Deckers Outdoor Corporation (DECK) Earnings

Management highlights

- Overall Q1 Performance * The company achieved a historic milestone, delivering over $1 billion in Q1 revenue for the first time in its history, with results modestly beating internal expectations * Disciplined supply management kept total inventory 5% lower year-over-year, supporting high full-price selling rates, pricing integrity, and clean retail channels * Gross margin for the quarter was 56.4%, up 60 basis points year-over-year, driven by favorable channel mix (faster DTC growth), better product mix, strong full-price selling, improved closeout management, and favorable FX, partially offset by higher tariff headwinds * SG&A spend was $420 million, up 13% year-over-year, driven by annualization of prior year new hires, marketing investments for growth, new store rent costs, higher technology expenses, and FX remeasurement * Diluted EPS was $0.94, compared to $0.93 in the prior year period, with the company repurchasing $338 million of shares in the quarter, leaving $4.7 billion remaining in repurchase authorization - HOKA Strategic & Operational Updates * Product innovation across road running, trail, and lifestyle categories drove strong consumer engagement, with new models including Speedgoat 7, Mach 7, Mafate Speed 2, and the recently launched Clifton Pro already seeing encouraging early demand and reorders from wholesale partners * The brand introduced a new structured product architecture (Glide collection for cushioned performance, Fly collection for responsive performance) to improve consumer clarity and support premium pricing, with more segmented launches planned for Spring 2027 * HOKA gained market share in premium performance running and trail categories above $120, with robust demand and record reorders in EMEA, and strong double-digit DTC growth across Europe, China, and Japan - UGG Strategic & Operational Updates * The 365 (year-round product) and men's growth initiatives drove favorable product mix shifts that lifted gross margins for the brand, with men's business representing the largest portion of UGG's incremental Q1 revenue * Key growth drivers include expanded classic franchise styles (including new low-profile Mini Mule), the Golden Collection of seasonal casual/sandal styles, the Outso clog for male consumers, and a growing apparel line that is performing well across all major regions * Culturally relevant marketing activations across key global cities reinforced UGG's positioning as a year-round lifestyle brand, supporting growing demand across seasons and reducing historical reliance on cold winter weather

Guidance

- Total fiscal 2027 revenue guidance is maintained at $5.86 billion to $5.91 billion, representing high single-digit year-over-year growth overall - HOKA is still expected to deliver low double-digit revenue growth for the full year, while UGG is still expected to deliver mid-single-digit revenue growth - Gross margin guidance is revised upward to slightly better than 56.5% from the prior outlook, reflecting Q1 outperformance, even after incorporating a higher tariff rate assumption of 12.5% (up from the prior 10% assumption) - SG&A as a percentage of revenue is still expected to be approximately 35%, as the company continues investing in long-term brand growth, with operating expense leverage expected to begin in fiscal 2028 - Operating margin guidance is increased to slightly better than 21.5%, and diluted EPS guidance is raised to $7.35 to $7.50, a 5 cent increase from prior guidance driven by higher expected full-year gross margins - Revenue growth is still expected to accelerate in the second half of fiscal 2027, due to planned wholesale shipment timing shifts from the first half; consolidated Q2 revenue is expected to grow approximately 5% year-over-year, with HOKA delivering high single-digit growth and UGG maintaining mid-single-digit growth - Q2 diluted EPS is expected to be in the range of $1.73 to $1.78, with gross margin pressured in the quarter by higher tariffs and rising freight costs, and weighted full-year SG&A investments falling in the first half

Segment performance

Total company first quarter revenue was $1.02 billion, up 5.7% year-over-year. - HOKA: Global revenue reached $704 million, an 8% increase year-over-year, accounting for 69% of total company revenue. HOKA DTC revenue grew 17% globally, with broad-based growth across all major regions, while global wholesale revenue grew 3% year-over-year, in line with planned international shipment timing shifts from last year. - UGG: Global revenue reached $278 million, a 5% increase year-over-year, accounting for 27.3% of total company revenue. Growth was balanced across channels: DTC revenue grew 6% and wholesale revenue grew 5% year-over-year, with international markets leading growth driven by strong monobrand retail adoption across new categories. - Other smaller brands: Expected to decline approximately 50% year-over-year in Q2 2027 as the company streamlines its brand portfolio.

Risks & headwinds

- Macro consumer backdrop remains pressured, with continued uncertainty around consumer spending patterns and the broader macroeconomic environment - Tariff policy is volatile, with the company now planning for a higher 12.5% go-forward tariff rate, and no assumptions for potential future tariff refunds included in current guidance - Geopolitical conflicts (including the ongoing Middle East conflict) create uncertainty around supply chain logistics and costs - Fluctuations in foreign currency exchange rates and global trade policy changes represent ongoing risks to operating results - Consumers are increasingly shifting to event-driven, buy-now-wear-now buying patterns, creating more concentrated peaks and valleys in demand that require flexible inventory and supply chain management

Analyst Q&A

• Q: Why is maintaining high full-price selling and a clean marketplace a core priority for HOKA, and how much of Q1 gross margin upside came from better-than-expected full-price sales? /

  A: Broad new product launches and innovation are resonating with consumers, with early reorders for new styles like Clifton Pro already coming in. Tight, lower inventory supports a full-price selling model, which keeps the brand premium and maintains profitability for both Deckers and its retail partners. For Q1, better full-price selling and product/channel mix contributed ~110 bps of upside, better closeout management added ~60 bps, and FX added ~40 bps, offset by a 150 bps headwind from higher tariffs year-over-year.

• Q: How is HOKA positioned against changing competition in the performance footwear space, and what would the company do with potential future tariff refunds? /

  A: HOKA continues to gain share in the premium performance trail and running space above $100, and the brand's broad product innovation across performance running, trail, hiking, fitness and lifestyle keeps it competitive. No refunds are assumed in current guidance. If refunds are received, the company will return a portion to retail partners that absorbed tariff costs, allocate some to taxes, and use remaining funds to drive business growth and return value to shareholders.

• Q: Are there order cancellations for H2 2027 following unseasonably warm weather, and how resilient is UGG's business to warmer winters? /

  A: There are no cancellations to the current order book. UGG's business is far more diversified than it has been historically, with strong growth across year-round styles including sneakers, mules, sandals, apparel, and men's products. Tasman has become a year-round business, and the brand is much less dependent on cold winter weather than in the past, so it is well-positioned to perform even with a warmer winter.

• Q: What is driving the expected HOKA growth acceleration in H2 2027, and how will DTC perform in the first half? /

  A: The H2 acceleration is purely a result of logistics timing shifts, not a change in underlying demand. Last year, early warehouse opening in Europe pulled wholesale shipments forward into the first half; this year, shipments are back to a normal cadence, so more volume will fall in H2. DTC is still expected to continue delivering strong significant growth for the full year, with no material change to channel dynamics in the first half.