Q2 2024 Deckers Outdoor Corp Earnings Call
[music].
Good afternoon, and thank you for standing by welcome to the Deckers brands second quarter fiscal 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. Following the presentation. We will conduct a question and answer session instructions will be provided at that time for you to queue up.
For questions. If anyone has any difficulties hearing the conference call. Please press star zero for operator assistance at any time I would like to remind everyone that this conference call is being recorded I'll now turn the call over to Erinn, Kohler, Vice President Investor Relations and corporate planning.
Hello, and thank you everyone for joining us today on the call is Dave powers, President and Chief Executive Officer, and Steve Fasching, Chief Financial Officer before we begin I would like to remind everyone of the Companys Safe Harbor policy. Please note that certain statements made on this call are forward looking statements within the meaning of the federal securities laws, which are.
Subject to considerable risk and uncertainty.
These forward looking statements are intended to qualify for the safe Harbor from liability established by the private Securities Litigation Reform Act of 1095.
All statements made on this call today other than statements of historical fact are forward looking statements and include statements regarding our current and long term strategic objectives changes in consumer behavior strength of our brands demand for our products product distribution strategies marketing plans and strategies disruptions to our supply chain and.
Sticks are anticipated revenues brand performance product mix margin expenses inventory levels and promotional activity and the impact of the macroeconomic environment on our operations and performance, including fluctuations in foreign currency exchange rates.
Forward looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made.
<unk> looking statements involve numerous known and unknown risks uncertainties and other factors that may cause our actual results to differ materially from any results predicted assumed or implied by the forward looking statements.
The company has explained some of these risks and uncertainties in its SEC filings, including in the risk factors section of its annual report on Form 10-K, and quarterly reports on Form 10-Q, except as required by law or the listing rules of the New York Stock Exchange the company expressly disclaims any intent or obligation to update any forward looking.
<unk>.
On this call management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency.
In addition, the company reports comparable direct to consumer sales on a constant currency basis for operations that were opened throughout the current and prior reporting periods.
The company believes that these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results.
With that I'll now turn it over to Dave.
Thanks, Darren good afternoon, everybody and thank you for joining today's call. It's great to be here with you today to discuss our exceptional second quarter, where our two.
Two marquee brands experienced high levels of full price consumer demand, leading to revenue increasing 25% versus last year eclipsing $1 billion for the first time in our September ending quarter gross margin, improving 520 basis points versus last year and diluted earnings per share increasing nearly 80%.
Versus last year to $6 82.
Our direct to consumer business was the fastest growing component of revenue growth in the second quarter, increasing nearly 40% versus last year with <unk> growing 46% and <unk>, increasing 38% as both brands experienced a greater than 30% global increase in consumer acquisition.
Our global wholesale business also put up strong revenue growth in the second quarter, increasing 19% versus last year again, driven by our two largest brands ogan hooker.
Our wholesale accounts also continued to see incredible heat and momentum for our key styles across both brands.
With this strong consumer demand selling for wholesale in the quarter included some accelerated fall seasonal shipments benefiting our first half results and increasing our confidence to achieve our outlook for the fiscal year.
As we continue to focus on our strategic marketplace management. We are pleased to have captured the strong momentum of demand early in the year, particularly with these products capturing high levels of full price selling across all channels.
As we focus on delivering the full year I think it's important to reflect on our year to date performance. We closed out a record first half for Deckers with total portfolio revenue across all channels growing 19% versus last year drew.
Driven by HOKA revenue, increasing 27% from global strength across its ecosystem of access points.
Revenue, increasing 18% primarily from gains across international regions and global DTC.
Total portfolio global DDC acquisition, and retention, increasing 29% and 27% respectively.
And international revenue across all brands, increasing 23% versus last year, while Steve will provide further details on our financial performance and related increased outlook later in the call I'd like to emphasize how proud. We are of the continued alignment of our strong near term performance with Deckers long term objectives to build hygge into a multi.
Billion performance brand grow <unk> through direct to consumer connections with elevated product and experiences expand DTC through consumer acquisition and retention gains and drive international growth through targeted investments with that let's get into the highlights of our successful first half starting with HOKA global revenue in the first.
Have increased 27% versus last year. This impressive result reflects the HOKA brand successful marketplace management execution, which is driving more business to DTC in conjunction with market share gains from high full price sell through at our existing points of wholesale distribution.
<unk> revenue growth in the first half was led by direct to consumer which increased 54% versus last year and represented 38% of revenue up from 31% in the prior year. This was aided by global increases in brand awareness. According to Deckers proprietary brand tracker study consumer acquisition, which is up 47%.
