Shoe Brands’ Secret to Success? Going Slow

Hoka sneakers, On shoes, Ugg boots and Birkenstock sandals don’t look very much alike, but they do have one thing in common: They have all been flying off the shelf. What are they doing right?

Getting a shoe’s comfort, performance and style right is important. But these brands also have taken a page out of luxury brands’ playbook by being choosy about where they make their shoes available and pacing growth.

Deckers Outdoor , which owns both Hoka and Ugg, has seen healthy growth at both brands. Sales at Ugg, its largest brand, rose 16% last fiscal year and are expected to grow by a further 7.4% in the current fiscal year. Revenue at Hoka, its second-largest brand, has managed an impressive compound annual growth rate of roughly 50% over the last four years, while its competitor, On, averaged compound growth of more than 65% over the comparable period. Revenues for both On and Hoka are expected to expand by some 25% this year. Sandal brand Birkenstock is set to increase revenue by a double-digit percentage in each of the next few years.

Industry analysts say Deckers stands out for the meticulous way it allocates inventory. The company learned its lesson through Ugg boots, which were popular in the early 2000s before fizzling out. The company made a decision in 2016 to stop distributing through certain retailers, pulling back from some 200 stores. Instead, it narrowed its distribution through larger partners such as Amazon and Macy’s. That effort, alongside buzzy, limited supply launches of some styles—such as the Ultra Mini Platforms—helped boost brand cachet.

Deckers applied those learnings to Hoka, which it acquired in 2012. The company has been introducing Hoka to retail partners at a “slow, deliberate pace,” and has been picky about the stores it works with, according to Joseph Civello, equity analyst at Truist Securities. The brand is also intentional about the styles it introduces by store: For example, putting performance-driven sneakers at running specialty stores while prioritising style-forward shoes at locations like Foot Locker to attract sneakerheads, according to Civello.

Hoka rival On has opted for a selective strategy, too, though it made some mistakes along the way. The company has stopped selling at discount shoe seller DSW in the U.S. and at stores it classifies as “comfort” shoe retailers in Europe, where the brand wasn’t reaching the right audience. Its current retail partners include specialty running stores such as Fleet Feet and upscale department store Nordstrom .

Birkenstock is another example: The brand typically ships retailers about 75% of what they would like to order, according to a research note from Evercore. In a September industry conference, Birkenstock Americas President David Kahan said the scarcity model drives consumers’ “urgency to buy.” “Nobody is buying the product and price comparing—[asking], can I get it cheaper someplace else?” he said.

The selective strategy is clearly showing up on these companies’ bottom lines: Deckers Outdoor, On and Birkenstock all boast gross margins exceeding 55%. On’s 60% gross margins are closer to luxury behemoth LVMH’s than to Nike ’s.

Getting the quantity of inventory right is important, but so is achieving the right mix of where it is sold. These brands would make more profit if they started channeling more sales through their own stores and websites. But as Nike learned the hard way, companies can also shoot themselves in the foot by trying to abandon middlemen too quickly . Sneaker upstarts like Hoka probably benefited from Nike’s decision to abruptly exit retail stores, notes Paul Lejuez, equity analyst at Citi. Deckers Outdoor, On and Birkenstock are increasing the share of shoes sold directly, but they are doing so slowly. Retail partners still account for about 60% of sales at all three companies.

Retail is littered with examples where brands’ desire for rapid growth backfired. Under Armour , for example, was the subject of an accounting probe a few years back, after it was accused of trying to inflate quarterly sales numbers by urging retailers to take products early and redirecting goods to off-price chains like T.J. Maxx in the final days of a quarter. The company settled those claims without admitting or denying wrongdoing. Whether or not those claims were true, Under Armour’s overexposure to discount sellers cheapened the brand’s image, which it is still trying to recover .

VF Corp., which acquired popular streetwear brand Supreme in 2020, failed to keep the brand’s street cred going, possibly because it made products too available . It sold Supreme to EssilorLuxottica earlier this year.

Publicly listed companies are prone to short-term thinking because they are beholden to investors who want to see growth quarter to quarter. That isn’t the case for European luxury conglomerates, which are publicly traded but are still family controlled and, thus, can put the brakes on short-term revenue growth in favour of long-term cachet.

To keep the streak of success going, investors of these popular shoemakers might need to adopt the patience of luxury-conglomerate families.

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

Shoe Brands’ Secret to Success? Going Slow

Trendy shoe brands such as Hoka, On and Birkenstock are taking a page out of luxury’s playbook

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.