a result of short-term macro fears masking the durability of its 57.7% gross margins and 78.8% ROIC.<ul><li>Driver: The continued scaling of HOKA into a multi-billion dollar global performance brand and the successful evolution of UGG into a year-round lifestyle icon.</li><li>Catalyst: Evidence of successful tariff mitigation through pricing actions and a re-acceleration of Direct-to-Consumer (DTC) growth in the US market.</li><li>Protection: A pristine balance sheet with zero debt and $1.4B in cash, providing a massive valuation floor and the ability to aggressively retire shares.</li></ul>Our variant perception is based on time arbitrage. The market is pricing the stock for a 'fade to average' over the next 3-5 years due to perceived saturation in the US running market. However, our analysis of the HOKA innovation pipeline and the 38% H1 international growth suggests the company can sustain above-average returns on capital for significantly longer than the market expects, justifying a premium valuation today.This is a long-term, buy-and-hold investment predicated on the continued execution of a proven business model and the compounding of per-share intrinsic value through organic growth and aggressive share repurchases.

Core Investment Rationale

Deckers operates a brand-led, asset-light model focused on two core pillars: UGG (51.2% of revenue) and HOKA (44.4% of revenue). The company generates revenue through a balanced mix of wholesale and Direct-to-Consumer (DTC) channels, with DTC now representing 43% of the total mix. Strategy is centered on a 'pull model' that prioritizes full-price sell-through and marketplace scarcity over volume-chasing, which has successfully driven operating margins to 23.5%.Operations are outsourced to independent third-party contractors primarily in Southeast Asia, allowing the company to maintain a lean capital expenditure profile of just 1.5% of revenue. This efficiency enables the company to convert over 100% of net income into free cash flow, which is then deployed toward brand building and shareholder returns.The company's primary assets are its intangible brand moats. UGG has evolved from a seasonal boot brand into a year-round lifestyle powerhouse with successful sneaker and hybrid franchises like the Tasman and Goldenstar. HOKA is a high-performance running brand that has achieved a $2 billion trailing 12-month revenue milestone, driven by technical superiority in its Bondi and Clifton franchises.Physical assets include a strategic network of leased distribution centers, most notably a 1.5 million square foot facility in Moreno Valley, California, and a growing fleet of 149 retail concept and outlet stores. The company also holds 232 design and invention patents, providing a defensive layer to its technical footwear innovations.Deckers competes in a fragmented but rational footwear and apparel market. Its primary rival is Nike, which operates at a significantly larger scale but is currently experiencing revenue contraction (-5.0% YoY) compared to Deckers' 12.6% growth. In the premium lifestyle and performance segments, Deckers faces competition from On Holding, Birkenstock, and Skechers. Deckers maintains a competitive edge through superior profitability, with an operating margin of 23.5% that nearly doubles the peer median of 11.5%.Deckers has a history of consistent execution, having met or exceeded revenue and EPS estimates in 100% of the last five years. This stability was solidified under the leadership of Dave Powers, who recently retired as CEO in August 2024. The company is now in a transitional phase under Stefano Caroti, the former Chief Commercial Officer, who was a key architect of the current growth strategy.While the company faced activist pressure in 2017 from Marcato Capital and Red Mountain Capital, who pushed for a sale, the board successfully defended its strategy, leading to a period of massive value creation. Today, the 'Current Situation' is defined by a strategic shift toward international expansion (up 50% in Q1 FY2026) and the management of a $150M tariff headwind. The company is currently utilizing its record $2.5B buyback authorization to take advantage of what it views as a sentiment-driven dislocation in its share price.

