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HOKA, Columbia, and The North Face: Inflation Not Inhibiting Demand for Out-On-The-Trail Products

Thomas Paulson
Nov 4, 2022
HOKA, Columbia, and The North Face: Inflation Not Inhibiting Demand for Out-On-The-Trail Products

Last week, HOKA, Columbia, and The North Face reported September-quarter results which revealed solid sell-in and sell-through trends for the companies’ U.S. retail and wholesale businesses.

Deckers Brands

  • Deckers Brands reported that HOKA produced a +$123M lift in revenue YoY (reflecting growth of 58%) to $333M, demonstrating that the brand’s "heat" continues to be red hot.  UGG brand sales were also up, but at a mature level of +6% growth to $478M. By next year, HOKA will be the company’s largest brand and management’s objective is to grow it into a multi-billion-dollar brand in the performance athletic market alongside Nike, Adidas, Under Armour, On-Running, and Lululemon.
  • Over the past year, HOKA opened five pop-up retail locations in the U.S. as the brand explores which markets to commit to. Management noted that HOKA brand had only 20% aided awareness in the U.S., which is lower than we expected, but increasing it is a tremendous opportunity. One strategy for increasing awareness is expanding in Dick’s Sporting Goods (100 doors) and in Foot Locker. For hiking (the activity that nearly all brands are chasing), CEO David Powers stated, "HOKA now has two franchises in the Kaha and the Anacapa that are experiencing immense growth and building market share."
  • As it relates to UGG, the brand has a new leader: Anne Spangenberg. She has been tasked with "refining a few key elements of the brand's approach to product and demand creation, which include expanding the base of UGG consumers through a clear strategic vision of brand purpose and experience, prioritizing the design DNA of UGG in the product proposition, editing and focusing UGG products and experiences to maximize consumer impact, and elevating the pinnacle expression of UGG," as described by Powers. To our ears, this means elevating the retail experience and presence, and to our eyes in looking at the business results, the brand has more progress to make.

Columbia

  • Columbia noted that the business was up on strong customer reception to its Omni-Heat innovation and SOREL. (As a reminder the Columbia business is eight times larger than SOREL, and its retail business is largely outlet with 132 outlets compared to 16 brand stores.) However, like many brands, its inventory levels (+47%) have outshot demand and retail customers have canceled some orders. The cancellations were predominately due to Columbia’s inability to hit the committed-to delivery window for Fall 2022 products. The company is making "alignments" including steering more product to its outlet stores.  
  • Columbia stores produced +low-double-digit comps with a consistent pace throughout the quarter. CEO Tim Boyle shared, "Early season sell-through trends reflect healthy demand and are tracking slightly below Fall '21...which was exceptionally strong."

VF Corporation

  • VF Corporation’s The North Face grew roughly 11% in the U.S., with its DTC business up 23%, led by the full-price stores and strong double-digit wholesale orders. (See last week’s Anchor report.) CEO Steve Rendle said that it is seeing strength across all channels and all product categories. In contrast, Vans continues to struggle with "brand heat" and share losses (Converse) and the Dickies business was heaving dented by wholesale declines at Walmart. (Please see our prior updates on Vans and the rest of the VF Corp portfolio for more analysis on the state of the business, and feel free to reach out to discuss further.)

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Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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