Q4 2025 Deckers Outdoor Corp Earnings Call
Good afternoon, and thank you for standing by welcome to the Deckers brands fourth quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen only mode.
Following the presentation, we will conduct a question and answer session and instructions will be provided at that time for you to queue up for questions.
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Speaker Change: I would like to remind everyone that this conference call is being recorded I'll now turn the call over to Erinn Kohler, Vice President Investor Relations and a M. P. Corporate planning you may begin.
Speaker Change: Hello, and thank you everyone for joining us today on the call as Stefano Karate, President and Chief Executive Officer, and Steve Fasching, Chief Financial Officer 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 <unk>.
Meaning of the federal Securities laws, which are subject to considerable risks and uncertainties. These forward looking statements are intended to qualify for the safe Harbor from liability established by the private Securities Litigation Reform Act of 1995.
Speaker Change: All statements made on this call today other than statements of historical fact are forward looking statements and include statements regarding our ability to respond to the macroeconomic environment and the impact on our business and operating results, including changes to global trade policy and fluctuations in foreign currency exchange rates, our current and long term strategic objectives.
The performance of our brands and demand for our products anticipated impacts from our brand product marketing marketplace and distribution strategy product development plans and the timing of product launches changes in consumer behavior or ability to achieve our financial outlook, including anticipated revenues product mix margin expense.
Speaker Change: Inventory levels promotional activity anticipated rates of full price selling and earnings per share and our capital allocation strategy, including the potential repurchase of shares.
Speaker Change: Forward looking statements made on this call represent management's current expectations and are based on information available at the time such statements were made.
Speaker Change: 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.
Speaker Change: The company has explained some of these risks and uncertainties in its SEC filings, including in the risk factors section of its annual report on Form 10-K, and quarterly reports on Form 10-Q.
Speaker Change: Except as required by law or the listing rules of the New York Stock Exchange the company expressly disclaims any intent or obligation to update any forward looking statements.
Speaker Change: Please note as previously disclosed the company effected a six per one board stocks, but during the second quarter of fiscal year 2025.
Speaker Change: Sure per share and resulting financial amounts mentioned on this call have been adjusted to reflect the effectiveness of the stock split 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 it.
Speaker Change: Constant currency basis for operations that were opened throughout the current and prior reporting period. 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.
Speaker Change: Please review our earnings release published today for additional information regarding our non-GAAP financial measures.
Stefano Karate: With that I'll now turn it over to Stefano.
Stefano Karate: Thanks, Darren good afternoon, and thank you all for joining today's call.
Stefano Karate: Let me begin by congratulating the entire Deckers organization, an another exceptional year for the full fiscal year 'twenty to 'twenty five Deckers record performance included.
Stefano Karate: Revenue growing 16% versus last year to just shy of $5 billion.
Stefano Karate: Gross margin expanding 230 basis points above last year to 57.9% operating margins, improving 200 basis points over last year to 23, 6%.
Stefano Karate: And earnings per share, increasing 30% versus last year to $6.33.
Stefano Karate: We are incredibly proud of our talented team, whose dedication has driven these exceptional results.
Stefano Karate: Our team's focus on the long term has proven to be a winning strategy.
Stefano Karate: Driving incredible progress over the past five years, including total company revenue growing at a compounded annual rate of 19%.
Stefano Karate: Coca, adding approximately $1 $9 billion of revenue.
Stefano Karate: Adding $1 billion of revenue.
Stefano Karate: Gross margin expanding 600 basis points operating margins, increasing 750 basis points and delivering an EPS compound annual growth rate of 32%.
Stefano Karate: These results demonstrate the strong foundation, we've built and provide a powerful framework and we should continue to operate.
Stefano Karate: In the nearly four months since our last earnings call Theres been a significant amount of uncertainty introduced as a result of shifting U S trade policy, while we expect impacts to our business in fiscal 2026, we do believe that our company and brands are highly capable of responding to challenges with the ability to adapt to consumer markets.
Stefano Karate: Please shifts as needed our disciplined approach has yielded two industry leading brands.
Stefano Karate: Okay.
Stefano Karate: Each with distinct products that operate in differentiated marketplaces, giving us multiple levers to adjust in this period of uncertainty we are confident in our long term strategy.
Stefano Karate: Which remains guided by consumer first mindset as we see an ability to drive increased adoption of our brands through awareness building activations globally.
Stefano Karate: Adding a product and creating meaningful connections to grow our consumer base well beyond today's footprint dead.
Stefano Karate: Dedicated to being Brian led using the strength of our authenticity to continue to gain share across expanding categories seasons and applications.
Stefano Karate: Supported by innovation focused investments.
Stefano Karate: <unk>, our unique ability to create products that are both technical and comfortable and can command leading marketplace positions all paired with our consistent globally driven approach that aims to balanced U S and international profiles as international growth Outpaces U S growth.
Stefano Karate: We also aim for a balanced channel mix of 50, 50, DTC and wholesale across the company. These building blocks of growth will be enabled by our talented and creative employees and fortified by the financial and operational discipline. We have demonstrated as we continue building for a bright future ahead.
Stefano Karate: <unk> will provide further specifics on how we're thinking about the year ahead as well as the financial recap on our fourth quarter and full fiscal year 2025.
Stefano Karate: Before that however, I will share some brand highlights from the year, just completed and some updates on how we're looking at the future of these captivating brands.
Stefano Karate: Starting with hookup, our fastest growing brand.
Stefano Karate: Global revenue in fiscal 2025 increased 24% versus prior year to $2 2 billion.
Stefano Karate: Hooker revenue growth versus last year was robust across channels and regions with wholesale revenue growing 24% outpacing door growth, indicating share gains with existing doors as we increased brand presence DTC revenue, increasing 23% driven by continued global gains in consumer acquisition and retention.
Stefano Karate: <unk>.
Stefano Karate: International revenue, expanding 39% and now representing 34% of global revenue up from 30% last year.
Stefano Karate: And U S revenue rising, 17% now totaling just under $1 $5 billion.
Stefano Karate: The HOKA brand success across channels and regions continues to benefit from efforts to build brand awareness around the world. According to our most recent proprietary your brand awareness survey consumer awareness of OCA in the U S has now reached 50%, which is a 25% increase from the same point in time last year.
Stefano Karate: And across international markets awareness has increased to an average of approximately 30% which is up from approximately 20% at this point last year.
Stefano Karate: This represents meaningful progress in our continued journey to bill hookah into a leading global performance brand.
Stefano Karate: Achieved primarily through deepening our global investments in brand building initiatives.
Stefano Karate: Adding points of distribution across key markets.