Versus last year, and consumer retention, which is up 52% versus the prior year.
<unk> experienced significant growth in awareness across all major markets with.
With the U S growing to approximately 30% in international regions on average rising to mid teens with much more room to grow.
Specific to our gains in DTC in the first half consumer acquisition in EMEA DTC nearly doubled to help achieve a 75% year over year increase in channel revenue for the region.
This represents great progress for our EMEA region and their DTC remains a relatively small percentage of its total revenue. We see this expansion is a positive indicator that hygge is increasingly resonating with the European consumer as.
As we have demonstrated in the U S. Thoughtfully building brand awareness through marketing Activations and strategic marketplace presence serves as a catalyst to DTC acceleration as the brand begins to take hold with the local consumer.
To that end Hooker recently opened its first European flagship store in Covent Garden in London, giving the brand a powerful presence in one of the most influential footwear markets around the world.
In the U S. Hooker continues to deliver exceptional growth DTC revenue increased nearly 50% versus last year for the first half with strong growth among 18 to 34 year old retained consumers, which increased to 70%.
We believe some of this demand was fueled by hooker, having increased residents in the back to school timeframe with college age students.
Brand loyalty among this group is especially exciting given the increased potential lifetime value of repeat purchases.
The hook and marketing teams have done an exceptional job building global brand awareness through compelling fly human flight campaign content connecting with consumers at Hooker sponsored events and.
In highlighting the incredible performances of Hooker athletes.
We continue to sponsor a key running events around the globe as part of our commitment to support the sport and provide a platform to showcase our innovative performance products. This includes events from five case to elite ultra marathons for all types of athletes around the world, allowing us to elevate the brand with pinnacle performance minded consumers and also to broaden.
Worldwide awareness of the achievements capable and hooker products.
This year's Hocus sponsored <unk> or Ultra Trail Montblanc World series finals held in Chamonix, France is the perfect example of our team's 360 degree collaborative approach to building <unk> brand awareness and performance credibility. This trail running event allows us to celebrate the roots of poker, which was born in the French Alps.
Further connecting their brand with European consumers at the <unk> World series finals. The Hooker team set up a base camp that offered consumers the opportunity to engage with the brand and a unique way through athlete meet and greets 24 hour product testing and shoe personalization, we received overwhelmingly positive feed.
Back on the experience and are already looking forward to leveraging these learnings at future events hook.
<unk> made its mark on the event, both from a product and athlete performance standpoint, with several impressive achievements, including HOKA athlete, Jim Walmsley, making history, becoming the first American man to win the dossier of <unk> of 106 mile race that included more than six miles of elevation gain completing the course and a record.
Time of less than 20 hours <unk>.
<unk> ranking tops among all brands with the most top five finishes across the series of three races, and hooker remaining the number one brand worn by <unk> participants.
From a product standpoint, first half hooker growth was driven by a variety of categories and styles, which includes among others. The Clifton franchise, which benefited from the ninth edition launch as well as new successful lifestyle versions with Sweet uppers.
Stability Staples like there you Rohit and Gab Yoda franchises, the latter of which launched its fifth edition during the second quarter. As we are seeing increased adoption of this category from consumers trailing hike favorites, the challenger and a cap of franchises benefiting from new innovations incorporated in recent updates speed choose highlighted by the rock.
Ex refresh and the all new Mark X and new lifestyle options, including the popular solar Maher and transport styles.
We remain encouraged by the breadth of category adoption across the innovative hooker product assortment, which continues to evolve and attract new consumers to the brand.
We are implementing greater segmentation across the ecosystem of polka access points to ensure our accounts are best positioned to serve their respective consumers and emphasize DTC is the pinnacle destination to experience the full depth of the brand's product offering for the balance of the year. The hooker team remains focused on executing its marketplace management.
Strategy, which includes a focus on building global brand awareness and heat to increased demand, which is helping to drive high full price sell through of DTC and across wholesale, allowing the brand to deliver healthy growth with best in class margins and inventory turns.
Complemented by several new innovative product launches coming up in our fourth quarter, we expect <unk> to continue delivering strong results for the remainder of this fiscal year and well beyond.
Now shifting to <unk> global revenue in the first half increased 18% versus last year. The brand's strong first half performance was driven primarily by high levels of brand heat disciplined marketplace management, leading to product scarcity on key styles exiting last fall and intentional pull forward of the brand's fall marketing campaign.
Pain relative to past years.
We currently have the most cohesive globally aligned product marketing and consumer targeting strategy I've ever seen for <unk>.
