WEBVTT 00:00:00.000 --> 00:00:02.540 Welcome back to the Deep Dive. Today we are taking 00:00:02.540 --> 00:00:04.700 a look at a company whose name you might not 00:00:04.700 --> 00:00:07.860 know, but whose products. Yeah. Well, there's 00:00:07.860 --> 00:00:09.679 a very good chance you've worn them. We're talking 00:00:09.679 --> 00:00:11.980 about the brands you see everywhere. That's right. 00:00:12.060 --> 00:00:14.259 And we're going deep into the corporate powerhouse 00:00:14.259 --> 00:00:17.039 behind them. Decker's Brands. Decker's Brands. 00:00:17.039 --> 00:00:19.379 You hear that name and maybe nothing clicks immediately. 00:00:19.660 --> 00:00:23.429 But if I say... UG boots. Or Tia Vandals. Or 00:00:23.429 --> 00:00:26.089 HOK running shoes. Right. Suddenly everyone knows 00:00:26.089 --> 00:00:27.989 exactly what we're talking about. And our mission 00:00:27.989 --> 00:00:30.690 for this deep dives is to go beyond, you know, 00:00:30.690 --> 00:00:33.409 the individual shoe. We're going to look at the 00:00:33.409 --> 00:00:36.710 corporate strategy, the history, really the decisions 00:00:36.710 --> 00:00:39.869 that turned a tiny flip -flop business into a 00:00:39.869 --> 00:00:42.469 multi -billion dollar giant. Okay, let's unpack 00:00:42.469 --> 00:00:45.509 this because the scale is genuinely astounding. 00:00:45.590 --> 00:00:48.070 The company is formerly known as Decker's Outdoor 00:00:48.070 --> 00:00:51.170 Corporation, but they do... business as Decker's 00:00:51.170 --> 00:00:52.869 Brands. They're based out of Galeta, California. 00:00:53.149 --> 00:00:55.789 And this isn't just some big shoe company. They're 00:00:55.789 --> 00:00:57.909 a major, major player, publicly traded on the 00:00:57.909 --> 00:01:00.810 NYSE. The ticker is DECK for anyone who wants 00:01:00.810 --> 00:01:03.469 to follow along. And this is a big deal. They 00:01:03.469 --> 00:01:05.870 recently became a component of the S &P 500. 00:01:06.370 --> 00:01:08.750 That's a point we really need to emphasize. Being 00:01:08.750 --> 00:01:11.109 added to the S &P 500 isn't just, you know, a 00:01:11.109 --> 00:01:13.670 nice little award. It's a huge signal to the 00:01:13.670 --> 00:01:15.950 market. It means you've hit a certain level of 00:01:15.950 --> 00:01:19.760 scale of stability. Basically, you're one of 00:01:19.760 --> 00:01:23.260 the 500 largest, most significant public companies 00:01:23.260 --> 00:01:25.459 in the U .S. It's a stamp of approval from Wall 00:01:25.459 --> 00:01:27.920 Street saying your long term strategy is working. 00:01:28.040 --> 00:01:31.120 Exactly. And while footwear is clearly the engine, 00:01:31.359 --> 00:01:34.379 their portfolio does span into apparel and accessories, 00:01:34.579 --> 00:01:37.120 too. They're a global company. So let's talk 00:01:37.120 --> 00:01:38.780 about that engine. Let's talk numbers because 00:01:38.780 --> 00:01:40.459 they're pretty staggering. We have a snapshot 00:01:40.459 --> 00:01:44.859 from March 31st, 2025. Annual revenue is closing 00:01:44.859 --> 00:01:47.409 in on. What is it, $5 billion? It's knocking 00:01:47.409 --> 00:01:49.670 right on the door. U .S. $4 .9 billion. It's 00:01:49.670 --> 00:01:52.189 a massive, massive revenue stream. And think 00:01:52.189 --> 00:01:54.310 about what it's built on. Sheepskin moots, you 00:01:54.310 --> 00:01:56.730 know, chunky running shoes and sandals. It's 00:01:56.730 --> 00:01:59.269 incredible. But revenue is one thing. What about 00:01:59.269 --> 00:02:01.890 profitability? Because you can sell a lot and 00:02:01.890 --> 00:02:03.870 not make much money. Well, this is where it gets 00:02:03.870 --> 00:02:06.810 really remarkable. The efficiency is just off 00:02:06.810 --> 00:02:08.830 the charts for this industry. You're looking 00:02:08.830 --> 00:02:11.569 at an operating income of about $1 .18 billion. 00:02:11.849 --> 00:02:14.389 A billion dollars. And that income comes in at 00:02:14.389 --> 00:02:19.349 $966 million. So think about that. For anyone 00:02:19.349 --> 00:02:21.930 who tracks business, that's an operating margin 00:02:21.930 --> 00:02:25.229 of over 20%. In the footwear and apparel industry, 00:02:25.449 --> 00:02:28.659 that's almost unheard of. It's so competitive, 00:02:28.800 --> 00:02:31.560 so cost sensitive. It tells you everything. It 00:02:31.560 --> 00:02:33.539 shows you they have incredible pricing power 00:02:33.539 --> 00:02:35.979 and really, really efficient operations. They're 00:02:35.979 --> 00:02:38.379 not just moving boxes. They're selling premium 00:02:38.379 --> 00:02:40.280 products that people want and they're doing it 00:02:40.280 --> 00:02:42.800 very, very well. You don't get to almost a billion 00:02:42.800 --> 00:02:45.500 in net income by accident. That takes incredibly 00:02:45.500 --> 00:02:48.719 tight brand management. Precisely. And to support 00:02:48.719 --> 00:02:51.139 all that, they have a huge global operation. 