Business & Situation

<ul><li>Bull Case: 1. HOKA is in the early stages of international expansion, with awareness in the mid-20s outside the US vs. 50% domestically. 2. Elite capital efficiency (78.8% ROIC) and $1.4B net cash provide a massive margin of safety. 3. Aggressive share count reduction (CAGR of -2.8%) accelerates EPS growth beyond top-line gains.</li><li>Bear Case: 1. US DTC growth is decelerating as consumers shift toward multi-brand wholesale environments. 2. Tariffs represent a $150M gross headwind that could compress margins if pricing power falters. 3. Increasing competition from On Holding and a resurgent Birkenstock could erode HOKA's market share.</li></ul>The consensus view is that Deckers' 'Golden Era' of margin expansion and hyper-growth is over. Investors are concerned that HOKA's US momentum is peaking and that the shift toward lower-margin wholesale channels will permanently impair the company's profitability profile. This has led to a multiple de-rating from 34.6x P/E in 2024 to the current 14.5x.The footwear industry is facing headwinds from shifting trade policies and cautious consumer spending. However, premium brands like Deckers are outperforming the broader sector. While Nike's revenue declined 5%, Deckers grew 12.6%, indicating that brand heat is trumping macro malaise.Our differentiated view is that the market is overly focused on a short-term growth deceleration while underappreciating the durability of the moat and long-term compounding power. We believe the shift to wholesale is a strategic choice to capture market share, not a sign of brand weakness. Furthermore, the $150M tariff risk is being mitigated by $75M-$95M in pricing and cost-sharing actions, which the market has not yet priced in. The fortress balance sheet and aggressive buybacks put a floor on the valuation, preventing 'value drift' and ensuring that per-share value continues to grow even during a period of top-line normalization.The debate between growth and value is resolved by Deckers' elite ROIC. Even at a lower growth rate, the company's ability to generate 78.8 cents of return for every dollar invested makes it a superior asset. At 14.5x earnings, the market is asking for zero growth, which is fundamentally inconsistent with HOKA's international trajectory.Our analytical edge comes from a deeper appreciation of the company's intangible assets and switching costs, leading us to believe the market is underestimating the durability of its high returns on capital in the face of perceived short-term threats. We have forensically analyzed the buyback program and tariff mitigation strategy to confirm that per-share value creation remains intact.

Core Thesis

CEO Stefano Caroti has a strong internal track record, having served as Chief Commercial Officer during a period where revenue grew from $3.1B to $3.6B. His 30+ years of experience at Nike and Puma provide deep industry credibility. The transition from Dave Powers has been seamless, with Caroti maintaining the 'pull model' strategy that defined the company's success.Management's skill is strong in operational reinvestment (Incremental ROIC of 176.7%) but has been mixed in buyback timing. While they have reduced the share count by 12.6%, they repurchased shares at $162 in early 2025, which destroyed short-term value. However, the overall strategy of returning 84.4% of capital to shareholders is correct for this archetype.Management maintains high credibility, evidenced by a 100% guidance hit rate over the last five years. Transcripts show a candid approach to discussing headwinds like tariffs and DTC shifts.<ul><li>Board Independence: 90% (9 of 10 directors)</li><li>Chairman/CEO Roles: Separate</li><li>Chairman Tenure: 7 Years (Cynthia L. Davis)</li><li>Insider Ownership: 0.4% (Group)</li><li>Shareholder Rights: Declassified Board, Majority Voting, No Poison Pill</li></ul>The stewardship verdict is strong. The board is highly independent and possesses deep retail and financial expertise. While insider ownership is low, the incentive structure is tied to operating income and revenue, aligning management with the core drivers of the Mature Compounder model. The lack of a poison pill and the declassified board structure reflect a shareholder-friendly governance posture.

Leadership & Governance

The valuation floor is anchored to the Bear Case DCF value of $89.69, which models a permanent erosion of the company's moat, 0% tariff mitigation, and a promotional spiral that compresses margins to 21%.Revenue grows at a 7-9% CAGR as international expansion offsets US DTC softness. Operating margins stabilize at 23% as tariff headwinds are mitigated by pricing. Share repurchases continue at a 3% annual reduction rate.HOKA achieves breakout success in China and Europe, driving a 12% revenue CAGR. Margins expand to 24.5% on DTC re-acceleration. Blue-Sky Potential: $157.81.The Bear Case is defined by a scenario of moat erosion and declining profitability. Revenue growth slows to 4.8% and margins compress to 21% as the company loses pricing power and fails to mitigate tariff costs. The Bear Case floor is $89.69.

Valuation Context

<ul><li>Successful mitigation of the $150M tariff impact in the FY2026 results. This will validate management's pricing power and brand strength, addressing the primary market concern regarding margin compression.</li><li>Re-acceleration of HOKA US DTC growth. A sequential improvement in DTC performance would refute the 'brand peaking' narrative and lead to a multiple re-expansion.</li></ul>Deckers is highly relevant at this moment because the stock has been unfairly punished for macro headwinds, creating a rare opportunity to buy a high-quality compounder at a 40% discount to its historical average multiple.

