Q1 2025 Deckers Outdoor Corp Earnings Call

July 25, 2024

Unknown Executive: Good afternoon, and thank you for standing by. Welcome to the Deckers-Brandt First Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Speaker Change: Good afternoon and thank you for standing by. Welcome to the Deckers-Brandt First Quarter Fiscal 2025 Earnings Conference Call.

Unknown Executive: 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 will now turn the call over to Erinn Kohler, Vice President, Investor Relations and Corporate Planning. Hello, and thank you everyone for joining us today.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: 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.

Speaker Change: If anyone has any difficulties hearing the conference call, please press star zero for operator assistance at any time.

Speaker Change: I would like to remind everyone that this conference call is being recorded. I will now turn the call over to Erinn Kohler, Vice President, Investor Relations and Corporate Planning.

Erinn Kohler: On the call is Dave Powers, President and Chief Executive Officer, Steve Fasching, Chief Financial Officer, and Stefano Caroti, our Chief Commercial Officer and incoming CEO. Before we begin, I would like to remind everyone of the company's 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 risks and uncertainties. These four forward-looking statements are intended to qualify for the Safe Harbor from Liability established by the Private Securities Litigation Reform Act of 1995.

Erinn Kohler: Hello and thank you everyone for joining us today. On the call is Dave Powers, President and Chief Executive Officer, Steve Fasching, Chief Financial Officer, and Stefano Caroti, our Chief Commercial Officer and incoming CEO . Before we begin, I would like to remind everyone of the company's safe harbor policy.

Erinn Kohler: 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, capital allocation, anticipated impact from our brand and marketplace management strategy, and changes in consumer behavior. Strength and Performance of our Brand. Demand for our products, product and channel distribution strategies, including Marketing Plans and Strategies. Disruptions to Our Supply Chain and Logistics, Our Anticipated Revenues, Product Mix, Margins, Expenses, Inventory Levels, and Promotional Activities. The impacts of the macroeconomic environment on our operations and performance, including fluctuations in foreign currency exchanges.

Erinn Kohler: 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 risks and uncertainties.

Erinn Kohler: These four looking statements are intended to qualify for the Safe Harbor from Liability established by the Private Securities Litigation Reform Act of 1995.

Erinn Kohler: Strength and Performance of our Brands, Demand for our Products, Product and Channel Distribution Strategies, including DTC,

Erinn Kohler: Marketing Plans and Strategies, Disruptions to Our Supply Chain and Logistics, Our Anticipated Revenues, Product Mix, Margins, Expenses, Inventory Levels, and Promotional Activity.

Erinn Kohler: The impacts of the macroeconomic environment on our operations and performance, including fluctuations in foreign currency exchange rates, our ability to achieve our financial outlook, and the expected timing and impact of the planned leadership transition.

Erinn Kohler: Our ability to achieve our financial outlook and the expected timing and impact of the planned leadership training. Four forward-looking statements made on this call represent management's current expectations and are based on the information available at the time such statements are made. Forward-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 statement.

Erinn Kohler: Four looking statements made on this call represent management's current expectations and are based on the information available at the time such statements are made.

Erinn Kohler: Forward-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.

Erinn Kohler: The company has explained some of these risks and uncertainties in its SEC filings, including in the risk factor section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Unless 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 statement. 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 open 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.

Erinn Kohler: Accept 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 statements.

Erinn Kohler: 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.

Erinn Kohler: In addition, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open throughout the current and prior reporting periods.

Erinn Kohler: 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.

Erinn Kohler: With that, I'll now turn it over to Dave.

Erinn Kohler: With that, I'll now turn it over to Dave. Thanks, Erin. Good afternoon, everyone, and thank you for joining us.

David Powers: I'm glad to be here today to discuss our strong start to fiscal year 2025. With this being my final call before I pass the torch to Stefano at the end of the month, I am confident that the Deckers team has laid the groundwork to deliver another year of excellent results as they build for the future of this amazing company. Specifically, Decker's first quarter performance is highlighted by revenue growing 22% versus last year to $825 million, gross margin improving to 56.9%, and Diluted Earnings Per Share increasing 87% versus last year to $4.52.

Dave: Thanks, Erin. Good afternoon, everyone, and thank you for joining us.

Dave: I am glad to be here today to discuss our strong start to fiscal year 2025. With this being my final call before I pass the torch to Stefano, at the end of the month, I am confident that the Deckers team has laid the groundwork to deliver another year of excellent results as they build for the future of this amazing company.

Dave: Specifically, Decker's first quarter performance is highlighted by revenue growing 22% versus last year to $825 million, gross margin improving to 56.9%.

Dave: and Diluted Earnings Per Share increasing 87% versus last year to $4.52.

David Powers: Importantly, this quarter's results were closely aligned with our objectives for fiscal year 2025, as HOCA was our main growth driver, increasing 30% versus last year to $545 million. UGG increased 14% versus last year as it continues to build year-round relevancy with consumers through iconic products.

Dave: Importantly, this quarter's results were closely aligned with our objectives for fiscal year 2025, as HOKA was our main growth driver, increasing 30% versus last year to $545 million.

Dave: UGG increased 14% versus last year as it continues to build year-round relevancy with consumers through iconic products.

David Powers: Both DDC and wholesale increased above 20% versus last year, as our brands captured healthy demand across the global marketplace, and International Regions increased 21% versus last year, led by robust DDC growth. These incredible results, which include some unique benefits specific to the first quarter, give us confidence that we can deliver the increased profitability reflected in our updated outlook for full fiscal year 2025. Steve will provide further details on our updated outlook later in the call, but first, I will share some of the brand highlights from our first quarter before turning it over to our Chief Commercial Officer and incoming CEO, Stefano Caroti, to review channel performance.

Dave: Both DDC and wholesale increased above 20% versus last year, as our brands captured healthy demand across the global marketplace, and international regions increased 21% versus last year, led by robust DDC growth.

Dave: These incredible results, which include some unique benefits specific to the first quarter, give us confidence that we can deliver the increased profitability reflected in our updated outlook for full fiscal year 2025.

Steve: Steve will provide further details on our updated outlook later in the call, but first, I will share some of the brand highlights from our first quarter before turning it over to our Chief Commercial Officer and incoming CEO , Stefano Caroti, to review channel performance.

David Powers: Starting with the brand highlights, global HOKA revenue in the first quarter increased 30% versus last year to a quarterly record of $545 million. Hoka Performance was driven by the brand's compelling product assortment, including new launches which experienced strong demand across the brand's global marketplace. More specifically, top styles like the Clifton and Bondi continue to experience healthy growth.

Speaker Change: Starting with the brand highlights, global HOKA revenue in the first quarter increased 30% versus last year to a quarterly record of $545 million. HOKA performance was driven by the brand's compelling product assortment, including new launches, which experienced strong demand across the brand's global marketplace.

Speaker Change: More specifically, top styles like the Clifton and Bondi continue to experience healthy growth.

David Powers: Emerging franchises like the Mach, Transport, and Kiwana drove outsized gains, and new styles like the SkywardX, Cielo X1, and SkyFlow brought incremental volume and attention to the brand through segmentation and greater innovation. Diving into our top styles, gateway products such as Clifton and Bondi remain the leading franchises for HOKU. The brand continues to build demand for these popular franchises through distribution segmentation as the introduction of model updates increasingly allows for differentiation of key partners to satisfy incremental demand and limited edition lifestyle treatments and collaborations that regularly sell out, offering unique versions of these hero styles. In terms of emerging HOKA franchises, I want to start by highlighting the Mach 6 launch, which has been a universal success.

Speaker Change: Emerging franchises like The Mock, Transport, and Kiwana drove outsized gains and new styles like the Skyward X, Cielo X1, and Skyflow brought incremental volume and attention to the brand through segmentation and greater innovation.

Speaker Change: Diving into our top styles, gateway products such as Clifton and Bondi remain the leading franchises for HOKA.

Speaker Change: The brand continues to build demand for these popular franchises through distribution segmentation as the introduction of model updates increasingly allow for differentiation of key partners to satisfy incremental demand.

Speaker Change: and limited edition lifestyle treatments and collaborations that regularly sell out, offering unique versions of these hero styles. In terms of emerging HOKA franchises, I want to start by highlighting the Mach 6 launch, which has been a universal success.

David Powers: This redesigned and upgraded Mach has experienced strong sell-through across the global marketplace, resulting in the Mach being a top five revenue style for HOKA in Q1. Thus far, we are encouraged by the consumer adoption of the mock, which is skewing younger and driving considerable acquisition in the U.S. and EMEA. We believe the expansive consumer demand we're seeing for the MARC is attributable to the fantastic work of the HOKA product and merchandising team, who designed the collection with color and branding variations that allow for greater differentiation across points of distribution.

Speaker Change: This redesigned and upgraded mock has experienced strong sell-through across the global marketplace, resulting in the mock being a top five revenue style for HOKA in Q1.

Speaker Change: Thus far, we are encouraged by the consumer adoption of the MOC, which is skewing younger and driving considerable acquisition in the U.S. and EMEA.

Speaker Change: We believe the expansive consumer demand we're seeing for the MARC is attributable to the fantastic work of the HOKA product and merchandising team who designed the collection with color and branding variations that allow for greater differentiation across points of distribution.

David Powers: Regarding Transport and Kiwana, we continue to see these styles perform well on our DDC channel and with our lifestyle athletic partners. Both styles saw explosive growth in the quarter, landing them in the Hoka brand's top 10 styles ranked by revenue. While the Transport and Kiwana were designed as a light hiker and fitness shoe, respectively, the consumer is increasingly adopting them for more casual and versatile wear. On the innovation front, the Hookah brand's most advanced performance leading styles, the Cielo X1 and Skyward X, have far outperformed our expectations. These groundbreaking styles were featured as part of the HOKA Fly Lab experience, which was celebrated at worldwide events such as the Boston Marathon, Big Sur International Marathon, Hackney Half Marathon in London, and the Tokyo Marathon.

Speaker Change: Regarding Transport and Kiwana, we continue to see these styles perform well on our DDC channel and with our Lifestyle Athletic Partners.

Speaker Change: Both styles saw explosive growth in the quarter, landing them in the Hoka brand's top 10 styles ranked by revenue. While the Transport and Kiwana were designed as a light hiker and fitness shoe, respectively, the consumer is increasingly adopting them for more casual and versatile wear.

Speaker Change: On the innovation front, the Hookah brand's most advanced, performance-leading styles, the Cielo X1 and Skyward X, have far outperformed our expectations.

Speaker Change: These groundbreaking styles were featured as part of the Hoka Fly Lab experience, which was celebrated at worldwide events such as the Boston Marathon, Big Sur International Marathon, Hackney Half Marathon in London, and the Tokyo Marathon.

David Powers: The Skyward X in particular has been a key focus of our marketing efforts, as it reinforces the HOKA brand's origins and leadership position and max cushion performance. The success of innovative styles like the Cielo and Skyward is critical to Hoka maintaining its performance roots and emboldens the product team to continue pushing the envelope of our technology. The Sky Flow, which only launched about 10 days ago, is also an all-new style focused on innovation, but at a much more commercial price point within the Hoka Brands product range. This exciting style combines premium SkywardX inspired geometry with upgraded foam compounds, creating an elevated experience for daily runs.

Speaker Change: The Skyward X, in particular, has been a key focus of our marketing efforts, as it reinforces the Hoka brand's origins and leadership position and max cushion performance.

Speaker Change: The success of innovative styles like the Cielo and Skyward is critical to Hoka maintaining its performance roots and emboldens the product team to continue pushing the envelope of our technologies.

Speaker Change: The Sky Flow, which only launched about 10 days ago, is also an all-new style focused on innovation, but at a much more commercial price point within the Hoka Brands product range.