Marketplace management has been a core strength of the UGG brand for some time now the allocation and segmentation of core and popular new styles continues to serve the brand well, helping drive high levels of full price sell through.
Last year, we shared that we did not fully captured demand on several key styles as we began this fiscal year we.
We strategically developed targeted inventory that caters to the brand's most popular products and seeded the fall marketing campaign feels like hug in July as opposed to the typical September timeframe.
From July 15th two August 15th we started groundswell of influence or public service announcements reminding consumers to buy <unk> now.
Videos using hashtag <unk> received over 25 million views during that timeframe and XR twice the level of engagement on Instagram as compared to last year.
We believe the UGG team strategic marketing shift served as a catalyst for earlier fall consumer demand globally in.
In the U S. Specifically this shift helped fueled greater back to school demand with search interest increasing 46% versus last year. According to Google trends.
To keep this momentum going at the tail end of September Agg celebrated the official kickoff of hash tag <unk> season with music Superstar Cardi B Who's video announcement, featuring the new classic Dipper had nearly 20 million views.
This resulted in significant press and media coverage of our launch with influential publications, such as Billboards and Vogue featuring <unk>.
Brand heat created by the UGG team directly translated to incredible first half results, particularly from the global DTC business in international regions, which both experienced a revenue increase of above 25% versus last year.
Furthermore, our gross margins benefited from transitional and fall product selling at full price during the second quarter.
This dynamic is in contrast, with prior years with the brand's DTC business has historically been more weighted towards end of spring and summer products that generally carry a lower average selling price.
The Tasman franchise, including the Taz platform as well as the classic mini and ultra many franchises have been the focal products of search interest and revenue growth in the first half as expected.
We are also excited that some of the new fall franchises are beginning to resonate with consumers as well.
<unk> the aforementioned classic Dipper Ah Kee globally marketed style.
The all gender hybrid whether collection, which includes modernized whether ready versions of the Tasman New mill.
And the low mill, a sneaker hybrid take on the original new mill.
<unk> is well positioned to capture consumer demand during the holiday season with great products like these.
<unk> the demand we've seen thus far we are already in chase mode for a select group of popular items and colors for which we are expediting production to ensure greater DTC inventory through the season.
The UGG brands first half growth sets us up well, especially when factoring the signals of a weakening global economy and lower consumer confidence given.
Given this dynamic we are glad to have captured some demand earlier to help reduce the pressure of competing with more promotional brands. During this upcoming holiday season, as we seek to continue selling premium AG products at full price.
Moving on to our discussion of consolidated channel performance global growth was across both direct to consumer and wholesale with DTC being the primary driver of revenue gains in the first half increasing 37% versus last year.
Our portfolio experienced DTC strength relative to last year across consumers with acquired and retained increasing 29% and 27% respectively.
Brands with Hogan revenue, increasing 54% and 26% respectively.
Regions with international and domestic revenue, increasing 48, and 34% respectively.
And channels as consumer demand was robust in stores and online. Additionally, we saw a double digit increase in average selling price as a result of a greater mix of HOKA.
Higher full price selling for <unk> combined with a focus on fewer proven skus.
And more favorable foreign currency exchange rates.
Regarding global wholesale revenue in the first half increased 11% versus last year.
Growth was driven by strength in UGG, and HOKA as well as across both our domestic and international regions.
Market share gains continue to be the primary avenue of wholesale growth for HOKA, which is now the top selling brand in U S run specialty stores in aggregate. According to third party market sources.
<unk> has also quickly become the top running brand with key strategic partners and applicable doors. Our teams are extremely proud of the hooker brands top market share achievement, which further validates the brand's performance rooted credibility.
<unk> sales performance in the first half is right in line with our strategy. This year with international regions fueling the majority of growth while the brand maintains its strong business in the U S.
With these first half results. It is clear that our marketplace management strategies are working well positioning our brands to excel during the holiday quarter and capture increased consumer demand across their respective ecosystems of access points.
Before I hand, it off to Steve to discuss our results in more detail.
Note that we also announced our plan to divest <unk> at Deckers were focused on the most effective allocation of our resources that are in alignment with long term objectives consumers have long valued sooner for its fun innovative and comfort first products over the coming months, we will work to find the right owner to support the brands next chapter while we.
To execute our growth priorities.
Thanks, everyone and now I'll hand, it over to Steve.
Thanks, Dave and good afternoon, everyone. We are excited by the strong performance HOKA continued to exhibit through the first half of fiscal year 2024 stemmed.
Stemming from our strategic marketplace management execution that continues to benefit our brands.
As Dave covered hooker drove another quarter of strong growth led by DTC, while <unk> demonstrated broad based growth across regions and channels by continuing to captivate consumers and elevated presence around the world are.