Stefano Karate: And most importantly, driving innovation with product newness and technology upgrades.
Stefano Karate: Turning hook, our retail stores and influential locations contributes to this progress and demonstrates our commitment to brand building efforts just.
Stefano Karate: Just a few weeks ago I was able to attend the grand opening of our newest hooker flagship store in Shanghai. This first of its kind flagship which were more appropriately labeling and experience center is the highest and most comprehensive expression of OCA to date.
Stefano Karate: The whole experience center feature.
Stefano Karate: Teachers, Hi Tech testing lab opened 12 consumers.
Stefano Karate: Shoot personalization station <unk>.
Stefano Karate: The community hub for hosting unique consumer experiences.
Stefano Karate: Exclusive products and much much more.
Stefano Karate: I saw firsthand the enthusiasm from people exploring the store immersed in the origins of polka throughout as they experience the full breadth of the brands innovative products.
Stefano Karate: We're still in the early stages of building out the HOKA brand's physical DTC presence.
Stefano Karate: This experience center gives us a concept of engaging elements to deploy in future locations over time at.
Stefano Karate: At the same time, we continue to leverage our valued wholesale partners to further expand the HOKA brands in store presence.
Stefano Karate: As you view, the progress and awareness both in the U S and internationally as inflection points that indicate a growing appetite for a wider hooker distribution further the HOKA brand continues to level up with global brand campaigns and major product launches.
Stefano Karate: The recent everybody Bondi campaign, our most successful globally integrated campaign to date reached a massive audience.
Stefano Karate: Generating record levels of impressions, a widespread press coverage around global markets.
Stefano Karate: On the product front.
Stefano Karate: <unk> made great strides in fiscal 'twenty, five with key advancements, including introducing category defining technology for pinnacle athletes with Cielo X one in tektronix.
Stefano Karate: Continuing to elevate well established franchises with technology upgrades to the Bondi, Clifton and Marc and diversifying the assortment and marketplace with all new innovation in run specialty focused differentiation in the Sky would ask ensky flow.
Stefano Karate: Through our most advanced innovation to date include.
Stefano Karate: Including material inform enhancements and unique geometries. The brand is expanding the aperture of consumer adoption.
Stefano Karate: What kind of has five franchises that each deliver more than $100 million of global revenue, reflecting the power of the brands top models and strength of the assortment overall.
Stefano Karate: As many of you are aware 12. These top revenue driving franchises are Bondi Clifton.
Stefano Karate: Of which are in the midst of model upgrades with Bondi nine having launched in January in Clifton 10 in April.
Stefano Karate: The consumer response and feedback from our wholesale partners has been extremely positive on both franchises with great appreciation for the enhance ride and fit of these new models over the next three months, we expect hooker to continue delighting consumers with compelling product upgrades in the Res road.
Stefano Karate: Trailed categories, including rocket sweep designed for the highest performing athletes to setting a new pace.
Stefano Karate: Alright, he eight highly anticipated redesign of our most popular motion control road running franchise.
Stefano Karate: 45 crafted to absorb the impact on the underfoot.
Stefano Karate: Unique cushioning, we're very very confident these new models will resonate well with consumers around the world.
Speaker Change: I'd like to thank and congratulate the entire hygge team on another incredible year.
Stefano Karate: Looking ahead, the global addressable market for <unk> continues to expand as more people are adopting active lifestyles. We see this as an opportunity to increase the brand's market share through a relentless focus on innovation across broader use cases.
Stefano Karate: We'd like to say that we are in the early miles of a long distance run for this powerful performance brand with a global markets in different stages of the journey.
Stefano Karate: In the United States, we developed a successful playbook.
Stefano Karate: Hooker into a top performing brand and specialty distribution.
Stefano Karate: Drive acquisition in the brand's DTC channel as consumers have the ability to engage with the full breadth of the product assortment.
Stefano Karate: Kris opportunities for new consumers to discover and experience OCA to select wholesale expansion as brand awareness grows we continue to see substantial U S market share opportunities head through control distribution increases expanded categories replenishment and further consumer acquisition in the DTC channel.
Stefano Karate:
Stefano Karate: Okay still emerging across international markets with our view that EMEA and China. The brand's two largest direct percentage growth drivers in the near term aided by distributor contributions in other markets in EMEA HOKA is moving up brand rankings with running specialty partners in the U K, Germany, France and Italy.
Stefano Karate: One of the fast growing athletic footwear brands with key influential sporting good retailers and is expanding its presence with key lifestyle Athletic partners as the brand gains recognition with the consumer in China Hook is increasing its partner footprint in key cities with strong local operators are resonating as the premium performance brand online with a high degree of <unk>.
Stefano Karate: Price selling gaining share a major road races in the region and altogether building strong community engagement through local investments partnerships and athletes sponsorships.
Stefano Karate: Through the strength of these markets, we expect to drive higher proportionately international growth in relation to the U S. As we aim for regional parity, but realize this will take time as hookah continue to expand in America.
Stefano Karate: Globally, we remain committed to bringing more consumers through the starting line.
Stefano Karate: While the origins of hookup were primarily rooted in highly technical applications.
Stefano Karate: The global consumer today has found hooker to be much more than just the most comfortable issue to wear for running down mountains.
Stefano Karate: What are they running 50 miles if five K, a brisk walk around the block.
Stefano Karate: It's simply a desire to be more comfortable in everyday life.
Stefano Karate: The applications for Hooker footwear are vast and increasing.
Stefano Karate: Our plan to inspire a growing audience to show up at Hooker starting line includes winning and road <unk>.
Stefano Karate: Eloping products that allow athletes to run faster and longer with shorter recovery times.
Stefano Karate: Dominating the trail delivering disruptive innovation across different surfaces and trains.
Stefano Karate: Igniting and scaling lifestyle, infusing hooker technology and comfort into products that authentically resonate with the lifestyle consumer.
Stefano Karate: And accelerating fitness through a lateral move with solutions that expand the use cases of our products.
Stefano Karate: Although we have solid presence today in the road and trail categories, we still see much more room to increase focus their lifestyle and fitness are still in their global infancy for hooker and we believe the brand can begin to establish meaningful market share in the years to come.
Stefano Karate: <unk> has an abundance of opportunities site and our teams are aligned on the path forward to maximize the potential of this exceptional brand for years to come move.
Stefano Karate: Moving to <unk>, which also delivered another year of outstanding performance Global revenue in fiscal 'twenty, five increased 13% versus last year to $2 5 billion.
Stefano Karate: Brand drove strong growth versus last year across channels and regions with wholesale revenue, increasing 15%, reflecting an elevated presence with key influential retailers that are enhancing the brand's global exposure.
