Forget Walmart: The Biggest Retail Stock Split of the Year Has Arrived

Since the advent of the internet roughly three decades ago, investors have consistently had a next-big-thing innovation or game-changing technology to captivate their attention. However, 2024 has been somewhat unique in that two trends are vying for recognition at the same time.

While there’s no denying that the rise of artificial intelligence (AI) has helped lift all three major stock indexes to record-closing highs, the excitement surrounding stock splits has played an equally important role in sending the valuations of select prominent businesses higher in 2024.

This skyrocketing retail specialist — up 12,600% since its IPO — is conducting its biggest stock split to date

In mid-July, leading footwear and apparel retailer Deckers Brands (NYSE: DECK) announced plans to conduct a 6-for-1 forward split. This marks only the second time since its IPO that it’s conducting a forward split, with the other being a 3-for-1 split in July 2010.

Former CEO Dave Powers, who retired last month but had led Deckers Brands for the previous eight years, had this to say about his company’s board approving the historic 6-for-1 split:

The effective date for this split is (drum roll) following the close of trading today, Monday, Sept. 16. When Deckers Brands’ stock opens for trading tomorrow, it’ll be at the split-adjusted price of closer to $156, instead of the $935.07 it closed at on Sept. 13.

As I alluded earlier, one of the longtime keys to Deckers’ success has been its e-commerce push. As of the most-recent quarter, ending June 30, the company reported $310.6 million in direct-to-consumer (DTC) sales, which is up nearly 22% from the prior-year period. More importantly, DTC sales accounted for close to 38% of total revenue, which compares to less than 32% of net sales in the same quarter three years ago.

This almost six-percentage-point improvement might not sound like much, but it’s increasingly made Deckers Brands an inventory-light businesses. Not having to tie up its cash in inventory and manufacturing has led to superior margins for the company.

The strength of the company’s brands has played a key role in its long-term success, as well. Though it owns around a half-dozen major brands, the best-known include Ugg, Hoka, and Teva. Hoka ($420.5 million in the latest quarter), Ugg ($195.5 million), and Teva ($48.4 million) account for the lions’ share of sales.

But the most-exciting aspect of Deckers’ strategy has been its international expansion. E-commerce is still just getting off the ground in international markets, which affords the company a sustained double-digit, high-margin growth opportunity.

The icing on the cake is that Deckers Brands is a debt-free company with north of $1.4 billion in cash and cash equivalents. It has the financial flexibility to make deals happen, just as it did when it purchased Ugg in 1995 and Hoka in 2012.

While this sizable stock split is long overdue, it can also be argued that Deckers Brands has some work to do to grow into its current valuation. Although the company’s stock is absolutely deserving of a premium given the momentum it’s enjoyed from DTC growth, its international push, and its top-tier branding, shares are trading at 26 times forward-year earnings. This might not seem like a steep price to pay, but consensus annualized earnings growth over the next five years is a more modest 11.4%.

In other words, Deckers Brands will likely need to blow the doors off of Wall Street’s and its own growth forecasts if its stock is to head even higher.

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Walmart. The Motley Fool has a disclosure policy.

Forget Walmart: The Biggest Retail Stock Split of the Year Has Arrived was originally published by The Motley Fool