DECKERS OUTDOOR CORP Q3 FY2025 earnings call

Key Highlights - Third quarter was the largest and most profitable in Deckers’ history with revenue growing 17% to $1.8 billion, gross margins improving to 60.3%, and diluted earnings per share increasing 19% to $3. - UGG: Global revenue in Q3 increased 16%, balanced growth across DTC and wholesale; strong growth in all global markets, gains with new and existing consumers; successful collaborations like with Gallery Department and Palace; product segments like icons reimagined, hybrid versatility collections performed well. - HOKA: Global revenue in Q3 increased 24%, strong growth across DTC and wholesale; accelerated growth in APAC region, particularly China; key global moments and events driving consumer engagement; two exciting products launching in Q4: Bondi 9 and Cielo X1 2.0 update.

In the third quarter, UGG's global revenue increased 16% versus last year to $1.24 billion, accounting for approximately 67.76% of the total revenue of $1.83 billion. HOKA's global revenue increased 24% versus last year to $531 million, accounting for approximately 29.02% of the total revenue. Teva's revenue was approximately $19 million, accounting for about 1.04%, and Other was approximately $24 million, accounting for about 1.31%.

Fiscal 2025 Guidance - Raised full year revenue expectation to approximately 15% growth, equating to just above $4.9 billion. - UGG revenue growth expected to be approximately 10%, up from prior mid-single digits. - HOKA still expected to increase approximately 24% versus last year. - Increased full year gross margin expectation to at or slightly better than 57%, but expects freight headwinds and more promotional environment in the balance of the year. - SG&A still expected to be approximately 35%, operating margin expected to be approximately 22%, effective tax rate expected to be approximately 23.5%.

Risks - Macro-economic environment impact, including fluctuations in foreign currency exchange rates. - Supply chain and logistics disruptions. - Changes in consumer behavior. - Disruptions to achieve financial outlook due to various factors like promotional activity and inventory levels.

Q: Jay Sole asked about managing brand, fourth quarter growth by channel, and product launches beyond March.

A: Stefano Caroti said HOKA is a transformational brand with consistent strategy, Bondi 9 launch is well-received, Cielo X1 2.0 launching in Feb, Clifton 10 in April, Mafate X in May, Arahi 8 in May; Steve Fasching added it's about managing marketplace for long-term growth not chasing numbers.

Q: Laurent Vasilescu asked about HOKA launches reception from retail partners and domestic growth.

A: Stefano Caroti said reaction to Clifton and Arahi 8 from trade is positive; Steve Fasching said growth rates between quarters are moving differently due to marketplace management and inventory, demand for brands is still incredible.

Q: John Kernan asked about U.S. growth comparison to expectations, international growth potential.

A: Stefano Caroti said U.S. grew to expectations, international expected to outpace U.S. in percentage growth; Steve Fasching said some UGG sales came forward earlier than expected, international business performed well.

Q: Jonathan Komp asked about competitive dynamics for HOKA and distribution.

A: Stefano Caroti said selective and thoughtful distribution, will open a few more doors especially internationally, strong innovation stories will do well; Steve Fasching said brands are performing incredibly, not getting hung up on quarterly compares.

Q: Samuel Poser asked about EBIT margin and markdowns.

A: Steve Fasching said will wait for Q for EBIT margin details, anticipating more normalized promotional activity in Q4 with model changeover and freight headwinds.

Q: Christopher Nardone asked about Clifton 10 launch and margin impact.

A: Steve Fasching said Clifton 10 flow won't all be Q4, some in Q1, margin hits on Clifton 9 embedded in gross margin movement.