00:02:51.319 --> 00:02:53.800 We're talking 5 ,500 employees around the world, 00:02:54.259 --> 00:02:58.000 179 physical locations. which includes everything 00:02:58.000 --> 00:03:01.199 from corporate offices to distribution centers 00:03:01.199 --> 00:03:04.539 to retail stores. And when you look at that scale 00:03:04.539 --> 00:03:09.060 today, it's just so hard to imagine where it 00:03:09.060 --> 00:03:11.419 all began. It makes you really wonder, how did 00:03:11.419 --> 00:03:13.599 we get here from there? Yeah, the contrast is 00:03:13.599 --> 00:03:16.039 stark. So let's do that. Let's rewind the clock 00:03:16.039 --> 00:03:18.159 and get into that origin story. Section one, 00:03:18.300 --> 00:03:20.879 from California craft fairs to the Goleta headquarters. 00:03:21.360 --> 00:03:24.539 Okay, so the year is 1973. The whole thing is 00:03:24.539 --> 00:03:27.639 started by two guys. Carl F. Lopker and Doug 00:03:27.639 --> 00:03:31.819 Otto. And the story doesn't begin in some, you 00:03:31.819 --> 00:03:34.280 know, fancy boardroom. No. It starts at craft 00:03:34.280 --> 00:03:36.719 fairs. Right. Literally, Carl Lopker was making 00:03:36.719 --> 00:03:38.759 handmade flip flops and just selling them at 00:03:38.759 --> 00:03:40.360 different markets up and down the West Coast. 00:03:40.500 --> 00:03:42.340 That's the ultimate direct to consumer model, 00:03:42.419 --> 00:03:44.879 isn't it? Decades before it became a tech buzzword. 00:03:44.979 --> 00:03:47.419 Absolutely. It's local. It's hands on. You're 00:03:47.419 --> 00:03:49.240 right there talking to the person buying your 00:03:49.240 --> 00:03:51.860 product. I can just picture it. A folding table, 00:03:52.020 --> 00:03:55.360 a sunny day on a boardwalk. bins full of sandals. 00:03:55.400 --> 00:03:58.180 It's the complete opposite of an S &P 500 corporation. 00:03:58.539 --> 00:04:01.280 It is. And that foundational product, the flip 00:04:01.280 --> 00:04:03.139 -flop, is actually what gave them their name 00:04:03.139 --> 00:04:06.020 a couple of years later in 1975. Right, the naming 00:04:06.020 --> 00:04:08.099 story. This is a great little piece of trivia. 00:04:08.430 --> 00:04:11.409 It is. So Doug Otto is on a business trip in 00:04:11.409 --> 00:04:13.830 Hawaii, you know, ground zero for flip -flop 00:04:13.830 --> 00:04:16.529 culture. And he keeps hearing the locals use 00:04:16.529 --> 00:04:18.750 this slang term for the kind of sandals they 00:04:18.750 --> 00:04:21.589 were making. We call them dekas. Dekas. But why? 00:04:21.889 --> 00:04:23.910 What did that even mean? It was just a simple 00:04:23.910 --> 00:04:26.490 descriptive term. The way their sandals were 00:04:26.490 --> 00:04:30.209 built with these stacked layers of foam or wood, 00:04:30.350 --> 00:04:33.290 it created this striped look on the side. Ah, 00:04:33.449 --> 00:04:35.350 so it looked like a deck of cards or a stack 00:04:35.350 --> 00:04:38.019 of wooden decking. Exactly. Just a visual. metaphor. 00:04:38.300 --> 00:04:41.579 And Lopker and Otto, they loved it. It sounded 00:04:41.579 --> 00:04:43.519 authentic. It was connected to the product's 00:04:43.519 --> 00:04:45.839 look, so they just adopted it. Deckers. It's 00:04:45.839 --> 00:04:48.399 a great story. But a company selling flip -flops 00:04:48.399 --> 00:04:51.060 at craft fairs doesn't become a Wall Street giant, 00:04:51.259 --> 00:04:53.480 no matter how good the name is. There had to 00:04:53.480 --> 00:04:55.899 be a major shift. There was. And the first real 00:04:55.899 --> 00:04:58.079 sign of their strategic genius, I think, came 00:04:58.079 --> 00:05:01.759 in 1985. This is a critical milestone. This is 00:05:01.759 --> 00:05:05.589 the Teva deal. This is the Teva deal. Deckers 00:05:05.589 --> 00:05:07.889 secures a licensing agreement to produce and 00:05:07.889 --> 00:05:11.069 distribute Teva sandals. And this is the moment 00:05:11.069 --> 00:05:13.449 they pivot. They go from being just a manufacturer 00:05:13.449 --> 00:05:16.920 of their own stuff to being a manager. a scaler 00:05:16.920 --> 00:05:19.220 of other innovative brands. It's a huge change 00:05:19.220 --> 00:05:21.699 in mindset. Huge. Teva was this revolutionary 00:05:21.699 --> 00:05:24.100 product in its own little world. And Decker's 00:05:24.100 --> 00:05:26.000 realized, you know, licensing this thing is a 00:05:26.000 --> 00:05:28.800 much faster path to growth than trying to invent 00:05:28.800 --> 00:05:31.500 another hit ourselves. So that Teva licensing 00:05:31.500 --> 00:05:34.660 deal really becomes the blueprint for their entire 00:05:34.660 --> 00:05:37.060 future. It's the model. It is. It's the first 00:05:37.060 --> 00:05:39.220 time you see them say, our plan isn't to be Nike. 00:05:39.339 --> 00:05:42.240 Our plan is to find these very specific, almost 00:05:42.240 --> 00:05:44.500 weird product categories and just completely 00:05:44.500 --> 00:05:46.879 dominate them. And to do that, you need capital. 