Speaker Change: This exciting style, which combines premium Skyward X inspired geometry with upgraded foam compounds, creating an elevated experience for daily runs.

David Powers: As part of our segmentation efforts, the SkyFlow is developed as a co-exclusive for our DDC and our run specialty partners, continuing to elevate the Hoka brand's everyday performance lineup while differentiating its global market. We are receiving great feedback from consumers and our retail partners in the early days of this launch. The strength of performance across the Hoka product lineup is amplified by the continued evolution of the brand's global marketplace. During the first quarter, HOKA drove balanced growth across channels, with DDC revenue increasing 33% versus last year and wholesale revenue increasing 28% versus last year.

Speaker Change: As part of our segmentation efforts, the SkyFlow is developed as a co-exclusive for our DDC and our run specialty partners, continuing to elevate the Hoka brand's everyday performance lineup while differentiating its global marketplace.

Speaker Change: We are receiving great feedback from consumers and our retail partners in the early days of this launch.

Speaker Change: The strength of performance across the HOKA product lineup is amplified by the continued evolution of the brand's global marketplace.

Speaker Change: During the first quarter, HOCA drove balanced growth across channels, with DDC revenue increasing 33% versus last year, and wholesale revenue increasing 28% versus last year.

David Powers: From a DDC perspective, HOKA continues to experience global gains through consumer acquisition and retention, with particular strength among retained consumers in the first quarter. We believe this is a powerful reflection of HOKA consumer loyalty, reinforcing the long runway we see for this brand and the reason we are focused on building the HOKA brand's awareness while there remains significant opportunity. Part of our approach to building HOKA brand awareness is through expanded points of distribution with key partners.

Speaker Change: From a DDC perspective, HOKA continues to experience global gains through consumer acquisition and retention, with particular strength among retained consumers in the first quarter.

Speaker Change: We believe this is a powerful reflection of HOKA consumer loyalty, reinforcing the long runway we see for this brand and the reason we are focused on building the HOKA brand's awareness while there remains significant opportunity.

Speaker Change: Part of our approach to building HOKA brand awareness is through expanded points of distribution with key partners.

David Powers: During the quarter, we added strategic doors with select partners around the world, which contributed to HOKA wholesale growth in the quarter. We also continued adding shelf space and gaining market share as the brand refilled inventory in the channel and continued to see high levels of full-price sales. Outside of adding new distribution, HOKA is building awareness for its global marketing campaign. The latest chapter of the Hoka brand's Fly Human Fly campaign launched on July 1st with the new film Birdseye, which brings to life the brand's origin story and captures the exhilaration and joy of movement.

Speaker Change: During the quarter, we added strategic doors with select partners around the world, which contributed to hookah wholesale growth in the quarter. We also continued adding shelf space and gaining market share as the brand refilled inventory in the channel and continued to see high levels of full-price sell-through.

Speaker Change: Outside of adding new distribution, HOCA is building awareness to its global marketing campaign.

Speaker Change: The latest chapter of the Hoka brand's Fly Human Fly campaign launched on July 1st with the new film Birdseye, which brings to life the brand's origin story and captures the exhilaration and joy of movement.

David Powers: The film is the centerpiece of a 360-degree integrated brand campaign inclusive of connected TV, out-of-home content, social and earned media, and in-person community activations in key cities. All of the elements of the Fly Human Fly campaign are aimed at deepening connections with consumers, inspiring brand love, and introducing new consumers to HOKA around the world. We are really proud of this elevated campaign, and I hope you all check out the Birdseye film when you have a chance.

Speaker Change: The film is the centerpiece of a 360-degree integrated brand campaign inclusive of connected TV, out-of-home content, social and earned media, and in-person community activations in key cities.

Speaker Change: All of the elements of the Fly Human Fly campaign are aimed at deepening connections with consumers, inspiring brand love, and introducing new consumers to HOKA around the world. We are really proud of this elevated campaign, and I hope you all check out the Birdseye film when you have a chance.

David Powers: Overall, this quarter was an excellent start to the year for HOKA with healthy full price demand across global markets. The team is laser focused on executing the brand strategy to build global brand awareness and market share with an enhanced focus on international markets, expand DDCs for consumer acquisition and retention gains, and excite consumers with performance innovation. Shifting to UGG, global UGG revenue in the first quarter increased 14% versus last year to $223 million.

Speaker Change: Overall, this quarter was an excellent start to the year for HOKA, with healthy full-price demand across global markets.

Speaker Change: The team is laser focused on executing the brand strategy to build global brand awareness and market share with an enhanced focus on international markets, expand DDCs for consumer acquisition and retention gains, and excite consumers with performance innovations.

Speaker Change: Shifting to UGG, global UGG revenue in the first quarter increased 14% versus last year to $223 million.

David Powers: Performance in the quarter was driven by strong full-price selling of key iconic franchises with increased year-round momentum, increased adoption of the expanding Golden Collection, continued momentum in global DDC, and robust wholesale growth in the US, reflecting earlier demand. We are encouraged by consumer demand for UGG in the first quarter, as we believe it reflects continued progress in creating year-round excitement for the brand's versatile and seasonally relevant products. The UGG product team has done a fantastic job building products with purpose that is consumer informed, champions UGG brand codes, and has increased wearing occasions, allowing the brand to build and sustain demand over longer periods of time.

Speaker Change: Performance in the quarter was driven by strong full price selling of key iconic franchises with increased year-round momentum, increased adoption of the expanding Golden Collection, continued momentum in global DDC, and robust wholesale growth in the U.S. reflecting earlier demand.

Speaker Change: We are encouraged by the consumer demand for UGG in the first quarter, as we believe it reflects continued progress in creating year-round excitement for the brand's versatile and seasonally relevant product.

Speaker Change: The UGG product team has done a fantastic job building product with purpose that is consumer informed, champions UGG brand codes, and has increased wearing occasions, allowing the brand to build and sustain demand over longer periods of time.

David Powers: This is best evidenced by the continued year-round adoption of the Tazen franchise as well as the growth being driven by an expanding Golden collection. The UGG brand's ability to drive continued strong sales for the Tasman's franchise speaks to the power of its thoughtful management across the global marketplace, versatility of styling, and the marketing activations that preserve its relevance in the mind of our consumers. Specifically on the marketing front, UGG has collaborated with various brands and designers to create exclusive versions of Tasman franchise styles.

Speaker Change: This is best evidenced by the continued year-round adoption of the Tazen franchise, as well as the growth being driven by an expanding Golden collection.

Speaker Change: The UGG brand's ability to drive continued strong selling for the Tasman's franchise speaks to the power of its thoughtful management across the global marketplace, versatility of styling, and the marketing activations that preserve its relevance in the minds of our consumers.

Speaker Change: Specifically on the marketing front, UGG has collaborated with various brands and designers to create exclusive versions of Tasman franchise styles.

David Powers: During the first quarter, our upcoming Tasman collaboration with Chinese-born, London-based designer Feng Chen Wang was featured as part of her Spring-Summer 2025 collection unveiling at Paris Fashion Week. Her collection, and in particular, the Tasman Collaboration, was featured across influential fashion and cultural publications, including Vogue, Hypebeast, and Heisner Briery.

Speaker Change: During the first quarter, our upcoming Tasman collaboration with Chinese-born, London-based designer Feng Chen Wang was featured as part of her Spring-Summer 2025 collection unveiling at Paris Fashion Week.

Speaker Change: Her collection, and in particular, the Tasman Collaboration, was featured across influential fashion and cultural publications, including Vogue, Hypebeast, and Heissner Briery.

David Powers: The UG team's ability to maintain consumer interest through exciting marketing activations and collaborations is also benefiting newer franchises like the Golden Collection. The increasing consumer demand for this collection led to an expansion of silhouettes in the current year, which performed extremely well. Of the UGG brand's top 10 styles in the first quarter, ranked by revenue, four came from the Golden Collection, two of which were new to the brand this year. The Tasman franchise and Golden Collection were also key drivers of UGBrand's DDC success in the first quarter, which was equally strong in the U.S. and international regions.

Speaker Change: The young team's ability to maintain consumer interest through exciting marketing activations and collaborations is also benefiting newer franchises like the Golden Collection.

Speaker Change: The increasing consumer demand for this collection led to an expansion of silhouettes in the current year, which performed extremely well.

Speaker Change: Of the UGG brand's top ten styles in the first quarter, ranked by revenue, four came from the Golden Collection, two of which were new to the brand this year. The Tasman franchise and Golden Collection were also key drivers of the UGG brand's DDC success in the first quarter, which was equally strong in the U.S. and international regions.

David Powers: The UGG brand's more focused assortment of relevant franchises is driving the majority of consumer demand, which contributed to lower promotion as compared to prior first quarters, where the DDC business has historically been more influenced by end-of-season discounting on seasonal colors. While this dynamic is not expected to continue throughout fiscal year 2025, we do think it speaks to the strength of the brand and its ability to maintain year-round demand. UGG has exciting things ahead with the upcoming launch of its Feels Like UGG global marketing campaign, which features a dynamic group of creators who evoke the ethos of UGG. The Feels Like UGG campaign will come to life across the brand's global marketplace through social media, in-store events, and multi-sensory community activations that promote self-expression and a connected community.

Speaker Change: The UGG brand's more focused assortment of relevant franchises is driving the majority of consumer demand, which contributed to lower promotion as compared to prior first quarters, where the DDC business has historically been more influenced by end-of-season discounting on seasonal colors.

Speaker Change: While this dynamic is not expected to continue throughout FY 2025, we do think it speaks to the strength of the brand and its ability to maintain year-round demand.

Speaker Change: UGG has exciting things ahead with the upcoming launch of its Feels Like UGG global marketing campaign, which features a dynamic group of creators who evoke the ethos of UGG.

Speaker Change: The Feels Like UGG campaign will come to life across the brand's global marketplace through social media, in-store events, and multi-sensory community activations that promote self-expression and a connected community.

David Powers: The brand is on track to deliver another year of healthy growth with premium products and elevated experiences that enhance our consumer connection. Both UGG and HOCA are off to strong starts in fiscal year 2025 and are well positioned to continue capturing high levels of consumer demand for the remainder of this year and beyond. Before passing off to Steve, I want to give Stefano an opportunity to review Decker's excellent channel performance in the first quarter.

Speaker Change: The brand is on track to deliver another year of healthy growth with premium products and elevated experiences that enhance our consumer connections.

Speaker Change: Both UGG and HOCA are off to strong starts in fiscal year 2025 and are well positioned to continue capturing high levels of consumer demand for the remainder of this year and beyond.

Speaker Change: Before passing off to Steve, I want to give Stefano an opportunity to review Decker's excellent channel performance in the first quarter. As all of you know, Stefano will be becoming Decker's next CEO on August 1st.

David Powers: As all of you know, Stefano will be becoming Decker's next CEO on August 1st. I'm excited to welcome him today to speak on one of the areas he has been successfully leading for some time now in his current capacity as our Chief Commercial Officer.

Speaker Change: I'm excited to welcome him today to speak on one of the areas he has been successfully leading for some time now in his current capacity as our Chief Commercial Officer. Stefano?

Stefano Caroti: Thanks, Dave. It's great to be here with you all today and share Decker's channel highlights in the global marketplace. Before diving in, I want to thank Dave for his thoughtful, enlightening leadership over the last eight years, and in particular, the mentorship provided over the last six months. Dave has been an extremely valuable resource for me throughout the transition, and I'm thrilled to have the opportunity to lead Deckers on our continued exciting journey ahead.

Stefano: Thanks, Dave.

Stefano: It's great to be here with you all today and share Decker's channel highlights within the global marketplace.

Stefano: Before diving in, I want to thank Dave for his thoughtful, enlightening leadership over the last eight years, and in particular, the mentorship provided over the last six months.