Stefano Karate: DTC revenue rising, 11% driven by continued global gains in consumer acquisition and retention.
Stefano Karate: International revenue, expanding 20% now representing 39% of global sales up from 37% last year and.
Stefano Karate: In U S revenue growing 9% now totaling just over $1 5 billion.
Stefano Karate: <unk> built a universal love for its products through its iconic design and authentic brand codes that resonate across different categories.
Stefano Karate: This is particularly evident as we look at the brand's fastest growing styles in fiscal 'twenty five which include the Tasman.
Stefano Karate: Shoe slip a hybrid the ultra many lookout version of our original classic boot the low mill lifestyle sneaker rich with our brand DNA the diskette it platform outdoor slipper.
Stefano Karate: And the Goldstar clog is slip ons shoe with an adaptable strapped for versatile wearing these styles have a number of important traits is there further our conviction in the UGG brand's growth initiatives in the year heads, including recognizable visual identity Juran wearability global adoption and residents with male consumers.
Stefano Karate: These attributes directly influence our perspective on the brand's future growth sources, which encompass elevating and expanding the global marketplace leaning into international growth aligned with our company's objective to reach 50% of our time <unk>.
Stefano Karate: Increasing adoption for male consumers and capturing the 365 opportunity to develop your own products.
Stefano Karate: We're very pleased with progress made in the early stages of a refocus men's product initiative. Some recent wins on this front include delivering our first male focused global campaigning over five years featuring post Malone.
Stefano Karate: Launching email focused collaboration with la based designer risk Cooper.
Stefano Karate: Excuse me product with influential European footballers NBA players in Hollywood a listers.
Stefano Karate: Earning media placement across key publications like GQ sports, Esquire and height Beast.
Stefano Karate: Hoping an exclusive mens pop up so fridges in London, and tripling full price sell through of men's spring product in China during the fourth quarter, which benefited from new introductions, such as the low low mill Tasmin lug in P. Mod.
Stefano Karate: We see tremendous potential to accelerate adoption with medical <unk> and the team is working hard to make this a reality much of the UGG brand's current and future success is underpinned by increasing 365 wearability as.
Stefano Karate: As I mentioned earlier the progress we're seeing with the brand's fastest growing styles is a catalyst for continued year round adoption leveraging consumer insights and close collaboration with our wholesale partners. We're focused on extending the product wins, we're seeing with the Tasman franchise Goldman collection and low mill to put this initiative in perspective, only about a quarter of <unk>.
Stefano Karate: <unk> brands revenue comes from our first and fourth fiscal quarters, which align with the brands' spring and summer seasonal product lines. We believe I can continue to build the shoulder periods with products that are distinctly UGG and resonate with consumers year round with an increasing addressable market for the UGG brand.
Stefano Karate: With global trends continuing to shift towards casualization, I get is well positioned to gain share across geographies categories and seasons for years to come.
Stefano Karate: We have great confidence that I will continue to drive growth in the U S and further believe that the brand with significant long term growth capture with come from international markets.
Stefano Karate: I guess proven to be highly resilient with consumers in turbulent times.
Stefano Karate: And we believe the brand is well situated to deliver sustained success over the long run.
Stefano Karate: I want to congratulate and thank the entire team for their delivery of another outstanding year.
Stefano Karate: And I very much look forward to their continued success with that I'll hand over to Steve to provide further details on our fourth quarter and.
Steve Fasching: And full fiscal year 'twenty five results as well as our initial thoughts on fiscal year 'twenty six.
Steve Fasching: Thanks, Stefano and good afternoon, everyone.
Stefano Karate: Echo Stefanos commentary that highlights Deckers exceptional performance in fiscal year 2025, as we drove our fifth consecutive year of double digit revenue and earnings per share growth OCA continues to gain market share with performance runners while also continuing to expand its addressable market by building global awareness.
Stefano Karate: In attracting consumers, who want to wear more technical and comfortable footwear for a variety of use cases.
Stefano Karate: <unk> continues to build share across genders generations, and geographies inspiring brand love and consumer adoption for a variety of unique product franchises that span across seasons.
Stefano Karate: Both of these leading brands are succeeding by putting the consumer first driving strong loyalty through compelling and continuous product innovation that maintains their distinct respective brand codes looking ahead, while the macroeconomic environment remains fluid and there is greater uncertainty around consumer spending we remain.
Stefano Karate: <unk> to our fundamentals deckers flexible operating model and disciplined approach to financial management allows us to be nimble and navigate the current economic environment with confidence.
Stefano Karate: Further we exited fiscal year 2025, and a position of outstanding financial strength as our profitability profile and rock solid balance sheet reinforce our ability to continue investing behind our long term strategies.
Stefano Karate: With that let's get into a recap of our fourth quarter and full fiscal year 2025 results.
Stefano Karate: For the fourth quarter revenue came in at 1.02 billion, representing an increase of 6% versus the prior year performance in the quarter was driven by HOKA, and UGG, which saw increases of 10% and 4% respectively.
Stefano Karate: For Hooker Global wholesale was the primary driver of growth in the fourth quarter as the brand benefited from expanded distribution and sell in of the Bondi nine that launched in mid January and experienced strong sell through in the channel throughout the quarter as many consumers sought out new products in store.
Stefano Karate: From a DTC standpoint, the HOKA brand drove a 3% increase versus last year, which reflected continued strong growth from international regions and a slight decline in the U S. Due to some unique factors in the quarter.
Stefano Karate: These included consumers opting to explore and purchase new product updates in store higher levels of promotion on outgoing models and slower new consumer acquisition in the face of macroeconomic uncertainty.
Stefano Karate: In the near term this has put pressure on the HOKA brand's DTC growth. We are encouraged by the online retention metrics from repeat consumers in both the U S and internationally and expect this trend to improve following the first fiscal quarter.
Stefano Karate: On the UGG brand's fourth quarter performance wholesale was also the primary driver of global growth in the fourth quarter as the channel benefited from selling of transitional styles like the low mill Sneaker and addition to spring season sandals from the Goldman collection.
Stefano Karate: DTC was down 3% versus last year in the fourth quarter, primarily due to limited availability of key styles. During the quarter. This year as a result of strong sell through earlier in the year, whereas last year's fourth quarter benefited from third quarter back order fulfillment.
Stefano Karate: Gross margin in the fourth quarter was 56, 7% a 50 basis point increase from the prior year period. The improved gross margin primarily relates to benefits from higher levels of full price selling for <unk>.
Stefano Karate: And favorable brand and product mix, primarily due to higher margin products within <unk>.