00:05:46.920 --> 00:05:48.819 You need a corporate structure. Which leads directly 00:05:48.819 --> 00:05:51.740 to 1993. The company goes public on the NASDAQ. 00:05:51.939 --> 00:05:54.459 They officially rename themselves Decker's Outdoor 00:05:54.459 --> 00:05:57.439 Corporation. And that IPO gives them this huge 00:05:57.439 --> 00:05:59.680 injection of cash. Cash to go out and execute 00:05:59.680 --> 00:06:02.149 that blueprint on a much bigger scale. And they 00:06:02.149 --> 00:06:05.670 don't waste any time. That same year, 1993, they 00:06:05.670 --> 00:06:07.949 go out and buy a company called Simple Shoes. 00:06:07.990 --> 00:06:10.170 It's a smaller deal, but it's important. Why? 00:06:10.509 --> 00:06:13.110 Because it's their first test of outright brand 00:06:13.110 --> 00:06:15.829 ownership. They'd licensed Teva, so they had 00:06:15.829 --> 00:06:18.529 that experience. Now they were using their new 00:06:18.529 --> 00:06:20.649 public money to see if they could actually buy 00:06:20.649 --> 00:06:22.769 and integrate another shoe company into their 00:06:22.769 --> 00:06:25.129 system. It's the first taste of being a true 00:06:25.129 --> 00:06:27.290 portfolio manager. Exactly. You start with your 00:06:27.290 --> 00:06:28.910 own product, you learn how to manage someone 00:06:28.910 --> 00:06:31.620 else's, and then you start buying. Acquisition 00:06:31.620 --> 00:06:33.959 that really, truly changed everything. The one 00:06:33.959 --> 00:06:35.959 that bit the financial empire they have today 00:06:35.959 --> 00:06:38.680 that came just two years later. Which brings 00:06:38.680 --> 00:06:42.339 us to section two, building the portfolio, the 00:06:42.339 --> 00:06:45.279 strategy of niche acquisitions. And this section 00:06:45.279 --> 00:06:49.939 really is all about one word. UGG. UGG. The 1995 00:06:49.939 --> 00:06:53.300 acquisition of UGG Holdings completely redefined 00:06:53.300 --> 00:06:55.560 Deckers. It took them from being this, you know, 00:06:55.579 --> 00:06:58.339 California outdoor sandal company and turned 00:06:58.339 --> 00:07:00.920 them into a global fashion player. So what exactly 00:07:00.920 --> 00:07:03.319 were they buying in 95? I mean, what is a UGG 00:07:03.319 --> 00:07:05.959 boot fundamentally? Fundamentally, it's a very 00:07:05.959 --> 00:07:09.199 distinct thing. It's a sheepskin upper with that 00:07:09.199 --> 00:07:12.759 super warm, woolly inner lining and then a tanned 00:07:12.759 --> 00:07:16.220 outer surface worn by men and women, mostly for 00:07:16.220 --> 00:07:18.730 comfort and cold weather. But the story of how 00:07:18.730 --> 00:07:21.689 it got popular is so key. It wasn't born on a 00:07:21.689 --> 00:07:24.449 fashion runway in Paris. Not even close. Its 00:07:24.449 --> 00:07:27.490 biggest popularizer outside of Australia and 00:07:27.490 --> 00:07:29.569 New Zealand where it originated was surf culture. 00:07:29.750 --> 00:07:32.569 Right. An Australian surfer, Brian Smith, starts 00:07:32.569 --> 00:07:36.029 selling them in the U .S. back in 1979. And the 00:07:36.029 --> 00:07:38.589 whole purpose was purely functional. Totally 00:07:38.589 --> 00:07:40.350 functional. You get out of the freezing Pacific 00:07:40.350 --> 00:07:42.990 Ocean, you're peeling off your wetsuit, and you 00:07:42.990 --> 00:07:44.790 just want to stick your feet into something incredibly 00:07:44.790 --> 00:07:46.750 warm and comfortable. That's it. It was post 00:07:46.750 --> 00:07:49.449 -surfing gear. So for almost 25 years, it's this 00:07:49.449 --> 00:07:52.230 niche, performance -oriented product, and then 00:07:52.230 --> 00:07:55.910 a single moment changes everything. The Oprah 00:07:55.910 --> 00:07:59.209 Effect, 2003. The Favorite Things segment on 00:07:59.209 --> 00:08:01.910 The Oprah Winfrey Show. It's hard to overstate 00:08:01.910 --> 00:08:04.379 how big that was. It was the flashpoint. It's 00:08:04.379 --> 00:08:06.980 the moment UGG went from being this regional 00:08:06.980 --> 00:08:10.360 surfer thing to a global must -have fashion item. 00:08:10.540 --> 00:08:13.060 The cultural amplification that Oprah provided 00:08:13.060 --> 00:08:16.899 was, it was immediate. And it was total. And 00:08:16.899 --> 00:08:19.360 suddenly, that sheepskin boot wasn't just about 00:08:19.360 --> 00:08:21.980 function anymore. It was a status symbol. It 00:08:21.980 --> 00:08:24.639 was a fashion luxury item. And that transition 00:08:24.639 --> 00:08:28.040 to fashion luxury is what cemented this core 00:08:28.040 --> 00:08:31.180 strategic reality for Decker's, which is a heavy, 00:08:31.220 --> 00:08:33.940 heavy reliance on the UGG brand for revenue. 00:08:34.120 --> 00:08:36.860 That's a really important point. UGG is the company's 00:08:36.860 --> 00:08:40.059 primary moneymaker. And that sounds great, but 00:08:40.059 --> 00:08:41.960 doesn't it also make them incredibly vulnerable? 