Our record second quarter revenue exemplifies the exceptional demand for our brands and we look forward to continuing this momentum as we enter our largest and most complex fiscal quarter.
While ongoing macroeconomic challenges persist we believe we are well positioned to navigate this dynamic marketplace with a strong financial framework and in demand brands. We remain committed to building the foundation for success that drives long term sustainable growth.
Now, let's get into the details of second quarter results.
Second quarter fiscal 2024 revenue was 1.092 billion.
Representing an increase of 25% versus the prior year on a constant currency basis revenue grew 24% versus last year.
Growth in the quarter was primarily driven by.
Strong demand experienced across the hooker, DTC channel, which increased 46% versus last year and.
And contributed to delivering total brand revenue of $424 million for the quarter and.
And broad based growth across regions and channels delivering $610 million of revenue with global DTC, increasing 38% and wholesale increasing 25%.
With the HOKA brand's performance consistent with our expectation the outsized growth in the second quarter benefited from first a higher level of wholesale shipments in Q2. This year that in the past couple of years were captured in the first quarter as transit times of reduced supply chain logistics have improved.
And availability of inventory as more consistent relative to during the pandemic.
Seeding the fall global <unk> campaign earlier in the quarter reminding consumers of the scarcity that took place in the prior year, which created brand heat and demand for those same popular styles that sold out quickly last year driving earlier consumer purchasing this year and third an increased level of demand for the brand during the <unk>.
Back to school period, which signaled some wholesalers to desire shipments on an accelerated timeframe relative to our original plan.
Gross margin for the second quarter was 53, 4% up 520 basis points from last year's 48, 2%.
Second quarter gross margin benefited from lower ocean freight rates favorable product mix, partially driven by earlier fall demand favorable full price mix favorable channel mix with DTC, continuing to grow faster than wholesale and a slight benefit from foreign currency exchange rates.
SG&A dollar spend in the second quarter was $358 million.
Up 22% versus last year's $294 million as we continue investing in key areas of the business.
As a percentage of revenue SG&A was 32, 8% versus 33 six in the prior year 80.
<unk> 80 basis points lower than last year.
This resulted primarily from the aforementioned timing considerations regarding earlier consumer demand and timing of certain spend.
Our tax rate was 23, 8%, which compares to 21, 2% for the prior year.
These results culminated in diluted earnings per share of $6 82 for the quarter, which is just over $3 above last year's $3 80.
Diluted earnings per share representing EPS growth of 17, 9%.
This increase in diluted earnings per share was approximately evenly split between gross margin benefits and higher revenue with a small benefit from a reduced share count resulting from the share repurchases made over the past year.
Turning to our balance sheet at September 32023, we ended September with $823 million of cash and equivalents.
Inventory was $726 million.
Down 21% versus the same point in time last year and during the period, we had no outstanding borrowings.
During the second quarter, we repurchased approximately $185 million worth of shares at an average price of $534 53.
As of September 32023, the company had approximately $1 1 billion remaining authorized for share repurchases.
Yes.
Any color what you're hearing from your retail partners in terms of some of the order order trends.
Yes, Great question I'm glad you asked that so to put a little bit color on how we're thinking about the launches in the second half of the year.
We're strategically pushing launches into the Q4 timeframe, that's when we really get into the beginning of the spring summer season, when running starts to kick in again traditionally the holiday season is kind of less exciting. So to speak is still a lot of volume to do but we want to make sure that we come out really powerfully at the beginning of <unk>.
Next year in our Q4 timeframe. It also allows us to stay out of the Fray of a promotional marketplace. In Q3, so we're anticipating that particularly in the athletic space, where there is.
A lot of situations, where it's over inventory with a lot of inventory in the channel and the slowdown of the marketplace. We feel we're better to stay above the fray so to speak I don't want to launch two of our major major innovation launches coming in Q4 in Q3, when Theres a lot of markdowns and promotions going on so the teams are.
Strategically decided to push those launches to Q4.
I can tell you the innovation that is coming out in two of our launches are incredibly exciting.
And then we'll address how the the oversized trends.
Our evolving for us and we're taking that very seriously, we don't want to lose that dominant.
Position in the category that we created there is a lot of activity, obviously from competitive brands going in that direction.
Some good some bad but the bottom line is we're not as differentiated as we were three or four years ago with that type of profile.
But our technology.
Our focus on materials and geometry.
Product testing new use of.
Plates.
Different foams different compounds et cetera continues to be at the forefront of everything we do and but we are addressing the fact that people may want a little bit of low profile. They want different uses for their product, we think theres, a tremendous opportunity and trail and heightened we're going to go heavily after that we have a dominant position in that already.