Stefano Karate: Driving a larger percentage of growth with partial offsets from increased freight costs, though less than what we anticipated unfavorable channel mix shifts with wholesale growing faster than DTC and unfavorable foreign currency exchange rates.
Stefano Karate: SG&A for the quarter was $406 million.
Stefano Karate: Representing 39, 7% of revenue, which compares to last years $395 million and 41, 2% of revenue.
Stefano Karate: SG&A as a percentage of revenue was down 150 basis points year over year, primarily due to favorable impacts of foreign currency exchange rate Remeasurement.
Stefano Karate: These results drove diluted earnings per share of $1, which compares to 82 in the prior year period, representing a 22% increase.
Stefano Karate: Our fourth quarter closed out another impressive year for Deckers for full fiscal year 2025 results included <unk>.
Stefano Karate: Revenue, increasing 16% versus last year to a record $4 98 6 billion.
Stefano Karate: As compared to last year revenue growth was driven by the HOKA brand delivering an incremental $426 million to eclipse $2 2 billion.
Stefano Karate: Annual revenue with double digit percentage gains across all regions and channels and.
Stefano Karate: And broad based outgrowth as the brand grew 13%, surpassing $2 5 billion of revenue led by growth from international markets.
Stefano Karate: Gross margins for the year were 57, 9% up 230 basis points versus last year. The increase in gross margin was primarily related to favorable brand and product mix shifts with our highest margin products driving the majority of growth and favorable full price selling as the brand <unk>.
Stefano Karate: Levered, a near 60% gross margin with partial offsets from increased freight costs across all brands.
Stefano Karate: SG&A dollar spend for the year was $1 71 billion up 17% versus the prior year, one $4 6 billion.
Stefano Karate: SG&A represents 34, 2% of revenue, which is slightly above last year's rate of 34%.
Stefano Karate: Key areas of increased investment in fiscal year 2025 included higher marketing spend including successful strategic spend that amplified HOKA global awareness and increased investment supporting our growth initiatives.
Stefano Karate: Investments in talent to support key functions and infrastructure investments and related depreciation to support the continued growth of our organization.
Stefano Karate: This all resulted in a full fiscal year 2025 operating margin of 23, 6%, which is 200 basis points above last year, primarily reflecting the improvement in gross margin experienced.
Stefano Karate: Our top tier operating margin reflects another year of exceptionally low levels of promotional activity, coupled with better than expected returns on our marketing investments.
Stefano Karate: We are incredibly proud of the disciplined marketplace management and well targeted spend that contributed to these results. We are mindful of the current consumer environment and would not expect for these dynamics to be as favorable in the year ahead.
Stefano Karate: For the full year, our effective tax rate was 22, 3%, which is slightly below last year's 22, 4%.
Stefano Karate: Our record breaking performance, coupled with a lower share count from share repurchase activity and increased interest income on our strong cash balance culminated in a record diluted earnings per share of $6 33.
Stefano Karate: Which represents a 30% increase over last year's $4 86.
Stefano Karate: Turning to our balance sheet at March 31, 2025, we ended the year with $1 9 billion of cash and equivalents inclusive of repurchasing $567 million worth of shares in the year driven by back to back years of delivering a free cash flow above 900.
Stefano Karate: Million.
Stefano Karate: Inventory was $495 million up 4% versus the same point in time last year and during the period, we had no outstanding borrowings.
Stefano Karate: For the year. These results once again returned invested capital above 35%.
Stefano Karate: During the fourth quarter, we repurchased approximately $266 million worth of shares at a weighted average price per share of $149 62.
Stefano Karate: For the entire fiscal year 2025, we repurchased three 8 million shares for approximately $567 million at a weighted average price per share of $149 in 'twenty one.
Stefano Karate: Moving to our forward looking update as a result of macroeconomic uncertainty related to global trade policy, we will not be providing a formal outlook for fiscal year 2026 at this time, but would like to provide insights into how we are thinking about the year ahead.
Stefano Karate: Prior to the introduction of tariff uncertainty aligned with our longer term aspirations, we were targeting our brands to deliver another year of double digit growth led by mid teen growth from HOKA and mid single digit growth from <unk>.
Stefano Karate: Based on the tariffs as of today's date, which are still subject to change we expect to face an increase of up to $150 million to our cost of goods sold in fiscal year 2026, with the related yet to be determined impact to demand.
Stefano Karate: From a sourcing perspective less than 5% of our footwear production comes from China, some of which would not be routed for sale into the U S. The remainder of our production comes from Southeast Asian countries, primarily Vietnam.
Stefano Karate: Our teams are closely monitoring changes to tariff policies and continue to evaluate levers to mitigate the impact on our business, including but not limited to flexing the pricing power of our brands, which we are assessing for strategic selective and staggered implementation in the U S market and Nick.
Stefano Karate: <unk> cost sharing with our factory partners.
Stefano Karate: Although even with these mitigation efforts, we expect to absorb a portion of the tariff impact as we do not anticipate that these actions will fully offset incremental costs in fiscal year 2026.
Stefano Karate: We also believe there is potential to see demand erosion associated with the combination of price increases and general softness in the consumer spending environment.
Stefano Karate: Furthermore, our approach to fiscal year 2026 remains consistent with long term objectives highlighted by the following framework.
Stefano Karate: From a revenue perspective, we expect <unk> to continue as our fastest growing brand of to grow as it builds on top of impressive recent momentum international growth to outpace the U S and wholesale to likely outpace DTC, particularly for HOKA as we view increased awareness as an inflection point.
Stefano Karate: Strategically expand points of distribution for a growing consumer base to experience the brand.
Stefano Karate: We have a healthy order book across both brands that has not experienced material changes year to date, but would note we have yet to see the full impact of the tariff implementation.
Stefano Karate: We have existing and new partners, who want to support the HOKA brand with incremental doors, we will continue to be selective about where and how many additional doors are open but believe this is a great opportunity for <unk> to acquire new consumers through brand discovery at wholesale.
Stefano Karate: At the same time <unk> continues to bolster its position as a leading premium lifestyle brand and there continues to be more demand from wholesalers than we've been willing to fulfill.
Stefano Karate: From a gross margin perspective, we are facing a number of headwinds that include increased tariffs higher levels of promotion relative to the exceptionally low levels experienced over the last couple of years.
Stefano Karate: Unfavorable impacts from more expensive upgraded materials absorbed into our margins and higher ocean freight rates in the first half.
Stefano Karate: We believe these headwinds can be fractionally offset by selective and staggered price increases in the U S and partial cost sharing with factory partners.
Stefano Karate: Overall this is expected to result in a decline in our gross margin relative to the record high of 57, 9% achieved in fiscal year 2025.