00:08:42.320 --> 00:08:44.659 I mean, fashion is fickle. What happens if sheepskin 00:08:44.659 --> 00:08:47.200 suddenly goes out of style? That is the absolute 00:08:47.200 --> 00:08:49.019 critical tension at the heart of their whole 00:08:49.019 --> 00:08:51.440 strategy. It's a vulnerability, yes, but UGG's 00:08:51.440 --> 00:08:53.679 strength has proven to be unbelievably resilient. 00:08:54.100 --> 00:08:56.080 Let's put this in context. Think back to the 00:08:56.080 --> 00:08:58.399 2008 economic downturn. The Great Recession. 00:08:58.480 --> 00:09:00.940 The Great Recession, a time when, you know, discretionary 00:09:00.940 --> 00:09:02.580 spending just fell off a cliff. People stopped 00:09:02.580 --> 00:09:05.720 buying non -essential things. And yet, UGG sales 00:09:05.720 --> 00:09:08.190 held up. They did. They actually managed to show 00:09:08.190 --> 00:09:10.750 earnings and sales growth through that period. 00:09:11.110 --> 00:09:14.029 And that resilience, that just underscores the 00:09:14.029 --> 00:09:17.429 power of what they bought. Once UGG crossed over 00:09:17.429 --> 00:09:20.549 into that necessary luxury category, it created 00:09:20.549 --> 00:09:22.710 this buffer. It made the brand less dependent 00:09:22.710 --> 00:09:25.269 on trends and more resistant to big economic 00:09:25.269 --> 00:09:27.809 shocks. People were still willing to spend on 00:09:27.809 --> 00:09:31.129 UGGs even when money was tight. Exactly. It proved 00:09:31.129 --> 00:09:33.490 that their strategy of buying into these dedicated, 00:09:33.690 --> 00:09:36.269 high -value consumer niches really works. It 00:09:36.269 --> 00:09:39.029 doesn't matter if that niche is surfers or river 00:09:39.029 --> 00:09:41.730 guides or people who follow celebrity fashion 00:09:41.730 --> 00:09:44.490 trends. But even with that success, they didn't 00:09:44.490 --> 00:09:46.549 just sit back. They kept tinkering. with the 00:09:46.549 --> 00:09:49.830 portfolio, right? The M &A timeline after UGG 00:09:49.830 --> 00:09:52.830 is full of them testing things, refining, and 00:09:52.830 --> 00:09:54.970 sometimes cutting things loose. It's a really 00:09:54.970 --> 00:09:56.750 dynamic strategy. They're not just collectors 00:09:56.750 --> 00:09:59.250 of brands. They're constantly refining the mix. 00:09:59.409 --> 00:10:01.649 Take 2010, for example. They acquired a company 00:10:01.649 --> 00:10:04.289 called Mozo Shoes. I'm not familiar with that 00:10:04.289 --> 00:10:06.169 one. Most people aren't, and that's kind of the 00:10:06.169 --> 00:10:09.169 point. It was a very specific play. Mozo made 00:10:09.169 --> 00:10:12.389 footwear for the culinary industry. So think 00:10:12.389 --> 00:10:16.519 chefs, line cooks. People on their feet for 12 00:10:16.519 --> 00:10:19.240 hours a day in a kitchen who need durable, non 00:10:19.240 --> 00:10:22.100 -slip shoes. So they went from high fashion to 00:10:22.100 --> 00:10:25.480 kitchen clogs. That's a complete 180. It was 00:10:25.480 --> 00:10:29.000 a test. Can we apply our manufacturing and distribution 00:10:29.000 --> 00:10:32.240 power to a purely utility focused professional 00:10:32.240 --> 00:10:34.500 market? And what was the answer? The answer was 00:10:34.500 --> 00:10:37.980 no, or at least not well enough. By 2015, they 00:10:37.980 --> 00:10:40.340 had divested Mozo. They sold it off. It just 00:10:40.340 --> 00:10:43.740 it likely didn't have the scale or the margins 00:10:43.740 --> 00:10:46.820 to justify the focus within the Decker system, 00:10:47.139 --> 00:10:49.460 which was now really optimized for these huge 00:10:49.460 --> 00:10:51.639 fashion and technical sports brands. It shows 00:10:51.639 --> 00:10:53.460 a certain ruthlessness. If it doesn't fit, it 00:10:53.460 --> 00:10:55.350 goes. And we saw. That, again, much more recently 00:10:55.350 --> 00:10:57.789 in 2024 with Sanuk. That was a big one. They 00:10:57.789 --> 00:11:00.710 bought Sanuk back in 2011 for, what, $120 million? 00:11:01.070 --> 00:11:03.169 $120 million. So this wasn't some small experiment, 00:11:03.309 --> 00:11:05.289 but they sold it off to a Canadian company called 00:11:05.289 --> 00:11:08.289 Loli. So why let go of a nine -figure asset like 00:11:08.289 --> 00:11:10.669 that? What was the thinking? Well, the general 00:11:10.669 --> 00:11:13.490 analysis is that Sanuk, which is known for its 00:11:13.490 --> 00:11:16.929 kind of fun, bohemian lifestyle shoes, was just... 00:11:17.679 --> 00:11:21.039 It was struggling. Growth was stagnant. And there 00:11:21.039 --> 00:11:23.080 was probably some brand overlap. It was competing 00:11:23.080 --> 00:11:25.159 for the same casual customer as some of their 00:11:25.159 --> 00:11:26.960 other products, maybe. Exactly. Without having 00:11:26.960 --> 00:11:30.159 the massive margins of UGG or the explosive growth 00:11:30.159 --> 00:11:33.620 in tech of HOKA. So if a brand isn't doing one 00:11:33.620 --> 00:11:36.539 of those two things, it starts to look like dead 00:11:36.539 --> 00:11:39.769 weight. And selling it frees up capital and, 00:11:39.870 --> 