So it's top of mind for the teams I think Stefano as the interim president of the HOKA brand.
With the brand leadership team has done an exceptional job of fast tracking our innovation pipeline and we're excited to unveil some of those new concepts coming up in Q4, and I think John just to add on that.
This aligns with the strategy that we've laid out. So this is this is not a change as we've said the importance of controlling the marketplace product in the marketplace, maintaining full price selling continuing to build brand awareness aligns with our full year outlook and so we're continuing to operate on that with no change on that front as you can see.
By Q2 performance.
Seeing still good growth with the HOKA brand and really impressed with what we continue to deliver but we're going to be tight on marketplace management and thats, our strategy and Thats whats paying off yes, I think I think the theme here is really maintaining a healthy marketplace for the HOKA brand.
Listen Hoak as having an exceptional year you saw the results in the first half of the year.
On a on a promotion event or level we were.
Dominant at the <unk> event this year in Chamonix, France, our athlete won the race first American males.
Winter ever in that contest two weeks later, our athlete won the Iron Man Championship in nice France.
Actually just today it was announced by footwear news that <unk> is the brand of the year.
Youre seeing the increases in awareness and acquisition.
From our consumers our full price selling is exceptional.
Still no dominant in the run specialty channel.
Got tons of momentum here and we want to make sure that it doesn't get ahead of us and that we manage the marketplace effectively to continue to drive strength in DTC and I think the strategy that the teams have laid out and the cadence of.
Product.
Reductions in innovation is spot on so a lot of reasons to be excited but at the same time, we're not naive to the fact that this sector is having some challenges right now and in Q3 as people are talking about the fact that it may be really tough.
Havent quite seen that just yet but.
Again, it's a sector.
Economic issue that we're going to pay close attention to but we want to maintain scarcity in the marketplace full price sell through and keep this brand moving at a healthy pace.
That's very very helpful. Thank you and Steve if I could just ask one follow up on the financial guidance for the year, if I look at sort of the implied second half performance.
It looks like you're implying operating margins down maybe close to a couple of hundred basis points year over year, and EPS kind of flat to down slightly just could you help us make sense of that after.
The first half.
Such strong year over year growth rates on both of those thank.
Yes, I think it's a good question and yes as Youre looking at second half part of this is recognize that part of Q2 was benefiting from earlier sales of planned sales that we had in the second half of the year and so while we are raising our overall year is not the full.
<unk> beat of that what we've experienced in Q2, because some of those sales at this point in time appear to be timing we'll.
We will see how the marketplace plays out kind of in the back half but combined.
With some of the timing.
Back half sales moving into Q2, passing through what we think is a full year lift. It is taking some of the sales out of out of the back half a little bit but with the overall improvement in the year and as you know John I keep saying we're focused on the year not quarters, we are lifting our full year, we're lifting our full year.
<unk> gross margin, we're lifting our full year operating margin so.
Like Dave said, we're managing the business for the long run we're not managing the business on a quarter to quarter basis, we look at the full year. That's how we're guiding the full year and some of that outperformance in Q2 is allowing us to make these additional investments.
That makes sense. Thanks again.
Thank you.
The next question comes from Paul <unk> with Citi Research. Please go ahead.
Hey, Thanks, guys.
Talk about the Holdco DTC business, how that trended during the quarter and if there's any comments you can make about quarter to do normal so.
Did you have some unmet demand next year, you mentioned Youre in chase mode again.
Files.
Thinking about your ability to chase.
What are your assumptions for the second half.
On being able to fulfill that.
That demand.
Okay. Paul some of that was a little hard to harder here I'm going to.
I'll take my best shot Steve So on the <unk> DTC business strong very strong Q2.
Up 46% and we look at that factor.
The real true demand signal, we know there are going to be fluctuations with wholesale orders of when they flow.
And so we closely watch the DTC performance and having that up.
46% in Q2 is just another strong demonstration of how well hook is resonating with consumers so very encouraged by that.
I think as we've said and as Steve just articulated kind of how we're thinking about Q3 and back half managing the marketplace. We don't want to get into a promotional environment. We know there is a lot of competition out there thats over inventory, we're seeing a lot of promotion focus not in that space, we're not having to promote like other brands are and how we continue.
To build this brand forward.
And then build toward a bigger fourth quarter type increase on percentages terms as we have those new style insurance planned for Q4.
And then your other.
Secondly, my question was chasing do you want to say, yes, I'll talk about that one.
So I think one thing I think is important too.
Clarify it.