Stefano: Dave has been an extremely valuable resource for me throughout the transition and I'm thrilled to have the opportunity to lead Deckers on our continued exciting journey ahead.

Stefano Caroti: Diving into channel performance in the quarter, our results continue to reflect Deckers' successful global marketplace management that has maintained a pole model of consumer demand, driving high levels of full price selling. This year, we signaled a much more balanced growth story between our DTC and wholesale channels, which was well executed in the first quarter. For the quarter, global DTC increased 24% versus last year on a reported basis and 22% on a comparable basis.

Stefano: Diving into channel performance in the quarter, our results continue to reflect Decker's successful global marketplace management that has maintained a pole model of consumer demand driving high levels of full price selling.

Stefano: This year, we signaled a much more balanced growth story between our DTC and wholesale channels, which was well executed in the first quarter.

Stefano: For the quarter, Global DTC increased 24% versus last year on a reported basis and 22% on a comparable basis.

Stefano Caroti: HOKA drove the majority of gains in the DTC channel, but we also saw positive contributions from the ag brand. From a regional standpoint, DTC growth was robust across international regions and within the U.S., which increased 31% and 21%, respectively. Among international regions, growth was most meaningful in China and EMEA, as both drove strong increases online and benefited from successful recent retail store openings. Regarding wholesale, global revenues increased 21% versus last year.

Stefano: Hoka drove the majority of gains in the DTC channel, but we also saw positive contributions from the ad brand.

Stefano: From a regional standpoint, DTC growth was robust across international regions and within the U.S., which increased 31% and 21% respectively.

Stefano: Among international regions, growth was most meaningful in China and EMEA, as both drove strong increases online and benefited from successful recent retail store openings.

Stefano: Regarding wholesale, global revenues increased 21% versus last year.

Stefano Caroti: Similar to DTC, HOKA drove the majority of the year-over-year volume gain, with similar strength in the U.S. and international. Our growth was particularly strong in the U.S., as the brand continues to see earlier demand from wholesale partners and benefited from favorable year-over-year comparisons. Growth across Hawkeye Nug was driven by full price business, as both brands delivered exceptional gross margins in the wholesale market. The health of our balanced business across the global marketplace reflects both the demand for our brands and our team's outstanding channel management.

Stefano: Similar to DTC, HOCA drove the majority of the year-over-year volume gains.

Stefano: with similar strength in the U.S. and international regions.

Stefano: Our growth was particularly strong in the U.S. as the brand continues to see earlier demand from wholesale partners and benefited from favorable year-over-year comparisons.

Stefano: Growth across Hawkeye Nug was driven by full price business as both brands delivered exceptional gross margins in the wholesale channel.

Stefano: The health of our balanced business across the global marketplace reflects both the demand for our brands and our team's outstanding channel management.

Stefano Caroti: Our brands are off to a great start in Fiscal 25, and I look forward to sharing more with you next quarter. With that, I'll hand over to Steve to provide further details on our first quarter financial results, as well as our updated financial outlook for Fiscal 25. Thanks, Stefano, and good afternoon, everyone.

Stefano: Our brands are off to a great start to Fiscal 25 and I look forward to sharing more with you next quarter.

Stefano: With that, I'll hand over to Steve to provide further details on our first quarter financial results, as well as our updated financial outlook for Fiscal 25.

Steven J. Fasching: Deckers delivered strong results in the first quarter and demonstrated great progress towards our full fiscal year guidance, leading to increased profitability within our outlook that I'll cover shortly. As Dave outlined, HOKA was the main driver of growth in the quarter, delivering healthy gains in both the DTC and wholesale channels as the brand continues to build global awareness and market share. UGG delivered a solid quarter as the brand continued to see global demand in the DTC channel and increased its full-price wholesale business in the U.S. As we continue to operate in a very dynamic consumer environment, we will remain nimble in our approach to managing the business for long-term sustainable growth and executing against our strategic priorities.

Steve: Thanks, Stefano, and good afternoon, everyone.

Steve: Deckers delivered strong results in the first quarter and demonstrated great progress towards our full fiscal year guidance, leading to increased profitability within our outlook that I'll cover shortly.

Steve: As Dave outlined, HOKA was the main driver of growth in the quarter, delivering healthy gains in both the DTC and wholesale channels as the brand continues to build global awareness and market share.

Steve: UGG delivered a solid quarter as the brand continued to see global demand in the DTC channel and increased its full-price wholesale business in the U.S.

Steve: As we continue to operate in a very dynamic consumer environment, we will remain nimble in our approach to managing the business for the long-term sustainable growth and executing against our strategic priorities.

Steven J. Fasching: Our portfolio of leading brands continues to resonate with consumers, which positions us well in the global market. With that, let's get into the details of our first quarter fiscal year 2025 results. Revenue was $825 million, up 22% versus the prior year. Growth was primarily driven by HOKA, as the brand increased 30% versus last year due to exceptional demand experienced across the brand's global marketplace. Additionally, in the quarter, UGG increased 14 percent, primarily through wholesale gains as the brand continues to replenish certain inventory in the market.

Steve: Our portfolio of leading brands continues to resonate with consumers, which positions us well in the global market price.

Steve: With that, let's get into the detail of our first quarter fiscal year 2025 results.

Steve: Revenue was $825 million, up 22% versus the prior year. Growth was primarily driven by HOKA, as the brand increased 30% versus last year, due to the exceptional demand experienced across the brand's global marketplace.

Steve: Additionally in the quarter, UGG increased 14% primarily through wholesale gains as the brand continues to refill certain inventory in the marketplace.

Steven J. Fasching: Gross margin for the quarter was 56.9%, which was up 560 basis points from last year's 51.3%. As compared to last year, first quarter gross margin primarily benefited from favorable brand and product mix, as both our highest margin brand, Hoka, as well as higher margin products within UGG and Hoka drove a larger proportion of growth. Higher levels of full-price selling, particularly with the UGG brand, which was more promotional in the prior year's first quarter, and lower freight rates recognized in this quarter, which are anticipated to be a headwind for the remainder of this year. SG&A dollar spend in the first quarter was $337 million, which is up 22% from last year's $276 million.

Steve: Gross margin for the quarter was 56.9%, which was up 560 basis points from last year's 51.3%.

Speaker Change: As compared to last year, first quarter gross margin primarily benefited from favorable brand and product mix, as both our highest margin brand HOKA, as well as higher margin products within UGG and HOKA, drove a larger proportion of growth.

Speaker Change: Higher levels of full price selling, particularly with the UGG brand, which was more promotional in the prior year first quarter, and lower freight rates recognized in this quarter, which are anticipated to be a headwind for the remainder of this year.

Speaker Change: SG&A dollar spend in the first quarter was $337 million, which is up 22% from last year's $276 million.

Steven J. Fasching: As a percentage of revenue, SG&A was 40.9% versus 40.8% in the prior year. SG&A dollar growth compared to last year was driven by investment in key areas of the business in support of our growth initiatives, which include higher marketing spend, primarily related to expanding global HOKA awareness, and investments in talent to support key functions within our growing organization. Our tax rate was 22.5%, which compares to 21.9% in the prior year.

Speaker Change: As a percentage of revenue, SG&A was 40.9% versus 40.8% in the prior year.

Speaker Change: SG&A dollar growth compared to last year was driven by investment in key areas of the business in support of our growth initiatives, which include higher marketing spend, primarily related to expanding global HOKA awareness,

Speaker Change: and investments in talent to support key functions within our growing organization.

Speaker Change: Our tax rate was 22.5%, which compares to 21.9% in the prior year.

Steven J. Fasching: These results, coupled with higher interest income and a lower share count as a result of our share repurchase program, drove diluted earnings per share of $4.52 for the quarter, which was $2.11 above last year's $2.41 per share, representing growth of 87%. Turning to our balance sheet, at June 30, 2024, we ended June with $1.44 billion of cash and equivalents. Inventory was $753 million, up 2% versus the same point in time last year, and we had no outstanding borrowing. During the first quarter, we repurchased approximately $152 million worth of shares at an average price of $858.79.

Speaker Change: These results, coupled with higher interest income and a lower share count as the result of our share repurchase program, drove diluted earnings per share of $4.52 for the quarter, which was $2.11 above last year's $2.41 per share, representing growth of 87%.

Speaker Change: Turning to our balance sheet, at June 30, 2024, we ended June with $1.44 billion of cash and equivalents.

Speaker Change: Inventory was $753 million, up 2% versus the same point in time last year, and we had no outstanding borrowings.

Speaker Change: During the first quarter, we repurchased approximately $152 million worth of shares at an average price of $858.79.

Speaker Change: As of June 30, 2024, the company had approximately $790 million remaining under its stock repurchase authorization.

Steven J. Fasching: As of June 30, 2024, the company had approximately $790 million remaining under its stock repurchase authorization. Now, moving into our updated outlook for fiscal year 2025, we still expect total company revenue to grow approximately 10% versus last year to $4.7 billion, inclusive of HOKA, which is still expected to grow approximately 20%, and UGG, which is still expected to grow in the mid-single-digit range. We are increasing our gross margin, which is now expected to be approximately 54%, up 50 basis points from our prior guidance based on the strength of our first quarter result, which included near-term benefits that are not expected to repeat for the remainder of the fiscal year.

Speaker Change: Now, moving into our updated outlook for fiscal year 2025.

Speaker Change: We still expect total company revenue to grow approximately 10% versus last year to 4.7 billion dollars inclusive of HOKA, which is still expected to grow approximately 20% and UGG, which is still expected to grow in the mid single-digit range.

Speaker Change: We are increasing our gross margin, which is now expected to be approximately 54%, up 50 basis points from our prior guidance based on the strength of our first quarter result, which included near-term benefits that are not expected to repeat for the remainder of the fiscal year.

Steven J. Fasching: As a reminder, our assumptions for the full fiscal year include a more normalized promotional environment with lower full-price selling relative to the exceptional levels delivered in fiscal year 2024 and higher freight costs incurred and still experiencing related to the inventory brought in that will be expensed in the remainder of the year. SG&A is now expected to be in the range of 34% to 34.5% as we remain committed to investing in our key growth initiatives. Operating margin is now expected to be in the range of 19.5% to 20%. Our effective tax rate is still projected to be in the range of 22% to 23%.

Speaker Change: As a reminder, our assumptions for the full fiscal year include a more normalized promotional environment with lower full-price selling relative to the exceptional levels delivered in fiscal year 2024, and higher freight costs.

Speaker Change: Incurred and still experiencing related to the inventory brought in that will be expensed in the remainder of the year.

Speaker Change: SG&A is now expected to be in the range of 34% to 34.5% as we remain committed to investing in our key growth initiatives.

Speaker Change: Operating margin is now expected to be in the range of 19.5% to 20%.

Speaker Change: Our effective tax rate is still projected to be in the range of 22% to 23%.

Steven J. Fasching: As a result of these changes, we are increasing our diluted earnings per share expectations to now be in the range of $29.75 to $30.65, representing a 65-cent increase on the high end. Please note, as mentioned in our release this afternoon, we have entered into an agreement to divest the Sanuk brand, which we expect to close in August 2024. As such, the ongoing Sanuk business has been removed from our forward-looking guidance. Furthermore, this guidance excludes any unforeseen charges that may be considered non-recurring to our ongoing business or any impact from future share repurchase.

Speaker Change: As a result of these changes, we are increasing our diluted earnings per share expectations to now be in the range of $29.75 to $30.65, representing a 65 cent increase on the high end.

Speaker Change: Please note, as mentioned in our release this afternoon, we have entered into an agreement to divest the Sanuk brand, which we expect to close in August 2024. As such, the ongoing Sanuk business has been removed from our forward-looking guidance.

