HOKA Sales Surge in Q2 Bolsters Deckers' Growth, but DTC Weakness and High Inventories Linger

What happened

Deckers Outdoor Corp's Q2 results showcased a strong surge in HOKA brand sales, with double-digit growth driven by robust wholesale demand and accelerating international momentum, as reported in recent news. This aligns with the DeepValue master report's focus on HOKA as a key growth driver, but it contrasts with ongoing concerns over Direct-to-Consumer (DTC) comparable sales, which decreased by 2.9% in the same period. Despite the HOKA strength, inventories remain elevated at $835.6 million as of September 30, 2025, raising risks of potential markdowns that could pressure margins. Financially, Deckers reported Q2 net sales of $1.431 billion and diluted EPS of $1.82, supported by a debt-free balance sheet and active share repurchases. Overall, the HOKA performance reinforces the bull case, but it must be balanced against persistent DTC softness and inventory challenges that could impact future profitability.

Implication

Investors should interpret the HOKA sales momentum as a positive indicator of brand strength and international expansion, which are critical for Deckers' long-term growth strategy. However, the ongoing decline in DTC comparable sales suggests underlying issues in the direct channel that could hinder margin expansion if not reversed. Elevated inventory levels pose a tangible risk, as failure to reduce them may lead to markdowns, undermining the company's premium pricing power and full-price discipline. On the positive side, Deckers' robust net cash position and lack of debt provide financial flexibility to weather these challenges and continue shareholder returns through buybacks. Consequently, while the HOKA surge is encouraging, a cautious approach is warranted, focusing on execution in DTC and inventory management to validate the current BUY thesis.

Thesis delta

The HOKA sales surge directly addresses a key watch item from the DeepValue report—HOKA momentum—thereby reinforcing the BUY thesis by confirming sustained brand growth. However, the thesis does not shift materially, as risks such as DTC softness and elevated inventories remain unresolved and could trigger a downgrade if they persist or worsen. Investors should view this as a confirmation of strengths but remain alert to these ongoing vulnerabilities that could impact margins and guidance.