Stefano Karate: On the SG&A front, we are planning to largely keep our planned investments in tact as the strength of our operating model continues to fuel the future of our brands. We will continue to tightly manage our expenses and drive efficiencies, but at the same time provided the ability to grow brand awareness and share we will look to invest in our brands.
Stefano Karate: This could result in a short term increase in our SG&A expense ratio to revenue, but we believe over the longer term better positions our brands in the global marketplace.
Stefano Karate: Overall, we are viewing the current environment as an opportunity to flex our best in class operating model and free cash flow generation.
Stefano Karate: We plan to invest in variable areas, where we have a proven ability to adjust if necessary Keith.
Stefano Karate: Keep in mind, our investments drove better than expected returns in fiscal year 2025, as evidenced by our 23, 6% operating margin.
Stefano Karate: While we expect to continue investments that support strategic areas of growth. We are actively engaged to drive efficiencies in other areas of the business that can help offset some of these incremental investments our ability to continue investing in alignment with our long term strategy is something we see as a competitive advantage with a normalized.
Stefano Karate: Consumer environment, we believe we can deliver leverage in the coming years.
Stefano Karate: Similar to how we're looking at SG&A, we expect to deploy focused capital expenditures in the range of $120 million to $130 million to support the future of our company.
Stefano Karate: Further as we lean into our strong cash position, thus far in the first quarter of fiscal year 2026, as our subsequent event date of May nine 2025, we have repurchased approximately $84 million worth of shares at a weighted average price per share of $109 75.
Stefano Karate: As of May nine 2025, the company is still had approximately $291 million remaining under its stock repurchase authorization.
Stefano Karate: As announced today the board of Directors approved an increase of 2.25 billion on top of the company's existing stock repurchase authorization, bringing the total amount authorized to $2 5 billion.
Stefano Karate: Representing more than 10% of our current market capitalization.
Stefano Karate: We believe this highlights the board's confidence in our strategic plan and allows us to be opportunistic in our approach to repurchasing shares.
Stefano Karate: While it is not our practice to provide quarterly guidance and we do not intend to do so going forward in light of the current environment, we want to provide our outlook for the quarter ending June 30 for.
Stefano Karate: For the first quarter of fiscal year 2026, we expect revenue to be in the range of $890 million to $910 million with HOKA, increasing at least low double digits and increasing at least mid single digits.
Stefano Karate: Gross margin is expected to be down approximately 250 basis points versus last year due to higher freight cost expense relative to last year increased promotional activity as we lapped exceptionally low levels in the prior year and channel mix headwinds with wholesale growing faster than DTC.
Stefano Karate: SG&A is expected to increase slightly faster than revenue in the period as we prioritize disciplined and efficient spend while investing in brand building marketing.
Stefano Karate: Diluted earnings per share is expected to be in the range of 62 to 67.
Stefano Karate: As compared to last year's stock split restated 75.
Stefano Karate: As Stefano mentioned Deckers has the experience and resilience to operate from a position of strength. During this period of uncertainty we have premium brands that are in demand distinctive and have proven capability of delivering category, leading growth coupled with our powerful financial model that generates top tier levels of <unk>.
Stefano Karate: <unk> ability free cash flow and return on invested capital, giving us one of the healthiest debt free balance sheets in our sector with $1 9 billion of cash and an increased share repurchase authorization that now totals $2 5 billion. We are capable of continuing to return value to shareholders even.
Stefano Karate: And a more challenged environment.
Stefano Karate: I remain confident in the opportunities ahead for <unk> and look forward to sharing our continued progress in fiscal year 2026.
Stefano Karate: Thanks, everyone and with that I'll now hand off the call to Stefano for his closing remarks. Thank you Steve fiscal 'twenty 25 was a record setting year.
Stefano Karate: With industry, leading growth from <unk>.
Stefano Karate: Gross margin and operating margin expanding to new Heights.
Stefano Karate: And disciplined financial management further bolstered the strength of our balance sheet.
Stefano Karate: As we turn the page to fiscal year 2026. It is clear that we're operating in a very different environment.
Stefano Karate: Our strategy and the significant opportunities ahead for.
Stefano Karate: <unk> remained consistent.
Stefano Karate: We will take advantage of our best in class operating model and continue advancing towards building <unk> to become a leading performance brand through disruptive innovation elevating our global brand status.
Stefano Karate: Spending our DTC business through consumer acquisition, and retention and increasing our international business through the implementation of our successful playbook.
Stefano Karate: Before we turn to Q&A I'd like to address the board chair succession, we announced this afternoon.
Stefano Karate: As you saw Cindy Davis was named our next board chair, succeeding Mike Devine, who is retiring from the board after nearly 14 years of service, including six years as chair.
Stefano Karate: We are deeply grateful for Mike's incredible dedication deckers over the years.
Stefano Karate: His leadership during a period of immense growth and evolution.
Stefano Karate: Ill put us in a strong position we're in today.
Speaker Change: On a personal note I am extremely thankful to Mike for his support during my transition and all.
Speaker Change: Also like to congratulate Cindy on her new role.
Speaker Change: As they're iconic brands continued to gain momentum on a global scale, we know the cintas expertise and experienced on our board over the last seven years will be integral to our continued success on behalf of our management team I'd like to thank our employees around the world for their continued successful execution of our strategies and their continued dedication to building a bright future.
Speaker Change: For decades.
Speaker Change: Thank you all for joining today's call and thank you to our shareholders for your continued support.
Speaker Change: With that I'll turn the call over to the operator for Q&A.
Speaker Change: Thank you 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 and if you'd like to withdraw your question again press Star one.
Speaker Change: Also ask that you limit yourself to one question and one follow up your first question comes from the line of Jonathan Komp with Baird. Please go ahead.
Jonathan Komp: Yes, hi, good afternoon, I wanted to ask you about the slowdown in <unk>.
Speaker Change: Steve to see Steve I know you mentioned several factors contributing I don't know if you can give a little more color to the magnitude of those impacts and maybe just a broader question. What gives you confidence that there is not a broader change in the competitive dynamics in the trail.
Speaker Change: Road category.
Speaker Change: And youre still working to establish their lifestyle and fitness.
Speaker Change: Yes. Thanks, John This is Steve I'll start and then I think Stefano can jump in too I think as I said.
Speaker Change: The prepared remarks.
Jonathan Komp: Isolated in terms of some of the pressure that we saw in the U S. In DTC.
Jonathan Komp: In the U S. When you look at it in terms of dollars right, it's not huge dollars, but it is impacting the percentages.
Jonathan Komp: I think when we look at the international business the international DTC business did incredibly well.