Catalyst Path & Context

<ul><li>Moat erosion due to intensifying competition in the performance running and lifestyle segments. If HOKA or UGG lose their 'cool factor,' the company will lose its pricing power and high ROIC. On Holding and Birkenstock are aggressively expanding their product lines and marketing spend, directly targeting Deckers' core consumers.</li><li>Structural slowdown in consumer spending. As a premium discretionary retailer, Deckers is sensitive to recessionary pressures that could lead to lower volumes and higher promotions. US consumer sentiment has shown signs of pressure, with a shift toward multi-brand shopping and deeper 'valleys' in demand.</li></ul>

Primary Risks

<ul><li>Entry Target: Entry target set to current market price to capture immediate upside on a high-conviction thesis.</li><li>Stop Loss: The primary stop-loss is not a price, but the materialization of a 'Thesis Killer'. A secondary, 'disaster-check' technical stop is set at the 3-year low to protect against unforeseen structural multiple de-ratings.</li><li>Position Size: Base Conviction is High due to the company's wide moat, elite ROIC, and fortress balance sheet. This archetype supports the largest sizing ('Full') due to the lower probability of permanent capital loss and the high predictability of cash flows.</li><li>Time Horizon: The Compounder thesis mathematically requires time for the ROIC-WACC spread to generate value and for the share repurchase program to meaningfully reduce the float.</li></ul><ul><li>Gross Margin stability (target >55%)</li><li>International revenue growth (target >25%)</li><li>US DTC growth re-acceleration</li></ul>A fundamental, permanent impairment of the moat, such as HOKA losing its technical relevance to a competitor or a structural failure to maintain premium pricing in the UGG brand.

Actionable Parameters & Monitoring

Deckers Outdoor Corporation is a high-quality Mature Compounder trading at a significant discount to its intrinsic value due to short-term macro fears. The company's elite brand moats, fortress balance sheet, and exceptional capital efficiency provide a robust margin of safety. We recommend a Buy with a final fair value estimate of $168.77, representing 67.6% upside from current levels.

Final Conclusion

The continued scaling of HOKA into a multi-billion dollar global performance brand and the successful evolution of UGG into a year-round lifestyle icon.

Driver

Evidence of successful tariff mitigation through pricing actions and a re-acceleration of Direct-to-Consumer (DTC) growth in the US market.

Catalyst

A pristine balance sheet with zero debt and $1.4B in cash, providing a massive valuation floor and the ability to aggressively retire shares.

Protection

1. HOKA is in the early stages of international expansion, with awareness in the mid-20s outside the US vs. 50% domestically. 2. Elite capital efficiency (78.8% ROIC) and $1.4B net cash provide a massive margin of safety. 3. Aggressive share count reduction (CAGR of -2.8%) accelerates EPS growth beyond top-line gains.

Bull Case

1. US DTC growth is decelerating as consumers shift toward multi-brand wholesale environments. 2. Tariffs represent a $150M gross headwind that could compress margins if pricing power falters. 3. Increasing competition from On Holding and a resurgent Birkenstock could erode HOKA's market share.

Bear Case

Deckers is a premier brand compounder currently mispriced as a decelerating retailer. While the market is fixated on a temporary growth slowdown from 18.2% to 12.6% and a $150M tariff headwind, it is ignoring an elite ROIC of 78.8% and a fortress balance sheet with $1.4B in net cash. Our analysis suggests that international expansion and a disciplined scarcity-led distribution model will sustain high-teens earnings growth, justifying a significant re-rating from the current 14.5x P/E toward historical norms of 22.8x.

The strategy has evolved from a period of aggressive growth and margin expansion (FY2024) to a more defensive, disciplined posture focused on navigating macroeconomic uncertainty and tariff headwinds (FY2025-FY2026). The narrative shifted from 'maximizing full-price selling and brand heat' to 'prudent guidance, strategic wholesale expansion to capture share, and mitigating cost pressures.'

Method	Implied Value	Weight	Weighted Value
DCF	$130.50	60%	$78.30
Comps	$226.18	40%	$90.47
Total Weighted			$168.77

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