Speaker Change: Further, this guidance excludes any unforeseen charges that may be considered non-recurring to our ongoing business or any impact from future share repurchases.

Steven J. Fasching: Additionally, our guidance assumes no meaningful deterioration of current risks and uncertainties, which include but are not limited to changes in consumer confidence and recessionary pressures, inflationary pressures, fluctuation in foreign currency exchange rates, supply chain disruptions, and geopolitical tensions. In addition, as most of you may have seen, our board recently approved a six-for-one forward stock split of our outstanding capital stock, which is pending stockholder approval at our 2024 annual meeting to be held on September 9th. The potential impact of the stock split is not reflected in our EPS guide.

Speaker Change: Additionally, our guidance assumes no meaningful deterioration of current risks and uncertainties, which include, but are not limited to, changes in consumer confidence and recessionary pressures, inflationary pressures,

Speaker Change: Fluctuation in Foreign Currency Exchange Rates, Supply Chain Disruptions, and Geopolitical Tensions.

Speaker Change: In addition, as most of you may have seen, our board recently approved a 6-for-1 forward stock split of our outstanding capital stock, which is pending stockholder approval at our 2024 annual meeting to be held on September 9th.

Speaker Change: The potential impact of the stock split is not reflected in our EPS guidance.

Steven J. Fasching: Looking ahead, we remain confident in our ability to deliver the increased full fiscal year guidance as our disciplined operating model, in-demand global brands, and robust financial profile position us well to adapt to evolving marketplace dynamics. Before I hand the call back to Dave for his last time, I want to express my genuine appreciation for him. It has been a privilege and a pleasure working together for the last 12 years, especially the last eight years with him as our CEO.

Speaker Change: Looking ahead, we remain confident in our ability to deliver the increased full fiscal year guidance as our disciplined operating model, in-demand global brands, and robust financial profile position us well to adapt to evolving marketplace dynamics.

Speaker Change: Before I hand the call back to Dave for his last time, I want to express my genuine appreciation for him. It has been a privilege and a pleasure working together for the last 12 years, especially the last eight years with him as our CEO .

Steven J. Fasching: I am proud of all we have achieved together, building Deckers into an industry-leading company with an exciting future ahead. Dave, I wish you all the best in your retirement, and I look forward to working with you as a member of our board. Thanks, everyone.

Dave: I am proud of all we have achieved together, building Deckers into an industry-leading company with an exciting future ahead.

Speaker Change: Dave, I wish you all the best in your retirement and I look forward to working with you as a member of our board.

David Powers: I'll now hand the call back to Dave for his final remarks. Thank you, Steve, for the kind words and Stefano for your kind remarks earlier. I appreciate all you continue to do for the Deckers organization. HOKA and UGG continue to excite and delight consumers with unique and innovative products that are driving increased demand.

Speaker Change: Thanks, everyone. I'll now hand the call back to Dave for his final remarks.

Dave: Thank you, Steve, for the kind words and Stefano for your kind remarks earlier. I appreciate all you continue to do for the Deckers organization.

Speaker Change: HOKA and UGG continue to excite and delight consumers with unique and innovative products that are driving increased demand. The momentum of these brands gives us confidence to achieve our updated guidance for the year.

David Powers: The momentum of these brands gives us confidence to achieve our updated guidance for the year. I believe Deckers is poised for long-term continued success. With the strength of these two powerful brands, a well-managed global marketplace, and a strong, aligned management team, a disciplined approach to financial management, and engaged employees who embrace a purpose-led culture. I am proud of the culture we have built within our organization and for Deckers being recognized externally as well, as one of U.S. News & World Report's 2024-2025 Best Companies to Work For and as one of Time Magazine's World's Most Sustainable Companies of 2024.

Speaker Change: I believe Deckers is poised for long-term continued success with the strength of these two powerful brands, a well-managed global marketplace, a focused and aligned management team, a disciplined approach to financial management, and engaged employees who embrace a purpose-led culture.

Speaker Change: I am proud of the culture we have built within our organization, and for Deckers being recognized externally as well, as one of U.S. News & World Report's 2024-2025 Best Companies to Work For, and as one of Time Magazine's World's Most Sustainable Companies of 2024.

David Powers: Before handing off to the operator, there are a few things I'd like to add. First, I want to sincerely thank Steve Fasching. Steve has been an amazing partner to me over the past eight years and has had a tremendous impact on Deckers and our success. He deserves to be recognized for his leadership and disciplined strategic approach to developing and maintaining our strong operating model and fortified balance sheet. We've been through a lot together, and I just want to say thank you.

David Powers: I also want to thank Erin and Andy in our investor relations department for doing an outstanding job preparing us for these quarterly calls and communicating Deckers' strategy with all of you. It has been a pleasure working with them both. Thank you for all you've done and will continue to do at Deckers. I'm actually going to miss these quarterly calls, Ernie.

Speaker Change: Before handing off to the operator, there are a few things I'd like to add. First, I want to sincerely thank Steve Fasching. Steve has been an amazing partner to me over the past eight years and has had a tremendous impact on Deckers and our success.

Speaker Change: Steve deserves to be recognized for his leadership and disciplined strategic approach to developing and maintaining our strong operating model and fortified balance sheet. We've been through a lot together, and I just want to say thank you, Steve.

Speaker Change: I also want to thank Erin and Andy on our investor relations team.

Speaker Change: They have done an outstanding job preparing us for these quarterly calls and communicating Deckers strategy with all of you. It has been a pleasure working with them both. Thank you for all you've done and will continue to do at Deckers. I'm actually going to miss these earnings calls.

David Powers: Lastly, I want to express my gratitude for the final time. It has been the honor of a lifetime leading Deckers for the last eight years, and I am proud of all we have accomplished together during this time. I want to thank all of our dedicated employees for making Deckers not only a successful company but also an amazing place to work. We have proven that we are truly better together and that we can do a lot of good while doing great things. Deckers is in excellent hands with Stefano and his leadership team.

Deckard's: Lastly, I want to express my gratitude for the final time. It has been the honor of a lifetime leading Deckers for the last eight years, and I am proud of all we accomplished together during this time.

Speaker Change: I want to thank all of our dedicated employees for making Deckers not only a successful company, but also an amazing place to work. We have proven that we are truly better together and that we can do a lot of good while doing great.

David Powers: I have no doubt that he will do an exceptional job leading this organization and maintaining our great culture and strong results as he, along with our leadership team and all of our amazing employees, build the future of Deckers. One last time, on behalf of our management team, I want to thank everyone for listening and for your continued support. With that, I'll turn the call over to the operator for Q&A. Thank you.

Stefano: Deckers is in excellent hands with Stefano and his leadership team. I have no doubt that he will do an exceptional job leading this organization and maintaining our great culture and strong results as he, along with our leadership team and all of our amazing employees, build the future of Deckers.

Speaker Change: One last time, on behalf of our management team, I want to thank everyone for listening and for your continued support. With that, I'll turn the call over to the operator for Q&A. Operator?

David Powers: We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We ask that you please limit yourself to one question and one follow-up.

Unknown Executive: We ask that you please limit yourself to one question and one follow-up. Your first question comes from the line of Jonathan Komp from Baird. Your line is open. Yeah, thank you. Good afternoon.

Speaker Change: Your first question comes from the line of Jonathan Komp from Baird. Your line is open.

Jonathan Robert Komp: And Dave, certainly not my typical approach to say congratulations in this forum, but I think, you know, congratulations certainly are in order for just an incredible run here. Thank you, John. Yeah, thank you.

Jonathan Robert Komp: Yeah, thank you, good afternoon, and Dave, certainly not my typical approach to say congratulations in this forum, but I think, you know, congratulations certainly are in order for just an incredible run here.

David Powers: And really, to turn to the business, I want to ask about the HOKA business, the momentum that you're seeing in light of, you know, frankly mixed footwear data points in the industry. And then just given the shape of the year, how you're planning, still 20% growth for the year after you exceeded that to start, could you maybe just share a little bit more how you're planning, you know, distribution and product launches as we think about the balance of the year? Yeah, a good question.

Dave: Thank you, John .

Speaker Change: Yeah, thank you. And really, to turn to the business, I want to ask about the HOKA business, the momentum that you're seeing in light of, you know, frankly, mixed footwear data points in the industry.

Speaker Change: And then just given the shape of the year, how you're planning, still 20% growth for the year after you exceeded that to start, could you maybe just share a little bit more how you're planning distribution and product launches as we think about the balance of the year?

David Powers: I think, you know, I think it's important to just think of the context of this company. We're a global multi-channel, multi-brand business. And I think a little bit of data on a subset of that global business can, you know, be misleading in some ways.

Speaker Change: Yeah, good question. I think, you know, I think it's important to just think of the context of this company, we're a global multi-channel, multi-brand company.

Speaker Change: Business, and I think a little bit of data in a subset of

Speaker Change: that global business can be misleading in some ways. So I think our results speak for themselves in the past quarter, and we're super confident in the remainder of the year. And I'll let Stefano talk a little bit more about where the business is going from here for the rest of the year.

David Powers: So I think our results speak for themselves in the past quarter, and we're super confident about the remainder of the year. And I'll let Stefano talk a little bit more about where the business is going from here for the rest of the year. Yeah, hey, John.

Stefano Caroti: You know, keep in mind, we build brands for long-term health and sustainable growth. We just closed a great Q1, and we're confident in our full year guidance. We are very happy with how our brands are performing today.

Stefano: Hey John , keep in mind we build brands for long term health and sustainable growth.

Stefano: We just closed a great Q1 and we're confident in our full year guidance.

Stefano: We are very happy with how our brands are performing today. Key product launches have been selling through very, very strongly. So our brands are strong and in demand. So I don't anticipate major issues.

Stefano Caroti: Key product launches have been selling very, very strongly. So our brands are strong and in demand. So I don't anticipate major issues for the balance of the year. I think, John, and Steve, just to kind of add to that, as we think about the year, and it's what we discussed on the call last quarter, in terms of how we saw the cadence of the year play out, we always said, in percentage terms, right, that Q1 was going to be our strongest quarter. And as we came up against kind of more difficult comparisons from a year ago, those percentage rates would drop.

Stefano: for the Battles of the Year.

Steve: I think, John , this is Steve, just to kind of add on to that. As we think about the year, and it's what we discussed on the call last quarter in terms of how we saw it.

John: The Cadence of the Year Playout. We always said in percentage terms, right, that Q1 was going to be our strongest quarter. And as we came up against kind of more difficult comparisons from a year ago, those percentage rates would drop.

Steven J. Fasching: Just to remind everybody, we are in control of this marketplace, right? And so we're being very careful and thoughtful about distribution, how we're growing wholesale, how we're growing DTC, how we keep that balance in place. And as we said, FY25 is going to be a year of wholesale growth. We are expanding points of distribution.

Speaker Change: And, you know, just to remind everybody, we are in control of this marketplace, right? And so we're being very careful and thoughtful about distribution, how we're growing wholesale, how we're growing DTC, how we keep that balance in place. And as we said, FY25 is going to be a year of wholesale growth. So thank you.

Steven J. Fasching: But we're keeping that right in mind as we think about that expanded distribution in light of the DTC. We also know that when we feed and bring in new customers through wholesale, we do see them migrate to our DTC. So again, this is part of our strategy. And again, it's about growth. And so we're not trying to do too much.

John: We are expanding points of distribution, but we're keeping that

John: Right.

John: in mind as we think about that expanded distribution in light of the DTC.

John: We also know that when we feed and bring in new customers through Wholesale, we do see them migrate to our DPCs. So again, this is part of our strategy. And again, it's about that growth. And so we're not trying to do too much. Everything we do is to sustain the brands for long-term growth in the future. So I think that's what you're seeing play out.

