The Ugly Shoes Now Worth Billions of Dollars
Hokas are the chunky sneakers of choice for runners. And nurses. And waiters. And teens. And grandpas. How did shoes that were huge, weird and French conquer America’s hearts, wallets and feet?
The first time he laid eyes on the shoes that would be worth billions of dollars, Stefano Caroti wasn’t sure what he was looking at. But there was one thing the Deckers Outdoor DECK -0.88%decrease; red down pointing triangle footwear executive did know about this pair of colorful and chunky sneakers that went by the name of Hoka.
“I had never seen anything like it,” he said.
They were big, weird, contrarian and French, and there wasn’t much reason to expect they would become huge in the U.S. In fact, when Hoka’s founders sold the company to Deckers Brands in 2012, their sales were around $3 million that year.
Hoka’s sales over the past fiscal year: $1.4 billion.
These peculiar shoes have become the oversized sneakers of choice for people who are hardcore runners and people who have a hard time walking—athletes, nurses, restaurant waiters, postal workers, TV writers, cool teens and their grandpas. Some wear them because they want to. Others wear them because they have to. Either way, a great many of them develop a fascination and then an obsession with their Hokas, which have conquered the hearts, wallets and feet of American consumers.
There’s an obvious explanation for the success of any sneaker company: It’s gotta be the shoes. That applies to Hokas, too. The distinctive cushioning that creates a magical feeling made these shoes unlike any on the market. But it’s not just the shoes. Shoes alone can’t take a brand from $3 million to $1.4 billion—especially not these highly unconventional shoes.
The success of Hoka was also made possible by the brand’s counterintuitive business strategy. It turns out Hoka grew fast by moving slowly.
“Could we grow faster? Yes,” said Caroti, Deckers’ chief commercial officer and Hoka’s interim president. “Is that good for the long-term health of the brand? No.”
This was a curious thing to hear from an executive at a brand with explosive growth. But it’s not just corporate hokum. Wall Street analysts told me that Hoka’s selective distribution keeps supply below demand and maintains the premium appeal of sneakers that generally cost between $125 and $175. Hoka’s executives are pacing themselves, cautious about getting too big too soon, betting that trying to win every consumer is how a company loses its identity. They are running the business as if they are running a marathon.
That discipline is paying off. Hoka sales amounted to less than 10% of Deckers’ revenues only five years ago. Now they account for nearly 40% and Deckers has never been worth so much. This company is one of the few whose stock price has doubled over the past year for reasons that have absolutely nothing to do with AI.
The current growth rate is unsustainable, like sprinting for 26.2 miles, but its history of patient management is why investors are bullish on Hoka’s future.
“It’s something that has been one of the keys to our success,” said Colin Ingram, Hoka’s vice president of global product. “Knowing when to say yes, when to say no and when to say not yet.”
Hoka executives can afford to be judicious because there will always be a market for any product that solves problems and provides value. They say there are three key elements of Hokas—the midsole (for soft landings), the foot frame (for support) and the curved sole called a meta-rocker (for propulsion)—and the combination of stability, efficiency and cushioning helps prevent injuries and alleviate pain. Also, they’re super comfy.
The brand was founded in 2009 by Jean-Luc Diard and Nicolas Mermoud, who met at a ski race in the French Alps decades earlier. When they decided to start a company together, they gravitated toward shoes, because the footwear market was massive but the technology of shoe construction was fairly basic. Their original concept was to chase that sensation of riding a wave on a surfboard or floating down a mountain on skis—except for trail running. They called the brand Hoka One One, the Maori phrase that roughly translates to “flying over the earth.”
As they tinkered with sneakers designed to run faster downhill, they realized that shoes had something in common with modern tennis rackets, bicycle tires and their beloved skis: Bigger was better. Like so many radical innovations, the idea might sound like common sense today, but it seemed heretical when runners were smitten with minimalist shoes. Hokas were proudly maximalist. They were also pretty ugly. (They have been described by news articles and the brand’s executives as “marshmallow shoes” and “clown shoes,” bloated, engorged, wacky, bulbous, extreme, “kind of hideous,” “why?” and “just…no.”)