If you go back three or four years and you look at the UGG brand and what drove the business. It was really one or two styles that was all basically classic short mini.
Outside of classic we had varying degrees of success with other styles senior if you go back seven eight years. It was the Bailey bow and Bailey button, but we were more quite honestly have a one trick pony in those days the way the brand has evolved the assortment as we have now five to six top selling franchises. If you look at the tag.
Men, the Taz platform, the ultra and many of the ultra mini platform.
Some of the styles like the classic Dipper, Theres, a lot more assortment and variation and styles and heights and platforms et cetera.
<unk> from and the good news is that they are all resonating very well.
And we have good early reads on things like.
Weather styles.
New malware and the classic whether program and at the same time. The team has edited the line by about 30% versus prior year. So you have inventory that we can put.
Traditionally went into lower selling styles, we put that inventory into the top five to 10 styles. This year.
With an.
And help on and getting the team's focus and putting more emphasis behind behind these key styles from a marketing perspective, we've also been able to put more depth and those styles and inventory.
Now a couple of them, we are selling faster than expected due to the earlier demand, but the teams have reacted quickly.
We have the ability to chase some inventory not a ton, but I think.
Going into the back end of December it will be in good shape on some of these key styles.
So we feel like we have the inventory to do what we need to do it's not a bad thing to leave a little bit of demand on the table if thats the case and at the same time, we have a very exciting launch with weather extreme.
Extreme collection coming in which is.
A new category of focus for us going forward. So I think we're in pretty good shape that we have the inventory in the right styles, which we didn't last year and I think the teams have done a great job of adjusting and cleaning up the assortment and putting more power across the five to 10 styles that are really driving the growth.
And I think Paul I'll, just add to that one of the things with the strength that we've seen in Q2 on some of the styles that have been very popular and we're selling down the inventory, we're looking to expedite some of that back in but there's a limit right and we won't necessarily be able to chase every sale nor would we want to chase every sale. So we will see how thing.
Play out, but we're set up very well it is the driver of our full year increase.
So we're very encouraged going into the back half of the year.
Thanks, guys. Good luck.
Thank you.
Yes.
Okay.
The next question comes from Sam Poser of Williams trading. Please go ahead.
Thank you for taking my question guys.
First of all.
And you've got most of it.
Teva snuck in other for my normal question.
And then I.
I have a whole bunch of questions.
Hi, Sam sure I'll start off with that so for the second quarter.
For global wholesale and distributor.
Some of this I think you can pull out of what we said but.
$452 million.
I look at $263 million.
12 million.
Three three and that leaves you with other it just about $30 million.
Yes.
Okay.
Alright, so just get this out of the way with <unk> and that Youre going to are you are you going to take that as a discontinued operation.
The balance of the year or how should we think about that.
No guidance and so on.
Yeah. So no we're not looking to break that to discontinued operations. So we will continue to report it as we seek to find a buyer. So thats the current plan yes.
Okay and then what.
With the.
The way this is flowing in the back half.
Yes.
Yes.
Was there a lot of pull forward in the wholesale business I mean should we expect wholesale, especially in the acute in the third quarter to be down given how much how much came in in Q in.
In Q2.
Yes, so again, depending on your model because we haven't guided the quarter, so but yes, what we're basically saying is there is a portion of wholesale orders that occurred in Q2 that you may have planned for in Q3 and that is.
What's leading to the increase in the UGG performance. So again, we haven't given quarterly guidance I don't know exactly how you had it broken out, but yes, I think safe to say.
The increase in that we've seen in Q2 is wholesale orders that were moved forward into Q2, yes.
Yeah, and I think what is.
To be determined is how much of the upside and we captured in Q2 was just earlier demand or brand heat that will continue through Q3, and so either way I think we're positioned well.
Depending on how the market moves but.
At this point.
<unk> seen strong and healthy and we think it should continue but as we said we're heading into an unknown macro environment that.
Hard to say, what it's going to look like but we're optimistic that some of that demand was brand heat that will continue through Q3.
So and then and then okay and then on <unk>.
Same kind of question given that Youre moving a big launch.
Moving a big launch away or moving launches out is that mean that the wholesale business in.
In Q3.
Would look more like Q2, and then from a.
Maybe as a percentage, but then accelerate into Q4, and then but there's no real reason for DTC.
It appears to.
To slow down very much I mean, thats good momentum on new products, you've launched a lot of new products in the last few weeks of notice.
Yes, so Sam.
A good question and there is kind of different ways to look at it so.
I think.
Said.
And David said, we haven't changed the way we're looking at <unk> for the year. So I think that's most important.