Steven J. Fasching: Everything we do is to sustain the brands for long-term growth in the future. So I think that's what you're seeing play out. You know, I think the quarter was a great quarter, very much kind of in line a little bit better than what we expected. But that's really how we see the year play out over the next few quarters.

John: You know, I think the quarter was a great quarter, very much kind of in line, a little bit better than what we expected, but that's really how we see the year play out with the next few quarters.

Steven J. Fasching: Yeah, and just to finish that off, I think, you know, our objective is to control the marketplace and the health of our brands. And we're obviously experiencing very high rates of full price sell-through and healthy margins. And our goal is to continue that, you know, continue our pull model in the marketplace for all of our brands, take opportunities where we can. But we're not chasing numbers; we're in this long game and looking for sustainable, healthy, profitable growth for years to come.

Speaker Change: Yeah, and just to finish that off, I think, you know, our objective is to control the marketplace and the health of our brands. And we're obviously experiencing...

John: Very high rates of full price sell-through and healthy margins and our goal is to continue that You know continue our pull model in the marketplace for all of our brands take opportunities where we can But we're not chasing numbers where we're in this at a long game and looking for sustainable healthy profitable growth for years to come

Steven J. Fasching: That's very helpful. Just one follow-up question, if I could, should we still be expecting a new version of the Bondi? And maybe if you could comment at all on Clifton this fiscal year and give any color feedback on some of the new segmentation approach for some of your new launches recently? Thanks again.

Speaker Change: That's very helpful. Just one follow-up, if I could. Should we still be expecting a new version of a Bondi, and maybe if you could comment at all on Clifton this fiscal year, and any color feedback on some of the new segmentation approach for some of your new launches recently? Thanks again.

David Powers: Yep. Yeah, John, good point. We've created a collection with styles and colors and branding variation that allows for greater differentiation across points of distribution. Mach 6 is performing super well. Bondi, the Bondi 8 update will hit in Q4.

Speaker Change: Yeah, John , good point. We've created a collection with styles and colors and branding variations that allows for greater differentiation across points of distribution. Mach 6 is performing super well.

David Powers: So it's a February launch, and then we push back Clifton 10 to fiscal 26 to give Bondi 9, sorry, not Bondi 8, but Bondi 9, breathing room. And then I would also add the new SkyFlow that has just launched in the last couple of weeks is another opportunity for, you know, kind of a gateway product for runners into the brand. Incredible innovation, but a more commercial price point that'll help round out that Clifton Bondi franchise. And so we're less reliant on those two.

Speaker Change: The Bandai update will hit Q4, so it's a February launch.

Speaker Change: And then we pushed back Clifton 10 to Fiscal 26 to give Bondi 9, sorry, no, Bondi 8, Bondi 9 breathing room.

David Powers: Those will still be, you know, super important. Very, very strong sellers for us, but we think SkyFlow can add to that group of key sellers, and we'll see how that performs over the next 12 months. But so far, the response to that's been very strong, and we're super pleased with that as well. That's great. And Dave, best of luck with your transition. Thanks again.

Speaker Change: And then I would also add the new SkyFlow that recently just launched in the last couple of weeks is another opportunity for, you know, kind of a gateway issue for runners into the brand. Incredible innovation, but at a more commercial price point.

Speaker Change: That'll help round out that Clifton Bondi franchise. And so we're less reliant on those two. Those will still be, you know, super important.

Speaker Change: You know very very strong sellers for us, but we think the SkyFlow can add to that group of key sellers, and we'll see how that performs over the next 12 months But so far the response to that's been very strong, and we're super pleased with that as well

Speaker Change: That's great, and Dave, best of luck with your transition. Thanks again. Thanks, John . Appreciate it.

Jonathan Robert Komp: Thanks, John. I appreciate it. Your next question comes from the line of Laurent Vasilescu from BNP Paribas. Your line is open.

Speaker Change: Your next question comes from the line of Laurent Vasilescu from BNP Paribas. Your line is open.

Laurent Andre Vasilescu: Thank you very much for taking my question. Dave, again, congratulations for all you've done and for your future endeavors. I wanted to ask about your envious cash balance position of $1.4 billion. And obviously, there's going to be future cash generation. Dave, Stefano, this is also a question for you and Steve.

Laurent Andre Vasilescu: Oh, good afternoon. Thank you very much for taking my question. Dave, again, congrats for all you've done and for your future endeavors.

Laurent Andre Vasilescu: I wanted to ask about your tensiest cash balance position of $1.4 billion, and obviously there's going to be future cash generation.

David Powers: Can you talk about your capital allocation priorities? Clearly, buybacks are still important, but would you consider issuing a dividend at some point? Also, I don't think M&A is in the cards near term, but just wanted to be sure that's still the thought process going forward. Sure, good question.

Speaker Change: David, Stefano, this is also a question for you, and Steve, can you talk about your capital allocation priorities? Clearly buybacks are still important, but would you consider issuing a dividend at some point?

Speaker Change: Also, I don't think M&A is in the cards near term, but just wanted to be sure that's still the thought process going forward.

David Powers: It is a healthy cash balance, and we're very proud of that. We've built it over the last eight years. I will speak to the M&A piece of it, and then I'll hand it over to Steve for dividends, etc. M&A is something that, you know, our strategy hasn't changed here. We're always looking, exploring, and evaluating opportunities. And we keep coming back to the same answer: we have incredible organic growth with the brands we have for years to come, and we think we want to focus as much as we can on HOKA and UGG in reactivating Teba.

Speaker Change: Sure, good question. It is a healthy cash balance and we're very proud of that. We've built it over the last eight years.

Speaker Change: I will speak to the M&A piece of it, then I'll hand it over to Steve on dividends, etc.

Steve: M&A is something that, you know, our strategy hasn't changed here. We're always looking, we're always exploring and evaluating opportunities.

Steve: And we keep coming back to the same answer, is that we have incredible organic growth with the brands we have.

Steve: for years to come, and we think we want to focus as much as we can on HOKA and UGG in reactivating TEBA. You know, we have category expansion opportunities, we have men's opportunities in UGG.

David Powers: You know, we have category expansion opportunities. We have men's opportunities in UGG, and apparel opportunities in HOKA over the years. And so I think, given valuations out in the marketplace, given the integration challenges that it would cause on our end and potentially taking our eye off the ball, anything sizable is not on the radar right now. We just launched ONU.

Steve: Apparel Opportunity, and HOKA over the years.

Steve: So I think given valuations out in the marketplace, given the integration challenges that it would cause on our end and potentially taking our eye off the ball, anything sizable is not on the radar right now. We just launched Anu. We think that's got long-term potential.

David Powers: We think that's got long-term potential. So, really, no news on the M&A front from a cash perspective. Steve?

Steven J. Fasching: Yeah, and I think just to add to that a little bit, you know, with the growth rates that we're putting up, too, our focus really is on continued organic growth and delivering exceptional levels of profitability. It's what's helping us, at the same time, build a strong balance sheet. And I think, you know, as I've said for some time, we like to operate with a position of strength, and a strong balance sheet gives us that opportunity.

Steve: No news really on the M&A front from a cash perspective. Steve? Yeah, and I think just to add to that a little bit, you know, with the growth rates that we're putting up to, you know, our focus really is on continued organic growth, you know, and delivering exceptional levels of profitability. It's what's helping us at the same time build a strong balance sheet. And I think

Speaker Change: As I've said for some time, we like to operate with a position of strength and a strong balance sheet gives us that opportunity. To Dave's point, it gives us an opportunity to look what's around.

Steven J. Fasching: To Dave's point, it gives us an opportunity to look what's around, but at the same time, and first and foremost, it's about how we're investing in our business to continue to grow it over the long term.

Speaker Change: But at the same time, first and foremost, it's about how we're investing in our business to continue to grow this over the long term. I think you've seen some of our step-up in investment on the CapEx side.

Steven J. Fasching: I think you've seen some of our step-up in investment on the CapEx side. And then, as you know, Laurent, we are committed, we don't guide to any future share repurchase, but you can see from the past, with what we delivered in Q1, there's definitely a commitment to share repurchase. And then to your question on dividends, sure, it's something that we always consider.

Speaker Change: And then, as you know, Laurent, you know, we are committed.

Lauren: We don't guide to any future share repurchase, but you can see with the past.

Lauren: with what we delivered in Q1. There's definitely a commitment to share repurchase. And then to your question on dividends, sure. It's something that we always consider, and it's something that we discussed with our board of directors. So it's something that's on the table and being discussed, but nothing to announce at this stage.

Steven J. Fasching: And it's something that we discussed with our board of directors. So it's something that's on the table and being discussed, but nothing to announce at this stage. Okay, thank you very much.

Laurent Andre Vasilescu: And then the follow-up question, two parts to this question. I think Dave, you mentioned the opportunities with Hoka Apparel. I saw that you launched Aerolite recently. It looks like it's doing very well. Just love to get your take there. And then Steve, the guidance on the top line implies 8% for the balancing year. I know you've got the hardest top in 2Q.

Speaker Change: Okay, thank you very much. And then the follow-up question...

Speaker Change: Two parts. First of all, a question. I think, Dave, you mentioned opportunities with HOKA Apparel. I saw that you launched Aerolite recently.

Speaker Change: It looks like it's doing very well. Just love to get your take there. And then, Steve, the guidance on the top line implies 8% for the balancing year. I know you've got the hardest top in 2Q. Last quarter, you did give us some commentary about 1Q revenues.

David Powers: Last quarter, you did give us some commentary about 1Q revenues. Anyway, I know you don't guide by quarter, but how do we think about the shape of the revenues for the remaining three quarters? Yeah, just real quick on the hookup piece.

Speaker Change: Anyway, I know you don't guide by quarter, but how do we think about the shape of the revenues for the remaining three quarters?

Steven J. Fasching: The new launch is doing okay. You know, I think it's selling through well, in small, small units and limited distribution. You know, I think one of the key priorities for Robin and the team over the course of the next few years is to really create a compelling and exciting and innovative apparel offer. We've yet to do that, quite honestly.

Speaker Change: Yeah, just real quick on the HOKA piece the new launch it's doing okay, you know I think it's it's going through well small small units and a limited distribution you know, I think one of

Speaker Change: I know one of the key priorities for Robin and the team over the course of the next few years is to really create a compelling and exciting and innovative apparel offer. We've yet to do that, quite honestly, and it's been okay to this point because we have such amazing footwear growth, but we know that

David Powers: And it's been okay to this point because we have such amazing footwear growth. But we know that, A, consumers are wanting apparel from us, and B, we have a tremendous opportunity to disrupt that category. So consider that, you know, a key priority of Robin and Stefano and the team. And we're investing in leadership and also infrastructure to be able to support those efforts over the years to come. But we, you know, it's still early days.

Speaker Change: A, consumers want apparel from us, and B, we have a tremendous opportunity to disrupt that category. So consider that, you know, a key priority of Robin and Stefano and the team, and we're investing in leadership and also

Speaker Change: infrastructure to be able to support those efforts over the years to come. But we you know, it's early days still.

Steven J. Fasching: Yeah, then Laurent on the guidance, you're right, we don't give quarterly guidance. You know, I think that we've seen shifts in the business, we've seen revenue move, as demonstrated in Q1, with the health of our brands and the in demand nature of our brands. We are seeing demand move a little bit earlier, which is why we saw Q1 stronger.

Laurent Andre Vasilescu: Yeah, then Laurent on the guidance, you're right, we don't give quarterly guidance. You know, I think that we've seen shifts in the business, we've seen revenue move, you know, demonstrated in Q1 with the health of our brands and the in demand nature of our brands. We are seeing demand move a little bit earlier, which is why we saw Q1 stronger.

