Deckers Brands announced late Thursday it plans to divest its Sanuk brand.
The Goleta, Calif.-based footwear company dropped the news in a short section within its second quarter earnings report on Thursday evening, stating it made the decision to divest the comfort shoe brand as it “continues to focus on allocating resources that best align with its long-term objectives.”
On the company’s second quarter earnings call, Deckers president and CEO Dave Powers addressed the news further to analysts. “I’m proud of how the teams have managed this brand over the last few years from a marketplace management standpoint,” Powers said. “And the product right now is very, very strong. But what we realized is that the journey to scale that brand so that it’s meaningful in our portfolio, it’s just too long.”
Powers added that the decision to divest Sanuk was tough both “emotionally and financially,” but that the brand deserves “a good home” and someone who can “make it a priority” instead of being the fourth and fifth brand in Deckers portfolio. “I think it’s the best thing for the company and the brand to do this,” the exec said.
The news was music to investor’s ears. As of 11:00 am on Friday, shares for Deckers Brands were up over 20 percent.
Deckers acquired Sanuk in 2011 for roughly $120 million in cash, plus performance-based payments. At the time, Deckers had big plans for the casual sandal and shoe brand, best known for its quirky positioning and hanging flip-flops and Sidewalk surfer styles. Eight months after its acquisition, company executives were forecasting full-year sales of $90 million in 2012, up from $69 million in 2011, with $200 million in sales projected by 2015.
But the momentum didn’t last, as Sanuk continued to see multiple consecutive quarters of net sales declines. Just this most recent quarter alone, Sanuk saw net sales fall 28.5 percent to $5.4 million in the second quarter of 2024, down from $7.5 million the same time last year. These numbers are in stark contrast to the company’s other brands, which all saw net sales gains in Q2 except for Teva.
And now with Sanuk in its rearview mirror, the CEO told analysts that Deckers will now be investing on creating a new brand that he describes as a “super sneaker brand across various categories that combine the best of Hoka and Ugg along with all the learnings the company has from those two brands.”
“It’s not that the Sanuk was holding us back from building and launching a new brand,” Powers said. “We look at this decision separately as just fine-tuning our model. We have the distribution channels. We have the DTC network. We have a lot of leverage in the marketplace and some really innovative, exciting products. It will be a long haul, but we think this is a space that is emerging and that we want to make sure that we have some skin in the sneaker game going forward beyond Hoka.”
The move to divest Sanuk and invent a new brand comes as Deckers reported net sales in the second quarter of 2024 increased 24.7 percent to $1.09 billion, compared to $875.6 million the same time last year.
By brand, Ugg jumped ahead after several quarters of lagging sales, with net sales in the quarter up 28.1 percent to $610.5 million, compared to $476.5 million in Q2 2023. Hoka also continued its winning streak in the period, posting net sales of $424 million, a 27.3 percent from $333 million last year.