00:11:42.070 just as importantly, management focus for the 00:11:42.070 --> 00:11:44.169 real growth engines. Right. It shows they're 00:11:44.169 --> 00:11:46.370 always assessing the portfolio. But at the same 00:11:46.370 --> 00:11:48.190 time, they were pruning. They were also doubling 00:11:48.190 --> 00:11:50.049 down on the things that worked. Which brings 00:11:50.049 --> 00:11:53.370 us to the 2015 acquisition of Kulabura. This 00:11:53.370 --> 00:11:57.009 was a really clever strategic move. How so? Seems 00:11:57.009 --> 00:12:00.289 so similar to UGG. How do you launch that without 00:12:00.289 --> 00:12:02.070 just stealing your own customers? That's the 00:12:02.070 --> 00:12:04.929 art of market segmentation. They positioned Kulabura 00:12:04.929 --> 00:12:07.570 directly underneath UGG. It's a similar style, 00:12:07.730 --> 00:12:09.990 a similar feel, but at a slightly more accessible 00:12:09.990 --> 00:12:12.070 price point. So you capture the customer who 00:12:12.070 --> 00:12:15.409 wants the UGG look, but maybe can't or won't. 00:12:15.740 --> 00:12:18.639 pay the full UGG price. Exactly. You keep that 00:12:18.639 --> 00:12:20.600 customer within the Decker's family instead of 00:12:20.600 --> 00:12:23.039 losing them to a competitor making a cheap knockoff. 00:12:23.220 --> 00:12:25.659 And it's incredibly efficient. You already have 00:12:25.659 --> 00:12:27.899 the sheepskin supply chains, the manufacturing 00:12:27.899 --> 00:12:30.720 knowledge, the distribution networks. You just 00:12:30.720 --> 00:12:32.919 leverage that whole system for a complementary 00:12:32.919 --> 00:12:36.059 brand. It's a very smart play. But now we have 00:12:36.059 --> 00:12:37.840 to talk about the brand that is really driving 00:12:37.840 --> 00:12:41.460 the growth story today, the new powerhouse. And 00:12:41.460 --> 00:12:44.980 that takes us to section three, HOKA. and the 00:12:44.980 --> 00:12:48.419 maximalist movement. HOKA is, it's a phenomenon. 00:12:48.580 --> 00:12:50.840 It represents Decker's big bet on performance, 00:12:51.120 --> 00:12:54.120 innovation, and athletic growth. Since they bought 00:12:54.120 --> 00:12:57.259 it, it has just exploded. It's become this crucial 00:12:57.259 --> 00:12:59.980 high growth engine that helps offset some of 00:12:59.980 --> 00:13:02.620 that reliance on UDG. It really does feel like 00:13:02.620 --> 00:13:05.620 HOKA just appeared out of nowhere and is... Now, 00:13:05.740 --> 00:13:07.879 everywhere you go to an airport, you walk down 00:13:07.879 --> 00:13:09.340 the street, you go on a hiking trail and you 00:13:09.340 --> 00:13:11.860 see those thick sold shoes constantly. Yeah. 00:13:11.940 --> 00:13:13.600 Where did they come from? Well, the roots are 00:13:13.600 --> 00:13:15.240 actually pretty recent and they're European. 00:13:15.600 --> 00:13:19.000 HOK was founded in 2009 in Annecy, France. But 00:13:19.000 --> 00:13:20.840 by the time Deckers scooped them up in 2013, 00:13:21.139 --> 00:13:23.279 they had a base over in Richmond, California. 00:13:23.399 --> 00:13:26.379 And Deckers bought them right as they were starting 00:13:26.379 --> 00:13:29.179 to gain some serious momentum. Yes. Momentum 00:13:29.179 --> 00:13:31.720 based on being completely different from everything 00:13:31.720 --> 00:13:34.899 else on the market. HOKA didn't try to. build 00:13:34.899 --> 00:13:37.419 a better version of what existed. They just threw 00:13:37.419 --> 00:13:40.240 out the rulebook. I'm making these shoes with 00:13:40.240 --> 00:13:43.909 these. Just enormous midsoles. Enormous. And 00:13:43.909 --> 00:13:45.889 you have to remember the context. At that time, 00:13:45.929 --> 00:13:48.649 in the early 2010s, the running world was obsessed 00:13:48.649 --> 00:13:51.549 with minimalism. The whole idea was less is more. 00:13:52.029 --> 00:13:54.909 Thin soles, feeling the ground, barefoot running. 00:13:55.190 --> 00:13:57.289 And HOK came in and did the absolute opposite. 00:13:57.529 --> 00:13:59.970 The total opposite. Their shoes had these huge, 00:13:59.970 --> 00:14:02.250 lightweight, super cushioned stacks of foam. 00:14:02.490 --> 00:14:05.129 The industry immediately called them maximalist 00:14:05.129 --> 00:14:07.350 shoes. It was a direct challenge to the biggest 00:14:07.350 --> 00:14:09.309 trend of the day. Who was that even for initially? 