Deckers Outdoor Corporation Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Stefano highlighted strong second-quarter results with 9% revenue growth and 14% increase in diluted EPS. First half total company revenue grew 12%, HOKA up 15%, UGG up 12%, and EPS up 17%. International regions were key for both brands' growth. Product initiatives for HOKA included updates to road running and trail franchises, while UGG focused on key brand initiatives and new product launches like the Mel franchise and Zora Ballet Flat. Marketing efforts were emphasized for building brand awareness and engagement.
• Steve discussed second-quarter financial results: revenue of $1.43B, gross margin 56.2% (up 30bps), SG&A $477M (up 11% vs prior year), diluted EPS $1.82 (up 14% vs prior year). Balance sheet had $1.4B cash/equivalents, $836M inventory (up 7% vs prior year), and $2.2B remaining for share repurchases. Forward-looking update: full year fiscal 2026 revenue ~$5.35B, HOKA low teens growth, UGG low to mid-single digits growth, gross margin ~56%, SG&A ~34.5% of revenue, operating margin ~21.5%, EPS $6.30-$6.39.

Segment Performance

• HOKA: Second quarter revenue increased 11% versus prior year. First half revenue grew 15%. International regions drove growth, with top franchises like Clifton, Bondi, and Arahi contributing. Wholesale was the primary growth driver in the second quarter, with DTC growing 8% year-over-year.
• UGG: Second quarter revenue increased 10% versus prior year. First half revenue grew 12%. International regions accounted for the lion's share of growth, but DTC was softer due to pressures from wholesale in-stock positions and consumer shopping habits. Wholesale growth was 17% in the second quarter, offsetting a 10% decline in DTC.

Guidance

• Total company revenue expected ~$5.35 billion for fiscal 2026.
• HOKA to grow low teens percentage versus last year; UGG to grow low to mid-single-digit percentage.
• Gross margin anticipated ~56% with tariff headwinds in back half offset by mitigation strategies.
• SG&A to be approximately 34.5% of revenue.
• Operating margin expected ~21.5%.
• EPS in range of $6.30 to $6.39.
• Unmitigated tariff impact on fiscal year 2026 expected ~$150 million, with mitigation efforts offsetting ~$75 million to $95 million.

Risks

• Further updates to imposed tariffs or other global trade policy.
• Changes in consumer confidence and recessionary pressures.
• Inflationary pressures.
• Fluctuation in foreign currency exchange rates.
• Supply chain disruptions.
• Geopolitical tensions.

Q: Laurent Vasilescu from BNP Paribas asked about the revised guidance for HOKA and UGG, unpacking if it's due to conservatism and weather impact on UGG.

A: Stefano stated brands are healthy but back half anticipates a more cautious consumer due to tariffs, but brands are well-positioned for holidays. Steve explained guidance reflects considering U.S. consumer caution from tariffs, but brands continue to perform well internationally.

Q: John Kernan from TD Cowen asked about DTC and wholesale split, margin structure, and tariff impact carryover.

A: Steve said DTC expected to improve in Q3 and Q4 due to timing of wholesale expansion. John asked about margin guardrails; Steve noted tariff headwinds in back half and next year, but disciplined approach to manage.

Q: Adrienne Yih from Barclays asked about price actions and wholesale distribution balance.

A: Stefano said price actions on premium brands had no issues with strong sell-through. Steve explained wholesale expansion is strategic for long-term growth, not chasing short-term sales, and DTC will pick up as wholesale growth slows.

Q: Samuel Poser from Williams Trading asked about order books, UGG business peaks/valleys, and HOKA product evolution.

A: Stefano said order books for spring/summer '26 are healthy. He discussed UGG's deeper valleys and higher peaks due to U.S. consumer uncertainty. Stefano mentioned HOKA's focus on performance run, trail, hike, fitness, lifestyle, and upcoming product transitions.

Q: Jonathan Komp from Baird asked about HOKA product launch plans, margin, and growth buckets.

A: Stefano outlined HOKA's growth in 5 key areas: performance run, trail, hike, fitness, lifestyle. Steve explained back half margin impacted by tariffs, and margin change driven by tariffs with promotion considerations.

Q: Jay Sole from UBS asked about HOKA product transition in 2025 and guidance framing.

A: Steve said HOKA's performance in tariff-imposed world is positive, showing consumer response. Stefano noted 2025 is a transition year with learnings from product launches.