Jonathan Komp: So that's where I think some factors were unique to the U S market.
Jonathan Komp: I think we knew there would be some pressure on the DTC business. So not entirely surprised by that performance generally where the quarter came in is where we expected to come in.
Jonathan Komp: Not too surprised there very encouraged by the international business and very encouraged by the wholesale business. So as we expanded distribution. We saw very strong sell through with that expanded distribution, which we knew would put a little bit of pressure in the near term.
Jonathan Komp: As I said in the prepared remarks, we expect a little bit of near term pressure in DTC in the U S for a number of factors as we called out but once we get beyond Q1.
Jonathan Komp: With the success that we're seeing with the new introductions and hookup, we're encouraged youre going to start to see those numbers of group.
John Hayes: Yes, John Hayes.
John Hayes: Remember the Q4 was our biggest quarter ever for OCA.
Jonathan Komp: And we grew furnace and $5 million year over year.
Jonathan Komp: And I personally never felt stronger about the power of this brand.
Speaker Change: <unk> that was in place as well as the financial model and we see no change to our long term expectations.
Speaker Change: Okay, and maybe just one follow up I know I know you mentioned Q1 or at least slow double digit total global growth for <unk>.
Speaker Change: And it sounds like the U S could improve after Q1, so just yet.
Jonathan Komp: Or are there still scenarios, where you think your mid teens or higher growth for the year as possible and then thinking about the long term aspirations for how would you frame up sort of the importance in relative size.
Jonathan Komp: The potential for the lifestyle and fitness and some of the emerging categories. Thanks again.
Jonathan Komp: Yeah sure. Thanks, John I'll start and staff retention have been but we're encouraged by where <unk> is growing I think as I said, we havent given full year guidance. We gave you a bit of a framework of how we're thinking about the brands, we're very encouraged with the opportunity that okay.
Jonathan Komp: In the U S and internationally as we've said for a couple of years, we knew that the growth rate internationally would outpace what we're seeing in the U S. We're very encouraged with the strong progress that we're seeing and making on the international front I think what's also encouraging to your point is when we look at awareness.
Jonathan Komp: We've continued to grow awareness.
Jonathan Komp: We're still growing the brand.
Jonathan Komp: A lot thats going on in the U S. Since the beginning of January we know that that's had a bit of an impact on the consumer.
Jonathan Komp: Also had model changeovers, we've expanded wholesale distribution all of that is putting a little bit of pressure on DTC I would be careful to put too much on just one number in DTC in the U S. We're seeing incredible results across the globe. We are very encouraged with the progress that we're making.
Jonathan Komp: The feedback that we're getting from wholesale is very encouraging we're seeing strong sell throughs with OCA.
Jonathan Komp: So again don't judge one quarter on what the potential is that's our framework and I think why it was important to lay it out there we do see this.
Jonathan Komp: In a normalized environment in terms of mid teen grower I think what we are dealing with right now is with all the noise going on in the U S economy, it's hard to gauge what impact that demand is going to have.
Jonathan Komp: And Thats, where we want to kind of see things play out, but we're encouraged with where <unk> is and the opportunity. It has in front of it.
John: Yes, John.
Speaker Change: As we said previously we're playing the long game okay.
Speaker Change: The enormous potential across regions.
Speaker Change: <unk> categories seasons, the total addressable market to Hooker compete 10 is very very sizable so plenty.
Speaker Change: Plenty of opportunity for us.
Speaker Change: Running in trail and high.
Speaker Change: Fitness lifestyle.
Speaker Change: Despite our gains in.
Speaker Change: Brand awareness.
Speaker Change: Keep in mind, we still have plenty plenty of opportunity here in the U S and internationally.
Speaker Change: You asked why don't 5 billion approximately.
Speaker Change: It's one third of that internationally.
Speaker Change: The upside is very significant.
Speaker Change: And vis vis our competitors, we're still relatively underpenetrated and as our product offer expand across these categories will be able to better segment, the market and expand distribution both in DTC and wholesale.
Speaker Change: With new partners and also existing partners. So we're very very positive about the future of this brand.
Speaker Change: Great. That's very helpful. Thank you.
Jay Sole: Your next question comes from the line of Jay sole with UBS. Please go ahead.
Speaker Change: Terrific. Thank you so much.
Speaker Change: I'm curious just about in the fourth quarter for <unk> can you just talk about units versus Asps maybe.
Speaker Change: Maybe you can give us a little bit more color on how you felt about the transition to the bundled items eclipsing 10 was executed over over the quarter and here into Q1. Thank you.
Speaker Change: Yes, Jay I think clearly one of the impacts that we have is with the model changeovers. So there was more price promotion, which impacted revenue right but volumes.
Speaker Change: We're still strong so we did see some topline dollar pressure as a result of promotions in the quarter, but volumes still healthy now there is a little bit of shift too in terms of where some of that volume went with the wholesale expansion year on year comparison. So again. This is where I think there has been a lot of attention on the DTC performed.
Speaker Change: Without necessarily recognition of the strategic nature of our wholesale expansion. So generally what we saw was very encouraging.
Speaker Change: Good to see kind of how that transition with the Clifton and Bondi have occurred kind of since the beginning of January and the feedback again has continued to be strong as we closed out those older models and transition to the newer models.
Speaker Change: Got it and then if I can just ask you about the $150 million in tariff cost is that sort of like the unmitigated costs and then.
Speaker Change: The assumption that you can like you said you can take some price can share some cost of your vendors. So the overall net number will be less so just wanted to make sure. We've got the one thing it is a gross number or net number.
Speaker Change: Correct. Yeah. So the 150 is a gross number in terms of how we're looking at is still working through the details. We do kind of have a three pronged approach. So looking again at price movements using some of our pricing power, but we probably know we have more pricing power than what we may take the price up too. So you know to your point the one.
Speaker Change: He is a gross number and then we would look to recapture maybe up to half.
Speaker Change: Understood great.
Speaker Change: Great. Thank you so much.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Laura.
Speaker Change: <unk> with BNP Paribas. Please go ahead.
Speaker Change: Good afternoon, and thank you very much for taking my question, Steve I recognize you're not guiding for the year, but you did provide a framework that calls for <unk> to grow mid teens.
Speaker Change: How are you thinking about that framework between the HOKA DTC and wholesale.
Speaker Change: And then the full year framework of mid teens growth for Hooker Wood is evident included the guide that you're actually giving us for <unk> Q in terms of low double digit growth for HOKA.
Speaker Change: So.
Speaker Change: I didn't quite follow the last part of the question. So I think and I'll, let you follow up but let me just kind of address the first part. So I think it's we're looking at the current year, we have some.