00:14:09.759 --> 00:14:11.639 The first group that really embraced them were 00:14:11.639 --> 00:14:13.600 ultra runners, people running extreme distances 00:14:13.600 --> 00:14:16.179 like 50 or 100 miles. They needed the absolute 00:14:16.179 --> 00:14:18.860 maximum shock absorption and protection for their 00:14:18.860 --> 00:14:22.000 joints. HOKA provided that. So Deckers saw this 00:14:22.000 --> 00:14:25.100 really niche but very dedicated following in 00:14:25.100 --> 00:14:28.039 2013 and waned their move. But the real story 00:14:28.039 --> 00:14:29.960 is how they scaled it from there. That's the 00:14:29.960 --> 00:14:32.600 genius of it. Deckers had to take this shoe, 00:14:32.720 --> 00:14:35.159 which was seen as this weird thing for extreme 00:14:35.159 --> 00:14:38.600 athletes, and make it mainstream. They used their 00:14:38.600 --> 00:14:40.659 massive corporate power, their capital, their 00:14:40.659 --> 00:14:43.000 global distribution network, the same one that 00:14:43.000 --> 00:14:46.320 sells UGGs, and pushed HOK everywhere. And how 00:14:46.320 --> 00:14:48.159 did they change the perception? How did they 00:14:48.159 --> 00:14:50.899 convince everyday people to wear these maximalist 00:14:50.899 --> 00:14:53.580 shoes? They reframed the cushioning. It wasn't 00:14:53.580 --> 00:14:55.940 just a performance tool for a 100 -mile race 00:14:55.940 --> 00:14:58.139 anymore. It became a comfort necessity for everyday 00:14:58.139 --> 00:15:00.940 life. They targeted nurses, teachers, anyone 00:15:00.940 --> 00:15:03.500 on their feet all day. They made the colors and 00:15:03.500 --> 00:15:05.899 styles more appealing for lifestyle wear. But 00:15:05.899 --> 00:15:07.700 they kept the core technology. They kept the 00:15:07.700 --> 00:15:10.500 core tech, but they broadened the audience. And 00:15:10.500 --> 00:15:13.480 that pivot allowed HOK to jump out of the specialty 00:15:13.480 --> 00:15:16.620 running store and become a true lifestyle juggernaut. 00:15:16.759 --> 00:15:19.460 It was a brilliant move to diversify the portfolio 00:15:19.460 --> 00:15:22.519 away from just fashion. And it really solidified 00:15:22.519 --> 00:15:25.240 HOK as a serious athletic brand. They sponsor 00:15:25.240 --> 00:15:28.039 professional runners, major races. Oh, absolutely. 00:15:28.279 --> 00:15:31.139 That maintains the technical credibility. It 00:15:31.139 --> 00:15:33.179 creates this halo effect for the whole brand, 00:15:33.340 --> 00:15:35.139 even for the person who's just buying them to 00:15:35.139 --> 00:15:38.200 walk the dog. It's a masterclass in scaling a 00:15:38.200 --> 00:15:40.820 niche brand. Which brings us full circle back 00:15:40.820 --> 00:15:42.679 to the brand that started it all for them in 00:15:42.679 --> 00:15:44.539 a way. Yeah. The one that gave them the acquisition 00:15:44.539 --> 00:15:47.100 model in the first place. Teva. Let's go to section 00:15:47.100 --> 00:15:49.600 four. Teva, the invention driven by necessity 00:15:49.600 --> 00:15:53.820 and engineering. Right. If UGG is fashion and 00:15:53.820 --> 00:15:57.360 HEK is this maximalist tech, Teva is just pure 00:15:57.360 --> 00:16:00.500 problem solving utility. You have maybe the most 00:16:00.500 --> 00:16:03.080 unique origin story of them all. It wasn't about 00:16:03.080 --> 00:16:05.620 a trend. It was about solving a real world problem 00:16:05.620 --> 00:16:09.000 for a specific job. Exactly. The founder was 00:16:09.000 --> 00:16:11.460 a guy named Mark Thatcher. He was a geophysicist. 00:16:11.460 --> 00:16:14.039 But in 1982, he was working as a rafting guide, 00:16:14.179 --> 00:16:16.220 spending a lot of time in the Grand Canyon. And 00:16:16.220 --> 00:16:18.580 he just noticed this huge gap in the market. 00:16:18.960 --> 00:16:21.220 There's no good footwear for what he was doing. 00:16:21.340 --> 00:16:23.480 None at all. And the existing options failed 00:16:23.480 --> 00:16:25.799 in completely opposite ways. If you wore sneakers, 00:16:26.139 --> 00:16:28.220 they got soaked, they got heavy, they took days 00:16:28.220 --> 00:16:31.500 to dry, and they gave you blisters. Okay. And 00:16:31.500 --> 00:16:34.360 the other option? Flip -flops. They dried fast, 00:16:34.620 --> 00:16:36.519 but they'd just slide right off your feet the 00:16:36.519 --> 00:16:38.960 second you hit a strong current or had to climb 00:16:38.960 --> 00:16:41.980 over a wet rock. It was a safety issue. So he 00:16:41.980 --> 00:16:44.419 needed the security of a shoe with the quick 00:16:44.419 --> 00:16:47.259 -drying nature of a sandal. And his solution 00:16:47.259 --> 00:16:51.639 was... Almost comically simple. Deceptively simple. 00:16:51.799 --> 00:16:54.340 He took a basic thong -style sandal and he added 00:16:54.340 --> 00:16:58.340 one thing. A nylon ankle strap. That's it. That 00:16:58.340 --> 00:17:01.429 strap held the sandal securely to his foot. And 00:17:01.429 --> 00:17:03.730 just like that, the world's first sports sandal 00:17:03.730 --> 00:17:07.309 was born. He called them amphibious utility sandals. 00:17:07.390 --> 00:17:09.470 He did. And in his first year, he sold about 00:17:09.470 --> 00:17:12.109 200 pairs. It was a tiny word -of -mouth business 00:17:12.109 --> 00:17:14.250 just within the River Guide community. And we 00:17:14.250 --> 00:17:16.369 should mention the name Teva. Right. A little 00:17:16.369 --> 00:17:18.029 linguistic note. It comes from the Hebrew word 00:17:18.029 --> 00:17:20.130 preh, which means nature. And the pronunciation 00:17:20.130 --> 00:17:22.490 is important. It's T -E -H -V -E -T -A -Y, not 00:17:22.490 --> 00:17:25.230 Teva. So he has this great invention. He sells 00:17:25.230 --> 00:17:27.650 a couple hundred pairs. But the story gets complicated 00:17:27.650 --> 00:17:29.950 pretty fast, right? There were some serious challenges. 