Heading into the holidays, we noted that more customers were putting on HOKA and UGG and fewer were putting on SOREL. Last week, we got confirmation of those trends with blow-out results from Deckers (the parent company of HOKA and UGG) and softer results from Columbia (parent company of SOREL). Decker’s is largely a U.S. business, UGG net sales were up +15%, HOKA +22%, and annual guidance for revenue, gross margin, and operating margins were all substantially increased, which implies strong sell-throughs at their stores and those of their wholesale customers. Decker’s own inventory turns improved from 2.5X to 3.5X, suggesting that they were selling everything they could make. (Q4 gross margins were up +500 basis points.) Direct-to-consumer (DTC) revenue was up +23% and wholesale +9%.
Retiring Deckers CEO David Powers shared, “The Goldenstar Clog was somewhat of a surprise hit during the holiday season as it was created to bolster the shoulder seasons outside of winter, complementing the rising Goldenstar sandal. The Lowmel, which we see as the first unmistakably UGG sneaker represented a continuation of our hybrid strategy to redefine categories through UGG DNA.” On HOKA, Powers said, “Beyond the brand's pinnacle performance product, HOKA is also experiencing success with exciting lifestyle-oriented products. These products feature the same quality and comfort expected from a performance HOKA shoe but our package in an everyday wear aesthetic for more versatile wearing occasions...The HOKA brands captivating collaborations are also furthering its resonance with the lifestyle consumer. They are designed to reach a new audience by partnering with logical yet unexpected brands.”
Columbia’s 2023 ended on a soft note, which reflects a pull-forward of deliveries into Q3 and the continuing normalization from the COVID super-cycle which resulted in excess channel inventory and too many competing brands. Q4 sales were down -9% and profits -27%. The earnings release quoted Columbia's CEO Tom Boyle saying, “Looking ahead, we expect 2024 to be a challenging year [with sales down 2%-4%, including first half of 2024 sales down 6%-9% globally, with the U.S. worse]. Retailers are placing orders cautiously, and economic and geopolitical uncertainty remains high. We are working diligently to maximize sales in this environment, while optimizing our product, brand marketing and marketplace strategies to accelerate growth in 2025 and beyond. To mitigate erosion in profitability and to improve the efficiency of our operations, we are implementing a multi-year profit improvement program targeting $125-$150M in annual savings by 2026.” For the quarter by brand, Columbia revenue decreased -5%, Mountain Hardwear -12%, SOREL -19%, and prAna -29%. Total DTC revenue was down -4%, and wholesale was down -17%.
As it relates to SOREL, a new leader was appointed and as to the brand’s forward direction, Boyle said, “The next phase in the brand embraces SOREL's heritage and the opportunity to serve all consumers globally by bringing the most style in the outdoors and the most outdoors in style. The team is thoughtfully refining the product line and marketing strategies to accelerate growth in 2025 and beyond. I remain confident SOREL has meaningful long-term growth potential.”
On prAna, Boyle said, “The prAna team remains focused on repositioning the brand and unlocking its growth potential. They have made great progress reducing excess inventory and strengthening the brand's product and marketing strategies for future seasons. We anticipate modest growth in 2024, weighted towards the second half of the year as we stabilize the business and lay the foundation for growth.” Tricia Shumavon was newly named President of the brand last September; previously she was at Adidas, Nike, Gap, and L Brands.
VF Corp’s latest quarterly update started with, CEO Bracken Darrell saying, "Our third quarter top-line performance was disappointing. However, we are confident the actions we are implementing as part of Reinvent will enable VF to stabilize and then grow revenue and improve operational performance across brands and regions... I'm keenly aware that sustainability performance without company performance is not satisfying. To me, it's not just a good thing to do, but it's an example of what we're capable of in every part of our business. Now we have to work to get our company performance to match that. Now let me update you briefly on Reinvent, which prioritizes aggressively four key areas we introduced last quarter, which are: (1) fix the U.S. business; (2) deliver the Vans turnaround; (3) lower our cost base; and (4, strengthen our balance sheet." Revenue for the quarter declined -16%, with North Face down -10% and Vans down -28%. The release also noted that, “VF has initiated an in-depth strategic review of the brand assets within the portfolio, in alignment with the Board of Directors, to ensure the company owns the brands that it believes create the greatest long-term value."
Adidas incoming CEO Bjørn Gulden aspires to return the brand to high-single-digit growth in 2024, after a disappointing 2022 and 2023 for the same reasons impacting Columbia (channel inventory and too much competition). Gulden noted, “We are on the way of making adidas a good company again. As we said from the beginning, we just need the time to solidly build it up again. I feel that the attitude and agility in our teams are back and that we are showing the old adidas DNA again.” As part of that effort, adidas is also heavily pushing is Originals. The heat is improving and putting pressure on Vans. In terms of “maximal cushioning“ runners, one can see in the chart below, HOKA has set quite a high bar for the category in terms of awareness and interest. However, it also looks like the adidas TERREX has done a good job of building “brand heat” over the holidays. Gulden added, “TERREX running lifestyle--the classic look then to a more progressive--you will start to see feedings and limited lines during 2024, with the idea of scaling in 2025.”