Remember the underlying fundamentals of that is a very controlled wholesale marketplace right and so as we think about Q3 as Dave talked about we are controlling wholesale in that period, because we want the market to be seen as we're launching some new products in Q4.
So I think thats an important underlying the other than is remember we had very large DTC comps a year ago. So when you're looking at some of those are DTC comps last year Q3 was 100 and I think seven I think Q4 was like 97%. So we're coming off of <unk>.
Very big growth quarters, a year ago. So that's the other thing to consider as we're talking about this so there is growth then the other thing I think to take into account is what we've said about full year growth. So as we've said full year growth. Our first half has exceeded that average full year growth guidance.
Which means by definition the second half is going to be a little bit lower because we're controlling again that wholesale component of the marketplace. This is part of our strategy now as we talk and some of our partners have discussed there will be some wholesale expansion at the end of our Q4 right. So that wont necessarily get captured in our bag.
Half, but it's a setup for next year. So again everything is playing out like we said.
The brand continues to perform very well and I think there are some dynamics that are in there that are important to understand but most importantly, the brand continues to perform very well.
And the last thing I would add to that is last year. We were opening new doors in Q3. So there was some door expansion and so thats fed up quantities led to some of the growth in those doors. This year, we're still maintaining a net neutral through Q3 on door growth so and.
So comping that door growth last year could have a little bit of an impact on the wholesale performance too.
Got you and then lastly, Dave you've been now how long it deckers.
A little over 11 years.
Does that mean, you've had a long relationship with Sam.
Does that make you be elder statesman does that make you know elder statesmen.
No.
So you already described in that collaboration.
Yeah.
Yeah.
No I was excited to see it but I don't want to take credit for that was and in the team.
Alright.
Thanks very much.
Alright, Thanks, Tim.
The next question comes from Laurent <unk> of BNP part of US. Please go ahead.
Good afternoon. Thank you very much for taking my question and congrats on such solid results I want.
Ask about hope Steve I think you mentioned that international grew 44% in the quarter.
If that's the case, maybe can you just give a little bit of color just what you saw by region.
Driving that growth that you mentioned a little bit about Europe.
How did you how did you see the growth between the wholesale and DTC was there a spread between that internationally.
And maybe Steve I don't know if you can maybe give us some guardrails as to how just how youre thinking about international wholesale growth.
For for the year.
Okay.
Yes, so we can validate that number I don't know that it was exactly a 44%, but the bottom line is that we are very excited about the growth that we experienced internationally I know that's been a focus of ours for across all of our brands.
International teams are doing a tremendous job of creating.
Brand heat in that marketplace, and then also managing the marketplace effectively across DTC and wholesale.
Real strength of the growth that we saw in Q2 was really DTC led.
Typically in Europe exceptional results now smaller percent of our total business, but we.
We think that speaks to the health of the brand and the demand for that consumer as we're investing in more marketing in the region.
The events, such as we mentioned <unk> and the Iron Man were held in Europe. So there's a lot of buzz around the brand there.
And we're just getting better at managing that brand from a DTC perspective investing in that team and the capabilities over there. So really the growth is being driven primarily by the DTC channel.
Wholesale is still strong, but as we said in the U S. We're managing that tightly.
To create the excitement and the awareness, but still really ultimately drive the business to DTC and that's the formula were going to continue.
To lean on going forward.
What was the other question there was a third question here Steve there so.
I think the number you quoted was total company international DTC growth.
We didnt.
Provide the polka component so the total 44% I think that you quoted.
Was total company.
International DTC growth I think then just to your question on Hooker to me was a little bit about how do we see <unk> internationally expansion for the year.
I think what we see the trends that we're seeing are similar to what we saw in North America, probably a year or two ago right. So how we're seen hocus show up.
And the run community and then beyond the run community is similar but further behind and so this bigger expansion or faster growth in percentage terms is another indication that that seems to be the case that we're seeing the HOKA brand resonate with consumers kind of starts with runners run community and begins to.
Build out as awareness grows very similar trend to what we've seen in North America. So in that international Arena, we're little bit behind where we were still very early innings for both domestic and international but a little bit earlier on internationally and Thats why were seeing those growth percentages hi.
Total company, but you can extrapolate that to the HOKA brand as well.
The new stores opened in Covent Garden in London is off to a great start and we're seeing that that formula play out which is the mix of performance and everyday runners and lifestyle driving our results. There are a lot of tourists experienced the brand for the first time in <unk>.
Our stores, our own stores and our partner stores in China continue to perform well also.
That's great to hear that thank you for that and then Dave I think last quarter. During the Q&A you alluded to the launch of the new brands that might be small, but maybe just can you give us an update where that stands.