00:17:30.460 --> 00:17:33.680 Oh yeah, it was not a smooth ride. The first 00:17:33.680 --> 00:17:37.079 problem was a design flaw. The thong -style strap 00:17:37.079 --> 00:17:39.319 was great in the water, but when people started 00:17:39.319 --> 00:17:42.319 trying to hike or do other sports in them, they 00:17:42.319 --> 00:17:45.319 got terrible blisters between their toes. So 00:17:45.319 --> 00:17:47.380 it wasn't quite ready for a broader audience. 00:17:47.940 --> 00:17:52.519 Not yet. But then, in 1984, something weird happened. 00:17:52.920 --> 00:17:55.720 Demand just exploded, not because it was a perfect 00:17:55.720 --> 00:17:57.799 sports product, but because young people just 00:17:57.799 --> 00:18:00.140 thought it looked cool. It became this unexpected 00:18:00.140 --> 00:18:03.220 fashion item. And that sudden popularity brought 00:18:03.220 --> 00:18:05.460 all the legal issues to the surface. It did. 00:18:05.960 --> 00:18:08.359 The original shoemaker he was working with, a 00:18:08.359 --> 00:18:10.779 company called California Pacific, basically 00:18:10.779 --> 00:18:12.900 tried to claim ownership of the whole thing. 00:18:13.039 --> 00:18:15.200 They said the Teva name and the patent belonged 00:18:15.200 --> 00:18:17.140 to them, that Thatcher was just an employee. 00:18:17.440 --> 00:18:19.599 So he had to sue them to keep control of his 00:18:19.599 --> 00:18:21.400 own invention. He had to sue them, and he won 00:18:21.400 --> 00:18:24.619 in 1985. It was a huge victory. He severed all 00:18:24.619 --> 00:18:27.539 ties, set up the Teva company on his own in Flagstaff, 00:18:27.579 --> 00:18:30.680 Arizona, and now he had full control. And that's 00:18:30.680 --> 00:18:32.619 when Deckers comes into the picture. That's when 00:18:32.619 --> 00:18:36.720 they pounce. Late 1985. Thatcher makes that exclusive 00:18:36.720 --> 00:18:39.559 licensing deal with Decker's to manufacture and 00:18:39.559 --> 00:18:42.240 distribute Tevas. And this partnership is what 00:18:42.240 --> 00:18:44.200 really perfects the product. This is where they 00:18:44.200 --> 00:18:46.099 solve that blister problem with the universal 00:18:46.099 --> 00:18:49.359 strapping system. Exactly. Decker's manufacturing 00:18:49.359 --> 00:18:52.119 power and capital combined with Thatcher's idea 00:18:52.119 --> 00:18:55.259 created the Teva we know today. And that strapping 00:18:55.259 --> 00:18:58.599 system is a piece of engineering genius. So break 00:18:58.599 --> 00:19:00.299 that down for us. What makes it work so well? 00:19:00.559 --> 00:19:03.400 OK, so there are three key parts. First, the 00:19:03.400 --> 00:19:05.680 heel strap. It goes all the way around your ankle. 00:19:05.819 --> 00:19:07.799 That's the piece that stops the sandal from just 00:19:07.799 --> 00:19:10.119 sliding off your foot in a river. The security 00:19:10.119 --> 00:19:12.180 part. The main security part. Then you have the 00:19:12.180 --> 00:19:14.799 side straps. They're all about structural integrity. 00:19:15.240 --> 00:19:18.279 If you step on an uneven rock, they stop the 00:19:18.279 --> 00:19:20.400 whole sandal from twisting or stretching, which 00:19:20.400 --> 00:19:22.759 prevents injuries. And it's all held together 00:19:22.759 --> 00:19:25.039 by those little triangles. Those little triangular 00:19:25.039 --> 00:19:27.420 rings are the key. All the straps connect there, 00:19:27.519 --> 00:19:29.980 and it distributes the tension perfectly across 00:19:29.980 --> 00:19:32.690 your whole foot. It holds you in securely without 00:19:32.690 --> 00:19:35.690 creating those painful pressure points that caused 00:19:35.690 --> 00:19:37.690 the original blisters. It's an incredible design. 00:19:37.950 --> 00:19:39.670 Yeah. But they didn't stop at the straps, right? 00:19:39.730 --> 00:19:41.990 The sole was just as important. Oh, yeah. The 00:19:41.990 --> 00:19:44.589 sole is a two -layer system. The inner sole, 00:19:44.710 --> 00:19:47.549 the footbed, is softer. It's designed for comfort. 00:19:47.569 --> 00:19:50.450 It often has arch support. It's for the foot. 00:19:50.549 --> 00:19:53.079 And the outer sole. That's all about performance. 00:19:53.440 --> 00:19:56.240 It's a much harder rubber compound specifically 00:19:56.240 --> 00:19:59.640 formulated for incredible grip on wet, slippery 00:19:59.640 --> 00:20:02.359 surfaces. That's them staying true to the original 00:20:02.359 --> 00:20:04.799 rafting guide problem. And they added one more 00:20:04.799 --> 00:20:08.819 detail, the microband zinc technology. Why was 00:20:08.819 --> 00:20:10.839 that important? That's Deckers thinking ahead 00:20:10.839 --> 00:20:12.900 about the user experience. You have a sandal 00:20:12.900 --> 00:20:14.519 that's going to be wet all the time. It's going 00:20:14.519 --> 00:20:18.240 to get smelly. The microband zinc is an antimicrobial 00:20:18.240 --> 00:20:20.619 treatment that just reduces odor and kills bacteria. 