Speaker Change: We talked about that in kind of giving some direction on Q1. As we look out into the year and with the guidance that we're holding from a revenue growth standpoint year over year at the 10%,

Steven J. Fasching: We talked about that in kind of giving some direction for Q1. As we look out into the year, and with the guidance that we're holding from a revenue growth standpoint year over year at 10%. The future quarters start to fall in line with that future or, you know, full year guidance that we've given for the year. So we expected Q1 to be our strongest percentage grower. Again, it's one of our smaller quarters. As you stated, we know we're going to be up against harder comparisons against a year ago.

Speaker Change: The future quarters start to fall in line with that future or, you know, full year guidance that we've given on the year. So we expected Q1 to be our strongest percentage grower. Again, it's one of our smaller quarters. As you stated, we know we're going to be up against

Speaker Change: Harder comparisons against a year ago and so that growth will slow down but still delivering that top-line growth of around 10%.

Steven J. Fasching: And so that growth will slow down, but it will still deliver that top line growth of around 10%. Okay. Very helpful.

Laurent Andre Vasilescu: Thank you very much and best of luck, Dave, and to the team as well. Thanks, Laurent. Your next question comes from the line of Sam Poser from Williams Trading. Your line is open. Well, thank you guys for taking my questions. Dave, I wish you all the best in your future endeavors. I believe, since I mentioned sand in all of my notes with you guys, that there's a little bit of sandbagging on your part. You're really going to miss these earnings calls. I just...

Speaker Change: Okay, very helpful. Thank you very much and best of luck, Dave, and to the team as well.

Laurent Andre Vasilescu: Thanks, Laurent. Thanks, Laurent.

Speaker Change: Your next question comes from the line of Sam Poser from Williams Trading. Your line is open.

Samuel Marc Poser: Well, thank you guys for taking my questions. Dave, I wish you all the best in your future endeavors. I believe, since I mentioned sand in all of my notes with you guys, that there's a little bit of sandbagging on you're really going to miss these earnings calls. I just...

Samuel Marc Poser: I feel that a little bit, but that's either here or there. I have three things. One, Erin, the normal question because the numbers didn't add up on the HOKA numbers.

Speaker Change: Feel that a little bit

Samuel Marc Poser: But...

Speaker Change: That's either here or there. I have three things. One, Erin, the normal question, because the numbers didn't add up on the HOKA numbers, so if we could get the dollars for wholesale or dollars for direct by each brand for the quarter, that would be great.

Samuel Marc Poser: So if we could get the dollars for wholesale or dollars for direct by each brand for the quarter, that would be great. And then Steve, the freight impact in the, like the freight impact you're anticipating for gross margin and the mix impact, which would both be geographic because you're expecting international growth to, I think, outpace domestic growth as well as the channel. How will that impact the margins as well? Hi, Sam and Sarah.

Speaker Change: And then, Steve, the freight impact you're anticipating for gross margin and...

Speaker Change: The mix impact, which would both be geographic, because you're expecting international growth to, I think, outpace domestic, as well as channel. How will that impact the margins as well?

Erinn Kohler: And so I'll go ahead and kick off. So for our first quarter results for Global Wholesale and Distributor by Brand for UGG, it was approximately $143 million. POCA $333 million, Teva $31.4 million, and Sanook $4.4 million. And that leaves you with the rest, which is predominantly Kula Burra at $3.7 million.

Speaker Change: Hi Sam and Sarah. So I'll go ahead and kick off. So for our first quarter results for Global Wholesale and Distributor by Brand, for UGG, it was approximately $143 million, POCA $333 million, Teva $31.4 million, and Sanuk $4.4 million. And that leaves you with Other, which is predominantly Kula Burra at $3.7 million.

Steven J. Fasching: Thank you. Okay, Sam and Steve, on freight, you know, of the 560-ish basis point increase that we saw in Q1, 80 basis points of that was freight. So recall, a year ago, we still had higher freight rates that came down throughout the year, and we still benefited from that in Q1. So that Q1 comparison was a freight benefit. As we move forward, and as I indicated in the prepared remarks, that now turns into a headwind, right?

Speaker Change: Thank you.

Speaker Change: Yep.

Speaker Change: Okay Sam and Steve, on the freight, you know of the 560-ish basis point increase that we saw in Q1, 80 basis points of that was freight. So recall a year ago

Speaker Change: We still had higher freight rates that came down throughout the year, and we still benefited from that in Q1. So that Q1 comparison was a freight benefit.

Steven J. Fasching: And what we think the full-year impact of that freight will be is a negative 80 bits. So the positive 80 now flips to a negative 80, and that negative balance is going to be incurred over the next three quarters.

Speaker Change: and as I indicated in the prepared remarks, that now turns to a headwind.

Speaker Change: What we think the full year impact of that freight will be is a negative 80 bits, so the positive 80 now flips to a negative 80, and that negative balance is going to be incurred over the next three quarters.

Steven J. Fasching: [inaudible] Okay, and then, and then as far as mix and channel go, So in the quarter, what we're seeing with the 560, roughly about 250 basis points from margin expansion and brand mix. So we saw an improvement in the brand proportion as well as some of the product mix that contributed to that margin expansion. And then we had about 250 basis points of full price selling.

Speaker Change: Okay.

Speaker Change: Okay and then and then as far as mix and channel

Speaker Change: So in the quarter, what we're seeing of the 560, roughly about 250 basis points from margin expansion and brand mix. So we saw an improvement.

Speaker Change: in the brand proportion, as well as...

Speaker Change: Some of the product mix that contributed to that margin expansion. And then we had about 250 basis points of full-price selling. So, recall a year ago in Q1, we had more closeout business.

Steven J. Fasching: So recall a year ago in Q1, we had more closeout business, and that's where we probably performed a little bit better, which is what you're seeing on the path through to the full year, and the lift in the gross margin is some of that better full-price selling that we experienced with fewer closeout sales in Q1 this year. And you're expecting things to normalize going forward from a promotional activity, which is sort of your cushion if things continue the way they are; margins would be higher, I assume. Yeah, so look, and we'll see how it plays out.

Speaker Change: And that's where we probably performed a little bit better, which is what you're seeing on the path through to the full year and the lift of the gross margin, is some of that better full price selling that we experienced in fewer closeout sales in Q1 this year.

Speaker Change: And you're expecting things to normalize going forward from a promotional activity, which is sort of your cushion if things continue the way they are, margins would be higher, I assume.

Steven J. Fasching: But yes, and that's what we said in our guidance, we anticipate it to be a more promotional environment going forward. And we'll see how things play out. Thank you very much and continued success. Thanks, Sam. Your next question comes from the line of Dana Telsey from Telsey Advisory Group. Your line is open. Hi, good afternoon, everyone.

Speaker Change: Yeah so look and we'll see how it plays out but yes and and that's what we said in our guidance we anticipate it to be a more promotional environment going forward and we'll see how things play out.

Speaker Change: Thank you very much and continued success.

Dana Lauren Telsey: And congratulations, Dave, wishing you the best of luck on your next venture and what a terrific accomplishment at Deckers and the team that you've put in place to succeed. As you think about the freight cost, Steve, what you were just saying, is there any difference in terms of what the exposure to China is, how you're thinking about that going forward, and what are you seeing in terms of pricing, both on the retail price front and what you're seeing in terms of raw materials? And then Dave, on distribution, for both HOCA and UGG, what are you seeing in new channels for distribution, new retail partners, and the expansion of any of those doors? Thank you. Okay, Dana, this is Steve.

Samuel Marc Poser: Thanks, Sam.

Speaker Change: Our next question comes from a line of Dana Telsey from Telsey Advisory Group. Your line is open.

Dana Lauren Telsey: Hi, good afternoon, everyone, and congratulations, Dave, wishing you best of luck on your next, and what a terrific accomplishment at Deckers and the team that you've put in place to succeed.

Speaker Change: As you think about...

Speaker Change: As you think about the freight cost, Steve, what you were just saying,

Dana Lauren Telsey: Is there any difference in terms of what the exposure to China is, how you're thinking about that going forward, and what are you seeing in terms of pricing, both on the retail price front and what you're seeing in terms of raw materials? And then Dave, on distribution, for both HOCA and UGG, what are you seeing in new channels of distribution, new retail partners, and the expansion of any of those doors?

Steven J. Fasching: I'll start with freight. So I think, you know, what we are, and we started to see it earlier in the year, what we benefited from in Q1 were rates on product that were kind of in place before we started to see these freight rate increases. And that's what we were able to benefit from in Q1. And recall the way we spent inventory and that freight which gets allocated to that inventory when it sells through.

Speaker Change: Thank you.

Speaker Change: Okay, Dana, this is Steve. I'll start with the phrase. So I think, you know, what we are...

Speaker Change: And we started to see it earlier in the year. What we benefited from in Q1 was rates...

Speaker Change: on product that was kind of in place before we started to see these freight rate increases. And that's what we were able to benefit from in Q1.

Speaker Change: And recall the way we expense inventory and that freight which gets allocated to that inventory is when it sells through. So when we started to see the freight increases a few months ago, that's on the inventory that was inbound. That's what we're anticipating, you know, to sell through and therefore experience a higher rate.

Steven J. Fasching: So when we started to see the freight increases a few months ago, that was on the inventory that was inbound. That's what we're anticipating, you know, to sell through and, therefore, experience a higher rate. As you saw last year, rates declined during the year, so we're now anticipating rates increasing, and we've seen a significant increase. We haven't necessarily assumed any further rate increases from the rates that are out there today, so our assumptions are more around stabilization of freight rates for the year, and we'll see. If it gets worse, that could be a headwind.

Speaker Change: As you saw last year, rates declined during the year, so we're now anticipating rates increasing, and we've seen significant increases.

Speaker Change: We haven't necessarily

Speaker Change: Assumed any further rate increases from the rates that are out there today. So our assumptions are

Speaker Change: More around stabilization of freight rates for the year and we'll see if it gets worse that could be a headwind

Steven J. Fasching: If it gets better, it could be a little bit of a tailwind, but we're not seeing any indications of freight rates getting better at this point in time, so it can't be determined. And then just in terms of input costs, we're not seeing, you know, and we're well bought kind of through the fall season, buying into the spring season, not seeing too much change in input costs at this stage, something that we're keeping a close eye on. We have seen a little bit of an increase, but we're pretty much set for the year at this point. Yeah, and this is Dave.

Speaker Change: If it gets better, it could be a little bit of a tailwind, but we're not seeing any indication of freight rates getting better at this point in time.

Speaker Change: to be determined.

Speaker Change: And then just in terms of input costs, we're not seeing, you know, and we're well bought kind of through the fall season, buying into spring season, not seeing too much change on the input costs at this stage.

Speaker Change: We have seen a little bit increase, but we're pretty much set for the year at this point.

David Powers: On the distribution side, you know, I think the teams are doing an exceptional job of managing the marketplace, you know, making sure that our current accounts are having healthy, you know, full price sell through with us and managing inventory levels appropriately. But at the same time, we are looking for other opportunities, strategic growth, more so on the HOKA side. You know, we have store openings of our own that we'll be doing across UGG and HOKA globally.

Speaker Change: Yeah, and this is Dave. On the distribution side, you know, I think the teams are doing an exceptional job on managing the marketplace, you know, making sure that our current accounts are having healthy, you know, full-price sell-through with us and managing inventory levels appropriately.

Speaker Change: But at the same time, we are looking for other opportunities, strategic growth, more so on the HOKA side.

Speaker Change: You know, we have store openings of our own that we'll be doing.

David Powers: You know, it's not rolling out massively, but we will be opening some new doors. We think that's important for both brands. But I'll let Stefano speak to a little bit more specifics on which partners we're working with on the HOKA side. Yeah, Dana, yes, we'll be seeing some expansion with key partners, both domestically and internationally. With the likes of DSG, JD, both in the US, in Europe and Asia, Intersport in Europe, Foot Locker, as well as Top Sport in China and Sport Check in Canada, this is specific to Hoka.

