Can Hoka’s runaway boom last?

Barnaby Day owns several sneaker brands, but the avid runner reserves his highest praise for Hoka, one of the most popular athletic shoes in the world.

“I ran my first trail marathon at Hoka in 2018,” said Day, who runs every day and is director of sport and wellbeing for several schools in south-east London. “The Hokas I’m wearing now, Clifton GORE-TEX, I don’t actually wear them at all, I wear them every day.”

The 41-year-old is part of a global tribe numbering in the millions, whose members include trail runners, nurses, celebrities like Harry Styles and Britney Spears, and even US President Joe Biden, all of whom wear shoes bulbous but comfortable. which have been described by the Internet and the media as “ugly”, “thick” and “awful” due to their thick soles.

The eclectic mix underscores the broad appeal of the Hoka brand, which was acquired by Deckers Brands, owner of publicly traded footwear brands in the U.S., including Ugg boots and Teva sandals, in 2012.

It broke the billion-dollar sales mark in 2022, having sold only about $3 million worth of shoes a decade ago, when the French-founded brand was known only to hardcore runners.

“They’ve always been like Marmite among runners: They’re not necessarily the most aesthetically pleasing shoes, but as the shoes have gotten crazier, that’s become less important,” Day said. “Hoka has done some collaborations with designers and they have become as much of a fashion shoe as a performance shoe.”

US President Joe Biden wearing Hoka sneakers © Robert Schmidt/AFP via Getty Images

Despite its phenomenal growth, having reported another record year of sales on Thursday, Hoka and its owners – whose shares are about six times higher than they were five years ago – are at an inflection point.

Some analysts and investors wonder whether it can sustain its double-digit growth amid fierce competition after its shoes gained popularity during the pandemic. Last month, Adidas said demand for some of its shoes, including the Gazelle and Samba models, was so high that it was delaying product launches to maintain their appeal. Other newer rivals, such as On Running, are competing for the same slice of the pie and aggressively pushing for growth.

Hoka is also in the midst of a leadership change, with Deckers chief commercial officer Stefano Caroti set to take over as chief executive when Dave Powers retires in August after eight years at the helm.

Swetha Ramachandran, manager of Artemis’ Leading Consumer Brands fund, which invests in Deckers, said: “Does Hoka have what it takes to be a $5 billion brand and what do they need to do to get there?” She noted that they remain “resolutely focused on performance” even as rival On Running moves into a broader range of lifestyle products and accessories “because they see that’s a bigger part of the market.”

“Can Hoka do that in a way that feels authentic while still retaining legitimacy and authority in the footwear side of the business? Because that is what will also drive additional growth.”

Hoka controls only about 1.3 percent of the sports footwear market, with rival On Running at about 1.7 percent, while giants Nike, Adidas and Puma own about 23.7 percent, 11, 5 percent and 4.5 percent respectively, according to Stifel estimates.

Hoka has tried to cultivate its popularity among fashion lovers through collaborations with brands such as Moncler and Free People. At the current rate of growth, it could surpass Ugg as the largest Deckers brand, which has seen a resurgence in recent years and has $2.2 billion in annual sales. Hoka had $1.8 billion in revenue in the year to March 31, about 42 percent of the Deckers group’s revenue.

Deckers and Hoka did not respond to interview requests for this article.

Hoka traces its roots back to 2009, the same year Christopher McDougall published his best-selling book. Born to Run which popularized “barefoot running” and minimalist footwear.

That same year, Hoka was founded by Jean-Luc Diard and Nicolas Mermoud, who took a different approach and focused on developing lightweight trail running shoes with thick, supportive midsoles for faster downhill running. It was called “Hoka One One”, which roughly translates to “fly over the land” from the Maori language.

Hoka sponsorship at a UTMB World Series aid station: 50K Speedgoat Mountain Race © Kyle Rivas/Getty Images for the UTMB World Series

Three years later, Deckers acquired the brand for about $1.1 million. In 2014, minimalist footwear was going out of style and Hoka began to gain popularity, particularly among specialty running stores.

On the eve of the pandemic, it was benefiting from another development: Footwear retailers needed to diversify their product mix after industry leader Nike announced a plan to focus on its own direct-to-consumer sales.

Foot Locker, the New York-based global sneaker giant, reported that 75 percent of its merchandise was purchased from Nike in 2020, a figure that had dropped to 65 percent in 2023. CEO Mary Dillon of the company, has said that Hoka is one of its fastest-growing brands that fills that void.

But beyond its success with Foot Locker, Hoka has been selective about selling through other retailers, a strategy that has supported its rise, according to Laurent Vasilescu, CEO of BNP Paribas Exane.

“That’s why you don’t see Hoka in low-quality retail stores. . . All the good things (strategy) that you saw with Ugg, they (management) are applying in terms of best practices for Hoka,” she added, referring to the reluctance to discount and the ability to manage their inventory carefully.

Deckers has also been selling more shoes directly to consumers, earning higher profit margins. In its most recent quarter to the end of March 31, direct-to-consumer revenue rose 21 percent, accounting for just under half of the group’s revenue.

This week the company posted record annual results, boosted by Ugg and Hoka, with net sales rising 18.2 percent to $4.3 billion. Profits rose to $759.5 million, compared with $516.8 million a year earlier, and it said it expected net sales to continue growing about 10 percent to $4.7 billion.

Bigger rivals may be threatened by the pace of their growth, but Stifel’s market share estimates show Nike and Adidas will sell a combined 1.1 billion pairs globally in 2023, compared to Hoka’s 18 million.

Powers’ retirement will be a loss. He joined Deckers from Converse in 2012 as president of direct-to-consumer and “has been instrumental in terms of the takeoff that he (Hoka) has had,” Ramachandran said.

Vasilescu said incoming boss Caroti, who has had a long career working for Deckers, Puma and Nike, was a continuation candidate, who was “a thoughtful product leader” and “very similar to Dave (Powers).” “They are both very approachable people, a very important quality.”

He believes Hoka has barely made a dent in its international ambitions and that there is “simply a long way to go.”

Meanwhile, riders like Day are excited about Hoka sponsoring more high-level athletes.

“If athletes who wear Hokas win marathons and medals, runners like me who are not looking to win anything but to beat our personal best will be more and more interested in wearing their shoes. That angle of fashion, the number of collaborations they have, the innovation, make them an attractive brand.”

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