DECKERS OUTDOOR CORP Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Year-End Performance: Fiscal 2025 was a record year with revenue up 16% to $4.986 billion, gross margin 57.9% (up 230bps), operating margin 23.6% (up 200bps), and EPS $6.33 (up 30%).
• HOKA Highlights: Fastest-growing brand with global revenue $2.2B, strong growth across channels/regions. Focus on brand awareness, innovation (CLO X1, Tekton X), and new product launches like Rocket X3, Arahi eight, MFATI five.
• UGG Highlights: Robust growth, driven by international markets. Strong performance in fourth quarter due to high demand, with focus on male consumer adoption and year-round wearability through new styles and campaigns.
• Strategic Initiatives: Aim for 50/50 DTC and wholesale mix, balanced international and US growth, and continued investment in marketing, talent, and infrastructure.

Segment Performance

• HOKA: Global revenue in fiscal 2025 increased 24% vs prior year to $2.2 billion. Wholesale revenue grew 24%, DTC revenue 23%, international revenue expanded 39% (now 34% of global revenue), and US revenue rose 17% to just under $1.5 billion. Key products like Bondi nine and Clifton ten launched, with positive consumer and partner feedback.
• UGG: Global revenue in fiscal 2025 increased 13% vs prior year to $2.5 billion. Wholesale revenue grew 15%, DTC revenue 11%, international revenue expanded 20% (now 39% of global sales), and US revenue grew 9% to just over $1.5 billion. Fast-growing styles include Tasman, Ultra Mini, Lowmel, etc., with focus on male consumer adoption and year-round wearability.

Guidance

• Q1 2026 Outlook: Revenue expected to be $890M-$910M, HOKA up at least low double digits, UGG up at least mid single digits. Gross margin expected down due to higher freight costs, increased promotion, and channel mix headwinds. EPS expected $0.62-$0.67.
• Share Repurchase: Board approved increase of $2.25B to stock repurchase authorization, totaling $2.5B, highlighting confidence in strategic plan.

Risks

• Tariff Impacts: Unmitigated tariff cost of ~$150M, with plans to mitigate through price increases and cost sharing with vendors but expecting net impact to be less.
• Macroeconomic Uncertainties: Shifting US trade policy, foreign currency exchange rate fluctuations, and potential consumer spending softness impacting business performance.
• Competitive Dynamics: Potential changes in competitive landscape in trail and road categories, affecting market share and growth.

Q: Good afternoon. I want to ask about the slowdown in HOKA USD to C. What gives the confidence that there's not a broader change in the competitive dynamics in the trail and road category, especially as you're still working to establish lifestyle and fitness?

A: Thanks. This is Steve. It was isolated in terms of pressure in US DTC. International business did well. We're encouraged by international and wholesale business. Volumes were strong despite some price promotion. Stefano adds Q4 was biggest HOKA quarter ever, and no change to long-term expectations.

Q: Terrific. I'm curious just about the fourth quarter for HOKA. Can you just talk about units versus ASPs?

A: Jay, clearly one of the impacts was model changeovers leading to more price promotion impacting revenue but volumes still strong. Feedback on transition to Bondi nine and Clifton ten has been strong as we closed out older models and transitioned to newer ones.

Q: Good afternoon. Thank you very much for taking my question. Steve, I recognize you're not guiding for the year, but you did provide a framework that calls for HOKA to grow mid-teens. How are you thinking about that framework between HOKA DTC and wholesale?

A: Steve says our order book remains strong but we're cautious due to macro elements. We're encouraged by international performance. Stefano adds decision-making factors for wholesale expansion include door productivity turns, and we're systematically expanding with partners like Journeys and others.

Q: Good afternoon. Thanks for taking my question. All I have questions on HOKA. Obviously, UGG outperformed your expectations pretty significantly in the fourth quarter. Just curious if you'd give more color on UGG and by region, channel, and how you're thinking about UGG and fiscal 2026.

A: Stefano says UGG has solidations, continues to compete across segments, with men's business outpacing women's. Steve adds UGG's strong performance is due to demand and scarcity model, managing inventory to maintain high gross margin and profitability.

Q: Thanks. Good afternoon. Question on HOKA being planned mid-teens before the escalation of tariffs. So is there something that you're seeing in the wholesale order book for this fall in the way that consumers are shopping that leads you to have a more conservative view with the near-term plan up low double digits?

A: Steve says our order book remains strong but we're cautious due to low consumer sentiment in US, though international front is strong. We'll see how consumer response in fall impacts, and once more certain, we'll provide guidance.