Hoka was introduced to the U.S. when Mermoud attended a 2009 trade show with a bag of prototypes and without a booth. He didn’t need one. Those early shoes had so little in common with the competition that almost everyone who raves about them recalls when they first encountered them.
“I remember bashing my feet into the pavement and couldn’t feel anything,” Ingram said. “I was like, OK, there’s something to this. It’s not just a crazy-looking shoe. There’s actually a benefit to it.”
The brand shipped 1,100 pairs to the U.S. and Canada in 2010, said Steven Doolan, the vice president and general manager of Hoka North America. But soon the polarizing shoes were best-sellers in specialty running stores, where owners stashed boxes in back hallways to keep them in stock. Deckers took a stake in 2012 and then had a smarter idea than investing in Hoka: buying Hoka.
The deal for an undisclosed sum was a rounding error for Deckers, which already owned Ugg boots and Teva sandals, as the company said in a regulatory filing that the acquisition was not material to its finances.
It took five years for Hoka’s sales to accelerate from less than $3 million to more than $100 million. It took six more to zoom past $1 billion.
The improbable billion-dollar brand started as a word-of-mouth phenomenon in the niche but influential running community. In recent years, Nike and Adidas have ceded ground in the running market, opening a lane for much, much smaller upstarts like Hoka and On. The business also benefited from pandemic tailwinds like hybrid work and casual office dress, as people discovered that sneakers engineered to run down trails also worked as everyday shoes on flat roads and city streets. As they got more popular, Hokas even got less ugly.
But sudden ubiquity only makes it more important to preserve scarcity. Prudence doesn’t come naturally to companies with financial incentives to grow in the short term, and the retail industry is littered with cautionary tales of brands that overestimated their appeal, flooded stores and lost their air of exclusivity and ability to command a premium pricetag. Hoka’s executives have avoided the risk of overabundance by keeping their sneakers out of the biggest big-box chains, and that careful distribution and healthy reliance on direct-to-consumer sales allowed them to control pricing even when the brand was blowing up.
“It’s easy when you’re hot like this to let anybody buy what they want to buy, but that’s the fastest way to ruin a brand,” said Matt Powell, a longtime analyst of the sneaker industry. “The short-term gains are the easiest ones to get. It’s the long-term gains that make you a successful brand.”
To grow fast, think slow. That’s the business lesson in every box of Hokas. The way to stay hot is to stoke the fire, not to douse it with gasoline. But gradual progress can be hard to accept when companies are under pressure to deliver every quarter—and because it defies the way that many of the world’s most recognizable brands were once built.
“The way you got your brand out there was that you had to be everywhere,” Doolan said. “Today you don’t have to be. You want to be in the right places in front of the right individuals.”
You also have to get the timing right. On its path to $1.4 billion in sales, the brand moseyed from running shops to outdoor specialists like REI to large retailers, though executives actually turned down the opportunity to move Hokas into Foot Locker before the pandemic. “We were not ready,” Doolan said. People had to be familiar with Hokas before they were willing to buy Hokas. Otherwise the shoes would have been hiding in plain sight on the wall. By last summer, the brand’s awareness was high enough that it was ready for one of the country’s biggest sneaker chains. “We’ve held out a little bit longer than we needed to,” Doolan said. “But now we’re more likely to have success.”
They followed a similarly conservative playbook at Dick’s Sporting Goods. “We started very slowly with them,” Caroti said. “In fact, initially, it didn’t work.” Hoka tested the market in a small number of Dick’s stores as early as 2014. They were uncharacteristically quick to end the experiment when they didn’t like what they found. “It was a bit too early,” Caroti said. “There was no consumer demand.”
It was so early that the brand wouldn’t get back into Dick’s until 2020. They started in about 10 stores and paid close attention to the sell-through rate of its limited inventory over several months. In 2021, they expanded to 40 stores. In 2022, they planned for 100 doors. But they were still in less than 20% of the chain’s locations—and it’s oddly fitting that Deckers executives sound proud of how few places you can find a pair of Hokas.
They don’t want to get out over their skis.