Speaker Change: across Ogunhoka globally.

Speaker Change: You know, it's not rolling out massively, but we will be rolling out some new doors. We think that's important for both brands. But I'll let Stefano speak to a little bit more specifics on which partners we're working with on the HOKA side.

Stefano: Yeah, Dana, yes, we'll be seeing some expansion with key partners, both domestically and internationally.

Stefano: with the likes of DSG, JD both in the U.S. in Europe and Asia, Intersport in Europe , Foot Locker, as well as Top Sport in China and SportCheck in Canada.

Speaker Change: And this is specific to HOKA.

Speaker Change: and David Powers.

Speaker Change: Thank you.

Stefano Caroti: Thank you. Your next question comes from the line of Janine Stichter from BTIG. Your line is open. Hey, everyone. You've got Ethan on for Janine.

Dana Lauren Telsey: You bet.

Speaker Change: Your next question comes from the line of Janine Stichter from BTIG. Your line is open.

Speaker Change: Hey everyone, you've got Ethan on for Janine. My first question, just on the higher SG&A guide, could you give us a bit more color on where the spend is going and just philosophically how you think about investing revenue and margin upside into SG&A?

Janine Marie Hoffman Stichter: My first question, just on the higher SG&A guide, can you give us a bit more color on where the spend is going and, philosophically, how you think about investing revenue and margin upside into SG&A? Yeah, I think I'll start with Steve, you know, and what our thinking on that was, with some margin expansion, it affords us an opportunity, you know, delivering still exceptional levels of profitability to continue to invest in building brands and global awareness of our brands, right? And we see the competition. We see what's going on.

Speaker Change: Yeah, I think I'll start with Steve, you know, and...

Steve: What our thinking on that was, with some margin expansion, it affords us an opportunity, you know, delivering still exceptional levels of profitability to continue to invest in building brands.

Steven J. Fasching: And so again, as we improve profitability, we can invest some of that back into continuing to build our brands and the awareness of our brands globally, and at the same time, pass some of that through to lift our guidance. We think, again, this is a great long-term sustainable strategy of how we build our brands and the global awareness around them. Additionally, what's also included in there is, as we're growing at these rates, we have to build our teams and continue to invest in infrastructure that supports the continued growth of our business. And so you're seeing, you know, a continued step up in that respect.

Steve: and Global Awareness of our Brands.

Steve: Right and and we see the competition we see what's coming on and so again as we improve profitability we can invest

Steve: Some of that back into continuing to build our brands and the awareness of our brands globally and at the same time pass some of it through to lift our guidance. We think, again, this is a great long-term sustainable strategy of how we build our brands and the global awareness around it.

Steve: Additionally, what's also included in there is, as we're growing at these rates, we have to build our teams and continue to invest.

Steven J. Fasching: But again, you know, in line in percentage terms with what we've said with the revenue growth and again, delivering exceptional levels, especially in comparison to our peers in the state. So, you know, just a good place to be and take advantage of that when we're able to expand some of the gross margin. And we're continuing to work within our own internal guardrails, you know, in our financial model.

Steve: and Infrastructure that Supports.

Steve: The Continued Growth of Our Business. So, you're seeing, you know, continued step-up.

Steve: in that respect.

Steve: with the revenue growth. And again, delivering exceptional levels, especially in comparison to our peers in the state.

Steve: You know, just a good place to be and take advantage of that when we're able to expand some of the gross margin.

Steve: Yeah, and we're continuing to work within our own internal guardrails, you know, in our financial model. But given the opportunity and margin, we can be more flexible. And like we've said all along, we're going to continue investing in these brands for growth.

David Powers: But given the opportunity and margin, we can be more flexible. And like we've said all along, we're going to continue to invest in these brands for growth. But as we get bigger, especially in HOKA, there are more products to market. We just launched a handful of brand-new innovations in the marketplace, and they all need their time in the sun, so to speak, and support from a marketing perspective, in addition to top-of-the-funnel marketing to drive awareness globally. So it's going to good use. I can tell you that.

Steve: But as we get bigger, especially in HOKA,

Steve: You know, a handful of brand new innovations to the marketplace, and they all need their time in the sun, so to speak, and support from a marketing perspective.

David Powers: Our marketing teams are exceptional at managing our marketing spend across the globe. We do that centrally with a very talented team, and we monitor the return on that spend, you know, almost daily. So we feel really confident that if we continue to invest in marketing in the right areas to promote the brand's awareness and also individual launches, that's going to be successful for us. And at the same time, you know, we're heading into a big season with UGG, and we have some exciting marketing activations that we need to get behind as well. And we feel really confident about that spend going that way. Got it.

Steve: In addition to top-of-the-funnel marketing to drive awareness globally. So, it's going to good use, I can tell you that. Our marketing teams are exceptional at managing our marketing spend across the globe.

Steve: We do that centrally with a very talented team, and we monitor the return on that spend, you know, almost daily. So, we feel really confident that if we continue to invest in marketing in the right areas to promote the brand's awareness and also individual launches, that's going to be successful for us.

Steve: And at the same time, you know, we're heading into a big season with UGG and we have some exciting marketing activations that we need to get behind as well and we feel really confident about that spend going that way.

Unknown Executive: And then just a follow-up question for me, you know, for the wholesale growth you're talking about with Hoka driving it, just how much of that is going to be shelf space expansion or partners taking product earlier versus new door expansion? And just how should we think about the cadence of volume growth from new door openings for the rest of the year? Thank you. It's a combination of the two, both shelf space gain as well as indoors.

Speaker Change: Got it. That's all really helpful. And then just a follow-up from me, you know, for, you know, the wholesale growth you're talking about with HOKA driving it, just

Speaker Change: How much of that is going to be shelf space expansion or partners taking product earlier versus new door expansion? And just how should we think about the cadence of volume growth from new door openings for the rest of the year? Thank you.

Speaker Change: It's a combination of the two, both shelf space gain as well as indoors.

Speaker Change: Yep.

Speaker Change: Thank you so much.

Unknown Executive: Thank you so much. Thank you, thank you. Your next question comes from the line of Ike Boruchow from Wells Fargo. Your line is open.

Speaker Change: Do that. Thank you.

Speaker Change: Your next question comes from a line of Ike Boruchow from Wells Fargo. Your line is open.

Ike Boruchow: Hey guys, I just wanted a quick question on the Hoka DTC number. I mean, it's been strong for many years, but this is the first time it's accelerated its growth rate in about, you know, five quarters to 33%. And it's doing it, I think you guys mentioned about the Clifton launch kind of being kicked out later. So with that acceleration, with Clifton kind of not benefiting you, is it more, more Bondi? Is it more some of these newer launches? Like what exactly is driving that?

Ike Boruchow: Hey guys, I just wanted a quick question on the HOKA DTC number, it's been strong for many years, but it's the first time it's accelerated in growth rate in about, you know, five quarters to 33%. And it's doing it, I think you guys mentioned about the Clifton launch kind of being kicked out later.

David Powers: Is there a certain region that we could look to drive that? It's just, it's impressive to see, especially with the timing of the show. We want to build a balanced business across more franchises, and recent launches of Gaviota, Zarahi's, Mock, and Sixx have been very successful, so we want to build more legs for the Hoka Stool. Yeah, and I think these new launches in the last quarter, you know, the Cielo X and the Skyward, etc., really resonate on our DDC channels first. And, you know, styles like that bring a lot of energy from our core loyal consumers. They can't wait to get the new product.

Speaker Change: With that acceleration, with Clifton kind of not benefiting you, is it more Bondi, is it more some of these newer launches, like what exactly is driving that, is there a certain region that we could look to driving that, it's impressive to see, especially with the timing of the shifts.

Speaker Change: We want to build a balanced business across more franchises and recent launches of Gaviota, Zarahi's, Mach 6 have been very successful. So we want to build more legs to the Hokastool.

Speaker Change: Yeah, and I think these new launches in the last quarter, you know, the Cielo X and the Skyward, etc., you know, those really resonate on our DDC channels first and, you know, in styles like that bring a lot of energy from our core loyal consumers.

David Powers: And then, in addition to just the marketing efforts we're making across the board on awareness building and bringing new customers into the brand in general. So, I think, as Stefano said, as we build a balanced business across categories and franchises, this is an example of how that can benefit our business going forward. Yeah, and I think the other thing that we're watching closely, as we expand distribution and build brand awareness. We know customers come to us directly.

Speaker Change: They can't wait to get the new product. And then in addition to just the marketing efforts we're making across the board on awareness building and bringing new customers into the brand in general. So I think as Stefano said, as we build a balanced business across categories and franchises, this is an example of how that can benefit our business going forward.

David Powers: So the thing that we continue to watch is even as we're growing wholesale distribution, as consumers come into the brand, a way for them to find a broader offering is through our DTC experience. And so here, through DTC, they're able to experience a fuller line. Plus, we know we've engaged them.

Stefano: Yeah, and I think the other thing that we're watching closely is as we expand distribution and build brand awareness, we know customers come to us directly. So the thing that we continue to watch is even as we're growing wholesale distribution, as consumers come into the brand,

Speaker Change: A way for them to find a broader offering is through our DTC experience. And so here, through DTC, they're able to experience a fuller line, plus we know we've engaged them.

Steven J. Fasching: So they'll continue to buy through wholesale in many cases, but in some cases, they just want the product dropped at their doorstep. And so this is what we've talked about for quarters, you know, a part of our strategy of how we balance that wholesale growth and, combined with DTC and bringing customers in through DTC. Be Brawlful.

Speaker Change: They'll continue to buy through wholesale in many cases, but in some cases, they just want the product dropped at their doorstep. And so this is what we've talked about really for quarters, you know, a part of our strategy of how we balance that wholesale growth and combined with DTC and bringing customers in through DTC.

Ike Boruchow: Thanks, guys. Thanks, guys. Your next question comes from the line of John Kernan from TD Cowan. Your line is open. Good afternoon, it's Krista.

Speaker Change: Thanks, guys.

Eric: Thanks, Eric.

Speaker Change: Your next question comes from a line of John Kernan from TD Cowen. Your line is open.

John David Kernan: We're on for John and Dave. We wish you all the best and congratulations on your accomplishments at Deckers. Two questions for us. First, on the inventory, sort of in total, it was up, you know, relatively low single digits. Kind of, how would you characterize the inventory positioning, you know, across the channels for UGG, both domestic and internationally, and same for HOKA? And then, just as a follow-up, can you provide some insight into the shape of your order book trends in relation to, you know, your comments around marketplace management and maintaining a pull market? I suspect they're likely running higher than your planned revenue guide for fiscal 25. Thanks very much.

Krista: Good afternoon, it's Krista. We're on for John and Dave. We wish you all the best and congratulations on your accomplishments at Deckers.

Krista: Two questions for us. First on the inventory, sort of in total it was up, you know, relatively low single digits.

Speaker Change: Kind of how would you characterize the inventory positioning, you know, across the channels for UGG, both domestic and internationally, and same for HOKA?

Speaker Change: And then just as a follow-up, can you provide some insight into the shape of your order book trends in relation to, you know, your comments around marketplace management and maintaining a pull market? I suspect they're likely running higher than your planned revenue guide for Fiscal 25. Thanks very much.

David Powers: Yeah, I'll speak to the first one, and then I'll hand it over to Steve, and he can handle the order board transfer. We don't generally give that information, but I'll see how Steve answers it for you. But the inventory, yeah, up about approximately 2%. And specifically for UGG, we're feeling really, really good about our inventory position. I think you saw the success of Q1 with core styles like the Tasman and some of our franchise styles that did a lot of volume, but also the sell-through of the Golden Collection, both the Golden Star and the Golden Glow. It's probably the best sell-through at top line and bottom line we've had of a spring sandal ever, and we're super excited about that momentum.