00:20:20.839 --> 00:20:23.200 It's a small detail that makes a huge difference 00:20:23.200 --> 00:20:25.700 on a multi -day trip. So Deckers licenses the 00:20:25.700 --> 00:20:27.799 brand in 85. They help perfect the engineering. 00:20:28.000 --> 00:20:29.920 And then finally, they complete the acquisition. 00:20:30.430 --> 00:20:34.289 November 25, 2002. Deckers officially acquires 00:20:34.289 --> 00:20:37.109 all the worldwide patents, trademarks, everything 00:20:37.109 --> 00:20:40.130 from Mark Thatcher. And at that point, Teva is 00:20:40.130 --> 00:20:42.509 fully theirs. It's the second cornerstone of 00:20:42.509 --> 00:20:45.390 the empire, right alongside UGG. Which brings 00:20:45.390 --> 00:20:47.890 us to our synthesis. We've looked at three completely 00:20:47.890 --> 00:20:52.119 different brands. UGG. Teva, H -O -K -A. Different 00:20:52.119 --> 00:20:54.000 origins, different products, different customers. 00:20:54.299 --> 00:20:56.160 And that's the whole point. That's the overarching 00:20:56.160 --> 00:20:58.740 strategy of Deckers. They did not succeed by 00:20:58.740 --> 00:21:01.480 trying to be one giant brand for everyone. Their 00:21:01.480 --> 00:21:04.740 entire model is based on acquiring and then supercharging 00:21:04.740 --> 00:21:07.359 these powerful, distinct, high -margin niche 00:21:07.359 --> 00:21:09.319 brands. Just think about the ground they cover. 00:21:09.539 --> 00:21:11.900 They have the luxury fashion consumer with UGG. 00:21:12.099 --> 00:21:14.539 They have the technical outdoor and river user 00:21:14.539 --> 00:21:17.019 with Teva. And they have the massive running 00:21:17.019 --> 00:21:19.660 and athleisure market with H -O -K. And they 00:21:19.660 --> 00:21:22.200 were brilliant at leveraging key moments. They 00:21:22.200 --> 00:21:25.460 rode the Oprah wave with UGG. They invested in 00:21:25.460 --> 00:21:27.480 the technical innovation of Teva's strapping 00:21:27.480 --> 00:21:31.279 system and HOK's maximalist cushioning. And that's 00:21:31.279 --> 00:21:34.559 how they built this global presence, 179 locations, 00:21:34.700 --> 00:21:37.380 and maintained this incredibly strong financial 00:21:37.380 --> 00:21:40.279 position even through recessions. It really is 00:21:40.279 --> 00:21:43.619 a testament to smart, targeted acquisitions. 00:21:44.359 --> 00:21:46.700 They find these gems, and then they use their 00:21:46.700 --> 00:21:48.980 corporate muscle, their capital, their logistics 00:21:48.980 --> 00:21:51.819 to scale them in a way the original founders 00:21:51.819 --> 00:21:54.299 never could have. And it's not a static process. 00:21:54.519 --> 00:21:56.880 We can't forget that. The fact that they sold 00:21:56.880 --> 00:21:59.259 Emso and, more importantly, sold Sanuk, for which 00:21:59.259 --> 00:22:02.799 they paid $120 million, it shows they are constantly 00:22:02.799 --> 00:22:05.059 evaluating, they are pruning, they are optimizing. 00:22:05.460 --> 00:22:07.400 If a brand is in high margin or high growth, 00:22:07.759 --> 00:22:09.460 It's on the chopping block. No matter what they 00:22:09.460 --> 00:22:11.140 paid for it, they're willing to cut their losses 00:22:11.140 --> 00:22:13.420 and redeploy that focus and capital. Which leads 00:22:13.420 --> 00:22:15.259 us to our final thought for you, the listener, 00:22:15.359 --> 00:22:17.579 to consider. Where does this footwear titan go 00:22:17.579 --> 00:22:20.400 from here? We know UGG is the cash cow, the luxury 00:22:20.400 --> 00:22:23.519 foundation. We know HOKA is the high growth engine, 00:22:23.640 --> 00:22:26.180 the future of performance. So the central question 00:22:26.180 --> 00:22:29.039 is about balance. How do they continue to manage 00:22:29.039 --> 00:22:31.680 the risk of relying so much on UGG's fashion 00:22:31.680 --> 00:22:35.180 cycles while pouring fuel on the fire of HOKA's 00:22:35.180 --> 00:22:38.140 growth? What's the next move? Do they buy another 00:22:38.140 --> 00:22:40.519 technical performance brand to further balance 00:22:40.519 --> 00:22:43.680 the portfolio? Or do they try to replicate the 00:22:43.680 --> 00:22:46.460 UG Kulabura model in another fashion category? 00:22:46.759 --> 00:22:49.420 Will they find the next big thing, the next niche 00:22:49.420 --> 00:22:52.000 to dominate? The clearest signal of their future 00:22:52.000 --> 00:22:54.440 strategy will be their next acquisition. Will 00:22:54.440 --> 00:22:56.339 it be something to challenge HOKA or something 00:22:56.339 --> 00:22:58.470 to complement? Deva, or something else entirely. 00:22:58.809 --> 00:23:00.690 Keep an eye on those deals, because that's where 00:23:00.690 --> 00:23:02.650 they'll tell us where the Decker Brands empire 00:23:02.650 --> 00:23:03.390 is headed next.