Why Deckers stock fell today

Shares Deckers (DECK -5.37%) fell today. The culprit was an analyst downgrade, as one Wall Street observer lowered his recommendation for the fast-growing owner of Hoka and UGG.

Deckers stock fell 6% on the news at 12:08 p.m. ET.

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The seaport harms Deckers

This morning, Seaport Research lowered its recommendation for Deckers from buy to neutral, seeing less potential for growth in the company’s shares after recent increases and the relatively moderate dynamics of Hoka and UGG quotations.

Citing Google Trends data, the research firm said that interest in Hoka and UGG brands was not as strong during the back-to-school period, while other running footwear brands such as Asics and Brooks are starting to regain market share.

Seaport did not provide a target price for the downgrade.

Is Deckers in trouble?

Consumer products such as shoe brands are known for fashion, and it will be difficult for Deckers to maintain momentum in the Hoka market, which in the long run now accounts for more than half of the company’s sales. Hoka’s growth rate has slowed but remains high.

Hoka sales increased 59% to $1.41 billion in fiscal 2023, which ended March 31, 2023, and 28% in fiscal 2024. In the fiscal first quarter, the growth rate improved to 30% to $545 million, which potentially indicates some stability.

However, Nike said in its latest earnings report that it is regaining momentum in the running category, and other brands are likely to respond to Hoka’s dramatic growth in recent years.

Deckers stock appears to be reasonably valued given its price-to-earnings ratio of 30, but the biggest key to success will be maintaining the strong performance of the Hoka brand. While it’s unclear at this point whether the data points Seaport references are significant enough to change this dynamic, investors should keep an eye on Hoka’s growth rate.