Speaker Change: Yeah, I'll speak to the first one and I'll hand it over to Steve and he can handle the order board transcripts. We don't generally give that information, but I'll see how Steve answers it for you.

Steve: But the inventory, yeah, up about approximately 2%. And specifically for UGG, we're feeling really, really good about our inventory position. I think you saw the success of

Speaker Change: Q1 with core styles like the Tazman and

Steve: and some of our franchise styles that do a lot of volume, but also the sell-through of the Golden collection, both the Golden Star and the Golden Glow. It's probably the best, you know, sell-through at top line and bottom line we've had of a spring sandal ever, and we're super excited about that momentum.

David Powers: But it helps us go into fall with a very clean marketplace, and we're in a good inventory position to be able to take care of the wholesale demand that we have and also funnel our DDC engine with a tighter line, fewer SKUs, and more inventory in the top drivers of the assortment. And I think that's going to continue to serve us well going forward. Steve?

Steve: But it helps us go into the fall with a very clean marketplace and we're in a good inventory position to be able to take care of the wholesale demand that we have and also funnel our DDC engine with a tighter line, fewer skews.

Steve: More inventory in the top drivers of the assortment, and I think that's going to continue to serve us well going forward.

Steven J. Fasching: Yeah, I think, you know, just to add on the inventory too, that's something that we've been working on for a couple years now. And I think what you saw, especially coming out of the pandemic, is that we were pretty aggressive in terms of getting inventory in line. And I think we were, when I kind of looked across the space, one of the first ones really to get in a good position.

Speaker Change: Steve? Yeah, I think, you know, just to add on the inventory too, that's something that we've been at work for a couple years now. And I think what you saw, especially coming out of the pandemic, is we were pretty aggressive in terms of getting inventory

Speaker Change: in line. And I think we were, when I kind of looked across the space, one of the first ones really to get in a good position. I think, you know, from the balance that we're carrying, we feel really good. It's a good, healthy inventory position. We're not over inventory.

Steven J. Fasching: I think, you know, from the balance that we're carrying, we feel really good. It's a good healthy inventory position. We're not over-inventory. It also allows us to get quickly into the market. And so that's where you're able for us to move on innovation and move to new styles while being really disciplined in our inventory and inventory management. On the order book, as Dave said, we don't comment on the kind of order book levels.

Speaker Change: It also allows us to get quick into the market and so that's where you're able us for us to move on innovation and move to new styles as being

Steven J. Fasching: But what I will say is, you know, with the model that we run, the demand is greater than what we're supplying. And so that is our model, right? And it's working.

Speaker Change: really disciplined on our inventory and inventory management. On the order book, as Dave said, we don't comment on kind of order book levels. But what I will say is, you know, with the model that we run, the demand is greater than what we're supplying.

Steven J. Fasching: And so if you talk to a number of our accounts, I think you would likely hear that they would probably want to buy more than what we're allocating to them. And so from that perspective, I think we're in a good, healthy position as we look forward to the coming quarter. Thanks very much.

Dave: And so that is our model, right, and it's working. And so if you talk to a number of our accounts, I think...

Speaker Change: You would likely hear that they would probably want to buy more than what we're allocating to them. And so from that perspective, I think we're in a good, healthy position as we look forward to the coming quarters.

John David Kernan: Your next question comes from the line of Jason Soule from UBS. And this will be the last question. Your line is open. Terrific. Thank you so much.

Speaker Change: Thanks very much.

Speaker Change: [inaudible]

Speaker Change: Your next question comes from the line of Jason Soule from UBS and this will be the last question. Your line is open.

Jay Daniel Sole: We can just dig in on HOKA DTC a little bit more. Can you give us a sense of what the DTC growth rates were in, say, North America versus Europe? And if you're starting to see the HOKA brand really ramp up in Asia, was that a contributing factor to the growth? That's my first question. Thank you. Yeah, sure.

Jay Daniel Sole: Terrific, thank you so much. We can just dig in on HOKA DTC a little bit more. Can you give us a sense of what the DTC growth rates were in say North America versus Europe and if you're starting to see the HOKA brand really ramp in Asia, was that a contributor to the growth? That's my first question, thank you.

Steven J. Fasching: Yeah, we haven't necessarily given the breakdown of all that, but what we will say is that, you know, we're continuing to see strong international growth. We're seeing good growth, as demonstrated by the numbers in, in North America as well. All of that is contributing to the global lift that we did report. So I think, you know, what we believe in a lot of this is what we set out a couple years ago: the importance of building an international business. That's well on track.

Speaker Change: Yes, sure.

Speaker Change #100: Yeah, we haven't necessarily given the breakout of all that. But what we will say is that, you know, we're continuing to see strong international growth. We're seeing good growth, as demonstrated by the numbers in North America as well. All of that is contributing to the global lift that we did report. So I think, you know, what we believe in a lot of this is what we set out a couple years ago is the importance of building the international business that's well on track.

Steven J. Fasching: And what we are seeing is a kind of strong, kind of strong and building awareness of the HOKA brand internationally, which is contributing to DTC. It's also part of a bit of our expansion within the wholesale channel. So Asia is more DTC, still, but, you know, small numbers, but growing.

Speaker Change #101: Yeah, and what we are seeing is strong kind of strong and building awareness of the Hoka brand internationally that is contributing to DTC. It's also part of a bit of our expansion within the wholesale channel. So

Speaker Change #101: Asia, it's more DTC still, but you know, small numbers, but growing. And so that's something that we're continuing to focus on. Eyes kind of on the China market and the opportunity there. And there you'll see us.

David Powers: And so that's something that we've continued to focus on, eyes kind of on the Chinese market and the opportunity there. And there, you'll see us be more aggressive with a retail build out. So we have more HOKA stores in China than we do in any other country. So, you know, I'd say well balanced in terms of the growth of how we've looked at it, pleased with the progress that we're making.

Speaker Change #101: being more aggressive with like a retail build out. So we have more stores, Hoka stores in China than we do.

Speaker Change #101: any other country.

Speaker Change #101: You know, I'd say well-balanced in terms of the growth of how we've looked at it, pleased with the progress that we're making, but, you know, a big focus of ours is growing that international component.

David Powers: But, you know, a big focus of ours is growing that international component. Yeah, and I would just add, you know, we're really pleased with the success of the DDC business over the last few years. And, you know, I'm excited by the level of repeat customers we're getting both in UGG and HOCA that are driving incremental gains in addition to new customers. And then on the international front, you know, we have a long way to go, but we're off to a really good start in the last couple years, particularly in HOCA with the growth of our online and store distribution network in the international region and seeing good healthy growth there.

Speaker Change #102: Yeah, and I would just add, you know, I think it's, we're really pleased with the success of the DDC business over the last few years, and, you know, I'm excited by the level of repeat customers we're getting both in UGG and HOCA that are driving incremental gains in addition to new customers.

Speaker Change #102: And then on the international front, you know, we have a long way to go, but we're off to a really good start in the last couple of years, particularly in HOKA with...

Speaker Change #102: The growth of our online and store.

Speaker Change #102: distribution network in the international region and seeing good healthy growth there.

David Powers: So, as we've talked about, it's a priority for us. We want to get DDC to about 50% of our total business, potentially more down the road, because we gain all the data, we have a better relationship with our consumers, we're more engaged with them, and it's best for our margins and top-line ASPs.

Speaker Change #102: As we've talked about, it's a priority for us. We want to get DDC to about 50% of our total business.

Speaker Change #102: Potentially more down the road.

Speaker Change #102: Because we gain all the data, we have a better relationship with our consumers, we're more engaged with them, and it's best for our margins and top-line ASPs.

Speaker Change #102: We'll continue to invest in this channel and leverage the pull model and wholesale and drive this to as high as it can be. But so far across the marketplace globally, we're in really good shape.

Speaker Change #102: Got it. Well, David, if I can just do one follow-up. That's a very interesting answer, and just given...

Speaker Change #103: You know, the diversification of the UGG line, and now you're talking about Skyflow and Cielo and SkywardX, all the diversification in the HOKA line. And you mentioned starting to open up stores in both brands, which I think the diverse product stores are an unlock to that.

Speaker Change #104: It sounds like you're only going to open up, what's the unlock, what's the gating factor to deciding that maybe it's time to roll out both UGG and Hoka stores in a bigger way across the world?

Speaker Change #105: Yeah, you know, it's a good question. They're very different strategies. So in UGG, we're really employing more of a city flagship approach.

Speaker Change #104: And so we have 5th Avenue in New York, which we opened.

Speaker Change #104: A few years ago, we have a new store that's opening in Knightsbridge in London. We're looking for a flagship location, you know, similarly in Asia and China. We don't see us rolling a lot of...

Speaker Change #104: Fleet Doors for UGG, but more focused on, you know, exceptional experience and product showcasing in these larger cities and larger formats.

Speaker Change #104: Hoka is a little bit different. You know, we just opened Fifth Avenue, New York, which is doing extremely well. That's our biggest store ever and we're learning a lot there. It's early days of Hoka retail, but

Speaker Change #104: We see the demand, we see the opportunity, and we'll be a little bit more strategic and a little bit more aggressive, but we're not looking to roll out to 200 doors across the fleet. We're going to manage this tightly along with the marketplace and make sure that we have

Speaker Change #104: You know great experiences for our consumers. We are connecting with our local communities We have opportunity for that and then in big cities for our international consumers to experience the brand as well, so

Speaker Change #107: Early days, it will be an investment, and that's why apparel is so important down the road for both brands, to just kind of round out that overall assortment. But, you know, strategic, healthy, quality growth across the globe and leveraging our partners in Asia where we can to do the same.

David Powers: So, we'll continue to invest in this channel and leverage the pull model in wholesale to drive this as high as it can be. But so far, across the marketplace globally, we're in really good shape.

Jay Daniel Sole: Well, David, if I can just do one follow-up, that's a very interesting answer. And just given, you know, the diversification of the UGG line, and now you're talking about SkyFlow and Cielo and SkywardX, all the diversification in the HOKA line, and you mentioned starting to open up stores in both brands, which I think the diverse product stores are an unlock to that, but it sounds like you're only going to open up, what's the unlock, what's the gating factor to Yeah, you know, it's a good question. They're very different strategies.

David Powers: So in UGG, we're really employing more of a city flagship approach. And so we have Fifth Avenue in New York, which we opened a few years ago. We have a new store that's opening in Knightsbridge in London. We're looking for a flagship location, you know, similarly in Asia and China. We don't see us rolling a lot of fleet doors for UGG but more focused on, you know, an exceptional experience and product, showcasing in these larger cities and larger formats. Hoka is a little bit different.

David Powers: You know, we just opened Fifth Avenue in New York, which is doing extremely well. That's our biggest store ever. And we're learning a lot there. It's the early days of Hoka retail, but we see the demand, we see the opportunity, and we'll be a little bit more strategic, a little bit more aggressive, but we're not looking to roll out to 200 doors across the fleet. We're going to manage this tightly along with the marketplace and make sure that we have, you know, great experiences for our consumers.

David Powers: We are connecting with our local communities. We have an opportunity for that. And then in big cities for our international consumers to experience the brand as well. So in the early days, it will be an investment. And that's why apparel is so important down the road for both brands to just kind of round out that overall assortment.

Speaker Change #108: Understood. Thank you so much.

David Powers: But, you know, strategic, healthy, quality growth across the globe and leveraging our partners in Asia where we can to do the same. Understandable. Thank you so much. You bet. Thank you. And that concludes our question and answer session and does conclude today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #106: You bet. Thank you.

Q1 2025 Deckers Outdoor Corp Earnings Call

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