With the potential divestiture does that give you capacity.
Bandwidth time.
Resources to potentially.
Pursue M&A at the same time, it's launching new brands.
Yes, there are really two separate events, it's not that the nook was holding us back from.
Building and launching a new brand. So we look at these separately is just fine tuning our model just to speak to the <unk> decision for a second.
I'm really proud of how the teams have managed this brand over the last few years from a marketplace management standpoint and.
And the product right now is very very strong, but what we realized is that the journey to scale that brand. So that it's meaningful in our portfolio is just too long if there's other things that we think we can invest in and we think that this is a brand that the consumers love it deserves a good home and somebody who can.
Is the priority for them versus.
Our fourth or fifth brand in our portfolio. So it's tough decision emotionally and financially, but I think it's the best thing for the company and the brand to do this.
With regards to the new brand we are working on.
I don't want to give away too much to our competition, but we're excited we're going to be taking.
Taking the best of HOKA, and Doug and all the learnings we have from those two brands and creating what we're calling a super sneaker brand.
Across various categories we have.
The distribution channels, we have the DDC network, we have a lot of leverage in the marketplace and some really innovative exciting product.
It'll be a long haul, but we think this is a space that is emerging in that we want to make sure that we have.
Some skin in the sneaker game going forward beyond HOKA.
And then as far as M&A goes listen.
We have enough organic growth here in our portfolio for the next foreseeable future and years, we're always keeping our eyes on it and we've looked at a lot of opportunities in.
With regards to what it would do for our company financially and workload and disruption nothing.
Nothing has come across our desk that we're excited about yet but.
It's always a top of mind for us and we're continuing to look but we think.
Listen we have Teva that has opportunity down the road and we think we can create a new brand and launch that and see if we can make some.
Getting inroads with both those brands, while we focus on a real efforts and attention on <unk>.
Very helpful. Thank you very much for taking the questions.
Thank you.
Our last question today comes from comes from Janine Stichter from BTG. Please go ahead.
Hi, Congrats on the great quarter and thanks for fitting me in question on OCA wanted to hear more about what youre seeing at some of the more recent doors that you've been in over the last years foot locker decks I think you've recently tested J D. Just curious what the sell throughs look like there and if you have any thoughts on the type of consumer you're getting if it's helping you kind of Brian.
The aperture.
Okay, and then on just love to hear a bit more about international I think you talked quite a bit about international shouldn't that help that but just love to hear more about what youre seeing there with Argonne. If momentum is similar first of all what youre seeing in the U S. Thank you.
Yes. Good question, so hooker door performance, new doors that we have opened up are performing very very well I was talking to Stefano who is overseeing that brand right.
Right now.
<unk> new doors that we've opened over the last year in new accounts, all performing very well high a high level of full price sales strong turns.
Stealing market share run specialty stores, where you have a number one position there that we're fighting every day to maintain and we want to build out in that position, but new doors in foot locker, and Dick's and JD et cetera.
They want more so that's a good sign in the way that were performing those doors.
Is it right in line with what we had hoped would happen.
But we're managing it tightly as we have been doing so that we maintain full price selling and healthy turns and gross margins for our partners.
It's a good question on the type of consumer foot locker as as.
An example was a strategic play not just from a volume player, but also strategic to reach a younger lifestyle consumer both male and female and we're seeing that happen I think.
Some of the success in Q2 was probably back to school business that we hadn't really realized before and with our focus on 18 to 34 year old consumers and in college athletes, we're seeing that pay off and so it's exciting to see.
High School.
Fleets and.
College athletes and beyond gravitating to our brand going to those doors looking for the brand.
And the choice of HOKA over traditional Nike Dunker Air Force one.
That's super exciting, we're going to keep a close eye on that because we don't want that to be a big Spike and then go away. So we need to manage that tightly in the lifestyle teams are all over that and working with our accounts to make sure that it's a healthy business for the long term.
And then I'll get international similar to what Steve was saying in HOKA August in international particularly in Europe.
Is that the point, where Agua is a couple of years ago really healthy strong growth. They have been working hard on local marketing activations and leveraging PR in the region and the new product is resonating extremely well across the board, but particularly with younger consumers there and it's really exciting to see.
We haven't been in this position in Europe.
Quite some time, but the momentum is real the brand heat is improving.
The level of acquisition and consideration for our consumers are all heading in the right direction. So we.
We think this is an opportunity to build on this particularly in the UK and Germany are two biggest markets.
We're going to continue to play this playbook out and get more aggressive with marketing activations in the region.
Great. Thanks, so much best of luck.
Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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