Speaker Change: <unk>, specifically related to tariffs and how that's going to impact demand in the U S and that's where we're holding back on our full year guide at this point.
Speaker Change: In terms of how we think about okay. Yes, that's the right framework part of this year. We do know is as we've expanded U S. Wholesale distribution. So we've included more doors and that's been intentional and strategic to bring more consumers into the brand.
Speaker Change: It has also taken advantage of some of the growing awareness of the HOKA brand.
Speaker Change: That's all been intentional I think what we're waiting to see as we get into later months of this year, what does price adjustments.
Speaker Change: On the consumer what else is going on in the economy in the U S. So we think this is the demand pressures are largely related to the U S. We still want to sort that out again in a normal environment, we would see mid teen growth, we think with OCA.
Speaker Change: And then we will see it may be more or less than kind of what we're thinking in terms of what that pressure is on kind of on the consumer and I'll, let Stephen jump in here El Dorado, what is very encouraging is that.
Speaker Change: Our biggest two updates Bondi noninterest container are performing very well in the marketplace here in the U S and internationally.
Speaker Change: Across all channels.
Speaker Change: We're about to introduce one of.
Speaker Change: Our other top five franchises most.
Speaker Change: The motion control issue.
Speaker Change: And the read on the shoe so far from people outside of it.
Speaker Change: Very very strong.
Speaker Change: We have a strong pipeline of products.
Speaker Change: And at the end of this year in the back half of the year.
Speaker Change: We'll continue to monitor.
Speaker Change: And then I think the second part of your question was around the Q1 guide and was that pre tariff our posts here. So that is post Tara I think just to provide some perspective on that recall. So tariffs are in place. So we are incurring.
Speaker Change: Higher tariff in Q1 with Q1 does not include is any price increases right. So we're not.
Speaker Change: To mitigate any of the tariff impact that is included in that Q1 guide because that won't come until after Q1, So what youre seeing in our Q1 guide is kind of as of today, what we know from a tariff front.
Speaker Change: It does not include any of the mitigating factors of price adjustments for cost sharing with partners.
Speaker Change: Very helpful and then as a follow up.
Speaker Change: Now how much legacy product you have in the marketplace.
Speaker Change: When do you expect DTC to accelerate and then I think you mentioned that international was 30% flat.
Speaker Change: Last year last fiscal year.
Speaker Change: Our fiscal year 'twenty five it was 34% should we assume it goes to like something like 37% for fiscal 'twenty six is that a right frameworks.
Speaker Change: Yes, again, so we're not giving specific numbers in terms of growth, but what we are encouraged by is the continued success that we're seeing on the international front. So again, we haven't given specific guidance numbers on the full year, but we are very encouraged with.
Speaker Change: The continued progress that we're making on the international front.
Speaker Change: And then I think there was one more part yeah. The first part was just on how.
Speaker Change: How much legacy product you have I mean, just.
Speaker Change: Out there in the marketplace like do you think the marketplaces clean following the Bondi Clifton transition to upgrade cycle.
Speaker Change: Yeah Bondi H.
Speaker Change: Or pretty much liquidity in the marketplace, there's not a huge hangover of kryptonite they may be summarized in that marketplace, but not.
Speaker Change: Not huge positions.
Speaker Change: Okay. Thank you very much and best of luck.
Laura: Thank you Laura.
Speaker Change: Your next question comes from the line of Sam Poser with Williams trading. Please go ahead.
Laura: Thank you very much bye bye.
Speaker Change: Here one on the inventory.
Speaker Change: When we think about inventory at the end of Q1 are you going to be pulling forward or you try to pull forward stuff.
Laura: On the risk of what could happen on July nine I guess.
Laura: It's really been.
Laura: And then how should we think about where your inventory is going to be.
Laura: The end of the first quarter.
Laura: Yes, I think comparatively speaking to prior years, you are going to see a bigger increase in inventory a couple of reasons for that one as you said Sam is how we're taking a look at tariffs and bringing inventory in a little bit earlier in the U S.
Laura: The other call out I would say is that we are going through a DC transition in Europe. So we've brought more inventory in early to mitigate any.
Laura: Potential issues with that warehouse transfer, so youre going to see inventory increasing intentionally more this year early on compared to last year as we navigate kind of those two events.
Laura: As you know our inventories incredibly lean and tight.
Laura: And well managed.
Speaker Change: Thanks, and then secondly.
Speaker Change: Can you talk a little bit you talked about your wholesale expansion in the U S or globally, but really in the U S. Can you talk about sort of how you're approaching that with both <unk> and <unk>.
Speaker Change: So what you know.
Speaker Change: The decision making factors.
Speaker Change: In that.
Speaker Change: More specifics would be great.
Speaker Change: Yes, the decision, making factors other same door productivity turns.
Speaker Change: We are growing revenues faster than door expansion in the U S and internationally this past year and.
Speaker Change: That is still the plan for the foreseeable future.
Speaker Change: In terms of expansion we are.
Speaker Change: We did a test with journeys, which aren't well to try to attract a younger consumer that will be systematically and slowly expanding with them. We are adding a few more doors with.
Speaker Change: Some of our partners in sporting goods and in athletic specialty both here and internationally with the likes of interest for us for check.
Speaker Change: The JD group that cross.
Speaker Change: <unk> divisions.
Speaker Change: Et cetera.
Speaker Change: Thanks, and then and then lastly.
Speaker Change: Are there any new model are you are you working on some new models that nobody's seen yet maybe thinking silhouette changes.
Speaker Change: Breakthrough ideas from silhouette.
Speaker Change: Sure.
Speaker Change: Maybe less lower Max cushioning or the mini Max cushioning idea or anything like that in the offing.
Speaker Change: Oh, Yes, we had a strong pipelines of products that are being presented as we speak.
Speaker Change: For spring, 726%, including some lower profile.
Speaker Change: For instance.
Speaker Change: A product that has performed well for us, especially our higher tiers of distribution is in the hottest speed light.
Speaker Change: That is that resonating with consumers also speak to again small carriage in.
Speaker Change: High end <unk>.
Speaker Change: Nicole energy distribution is off to a great start so the team is working.
Speaker Change: At.
Speaker Change: Broadening our pallet.
Speaker Change: Alright, Thank you very much.
Speaker Change: Your next question comes from the line of John Kernan with TD Cowen. Please go ahead.
John Kernan: Good afternoon, and thanks for taking my question.
Speaker Change: Sure.
Speaker Change: Question is on wholesale obviously AGA outperformed your expectations pretty significantly in the fourth quarter. Just curious if you could give more color on <unk>.
