Deckers Outdoor plunges amid concerns over brand growth deceleration

Investing.com - Deckers Outdoor Corporation (NYSE: DECK) tanked 4.9% on Wednesday, following cautionary remarks from M Science regarding a significant slowdown in growth for its Hoka and UGG brands in June.

Despite the recent drop, Deckers' shares had seen a 40% upswing this year through Tuesday’s close, making it the top-performing stock on the S&P 500 Consumer Discretionary Index.

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In contrast, M Science reported robust sell-through for Adidas (ETR: ADSGN) in the wholesale channel in the US and Europe throughout Q2, leading to a 2.4% rise in Adidas shares.

BofA analyst Christopher Nardone issued a warning that after its first fiscal quarter, Deckers' UGG brand might face tougher comparisons and increased competition in the specialty running category, which could "temper" the magnitude of earnings beats.

While Nardone expects a strong Q1 report from the company, he anticipates this will be the last quarter where UGG significantly benefits from previous price increases and significantly lower discounting. Deckers is expected to report Q1 results later this month.

In a research note on Wednesday, Nardone observed that footwear stocks, including Deckers, Crocs Inc (NASDAQ: CROX), and Skechers USA Inc (NYSE: SKX), had retreated from recent highs. He attributed this to tariff and freight-related risks, as well as "recent volatility in the higher multiple athletic sector."

However, he identified Crocs and Skechers as the most compelling buying opportunities. Both companies are also slated to post quarterly results later this month.

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