Speaker Change: And by region channel and how Youre thinking about fiscal 'twenty six.
Speaker Change: I guess has the more color based on his iPad.
Speaker Change: And as I said previously we are no longer compete.
Speaker Change: Lipper category.
Speaker Change: Now also competing across.
Speaker Change: Different segments handle sneaker clogs.
Speaker Change: In very distinctive in one of our new segments.
Speaker Change: Such as the slipper sneaker hybrid.
Speaker Change: Had a lot of success with.
Speaker Change: Ah.
Speaker Change: New products.
Speaker Change: Such as.
Speaker Change: The low now and some of the new sandals like the Golden glow rise that we introduced this season really across the globe most interesting our men's business.
Speaker Change: Turning to outpace our women's business. So that's an area. We will continue to invest in so we feel very strongly about that Bryan this year and beyond yes, and John I think good question I think just to clear up because there was a lot of discussion in terms of.
Speaker Change: Perception of the brand as we entered Q4 now what Youre seeing with the results is the strong performance of <unk>. Its an indication of how strong the demand is for.
Speaker Change: I think as we've said for years now and in terms of a scarcity model approach there are going to be times, where you're going to run lean on inventory and that is what contributes to these high levels of gross margin that we've delivered. Another example, again is what we just delivered in Q4 the demand for us remains incredibly.
Speaker Change: Really strong <unk> and <unk>.
Speaker Change: That's across the globe.
Speaker Change: What we were able to do with bringing in a little bit more inventory to expedite it in terms.
Speaker Change: The quarter Thats, what helped contribute to a stronger performance, but I think the point here is we're going to manage inventory, we manage a scarcity model.
Speaker Change: When we run low it's helping us maintain high levels of gross margin.
Speaker Change: Increased levels of profitability and so again, another strong brand and a great performance in the fourth quarter.
Speaker Change: And I think just a demonstration of how strong the demand continues for <unk>. So good question and I appreciate you, bringing it up.
Speaker Change: You bet just one more for me.
Speaker Change: How should we think about.
Speaker Change: These new wholesale partner doors for HOKA.
Speaker Change: Globally, both domestically and internationally.
Speaker Change: Stores do you think you have the biggest opportunity.
Speaker Change: Which account to the biggest Australia.
Speaker Change: As I mentioned.
Speaker Change: Channel.
Speaker Change: We have opportunity like specialty and sporting goods.
Speaker Change: Both here and internationally.
Speaker Change: As I said.
Speaker Change: We're much more underpenetrated than many of our competitors.
Speaker Change: Our offer expand we will be able to.
Speaker Change: Offer different channels and different accounts.
Speaker Change: Proposition.
Speaker Change:
Speaker Change: We feel good about where we are we feel good about where our marketplace plays out across regions.
Speaker Change: Got it thank you.
Speaker Change: We have time for one more question and that question comes from Rick Patel with Raymond James Financial. Please go ahead.
Rick Patel: Thanks, Good afternoon.
Rick Patel: Question on HOKA being planned mid teens before the escalation of tariffs. So is there something that youre seeing in the wholesale order book for this fall and the way that consumers are shopping that leads you to have a more conservative view with a near term planned up low double digits.
Rick Patel: Yeah, I think Rick and I. Appreciate the question as I said in the prepared remarks, our order books remained strong we haven't seen.
Rick Patel: Any fall out at this point, but we.
Rick Patel: We see things on a macro element shifting right and we see low levels of consumer sentiment again, largely attributed to the U S market, we're not seeing anything on the international front International front continues to be very strong the orders that we're seeing in the U S continues to be very strong it's really just.
Rick Patel: US being a little cautious in terms of what the consumer response may be in the fall. So there arent any indications yet, but we expect that there may be and those are hard to predict.
Rick Patel: And so again people will begin to see higher prices across many things that they are purchasing we don't know what the fallout is on what purchasing intent is.
Rick Patel: We will see again, why we're not guiding to the full year yet.
Rick Patel: Once we have more certainty and we can can see how that impacts.
Rick Patel: The U S consumer that will be in a better position to give some guidance on that.
Rick Patel: And also have a question on the go to market strategy for OCA in the U S.
Rick Patel: Sounds like you are more willing to lean into the wholesale channel. This year than you have in the past maybe just some color on the thinking behind that.
Speaker Change: How we should think about the long term potential of the DTC channel, which I think historically has been a strategic priority for you.
Speaker Change: Yeah.
Speaker Change: Our long term aim is to have a 50 50 split between DTC and wholesale it keep in mind that the DTC for us.
Speaker Change: By and large.
Speaker Change: E Commerce, we have a very very small retail footprint in the U S and internationally a bit more in Asia, which will gradually expand as we find the right locations.
Speaker Change: So we're leaning on our wholesale partners and as I said as that offer expand we'll be able to segment the marketplace offer differentiated propositions and but we're very reflective of continued with very selective we have more asks.
Speaker Change: Then.
Speaker Change: Then what we grant in terms of distribution and we've been speaking to it widely.
Speaker Change: The wide variety of potential partners, but we want to make sure we do it the right systematically and methodically as we done until now.
Speaker Change: Yeah, and I think Greg just one more thing on that because.
Speaker Change: As you've heard us talk about it kind of in FY 'twenty five and now FY 'twenty. Six this is not a change in our strategy. This is us taking advantage of the opportunity presented to us with a growing awareness consumers looking for more places to find our product so working with the right strategic partners and wholesaler. So this is an opportunity to get.
Speaker Change: Product in front of consumers, who are searching our brand, yes, we recognize that it puts a little bit of pressure in the near term on some of that DTC comp data.
Speaker Change: But as I said in my prepared remarks, once we get beyond Q1, our expectation is you're going to see some improvements there I think the other callout and we are talking about it again in our prepared remarks is with new model changeovers. One of the dynamics that we saw since January is that customers wanted to go see feel and try on.
Speaker Change: The product and that helped contribute to the strong wholesale performance that we saw so there was a willingness on the part of the consumer to go into a physical retail presence define the issue to try it on because these were significant upgrades to our models that put a little bit of pressure on PTC. So again, yes, the numbers were a little bit lower than <unk>.
Speaker Change: <unk> seen historically not a change in strategy, we are confident that theyre going to return to their unique dynamics that happened between January and now that have affected the DTC comp growth, we're not concerned about that with these unique factors our ability to continue to grow this.
Speaker Change: But we're going to feel some pressure as we've opened up these points of distribution. So that's some of the near term pressure that youre seeing.
Speaker Change: Really helpful. Thank you.
Speaker Change: And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation and you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.