Q2 2026 Deckers Outdoor Corp Earnings Call

Speaker #1: Good afternoon and thank you for standing by . Welcome to the Deckers Brands second quarter fiscal 2026 earnings conference call . At this time , all participants are in a listen only mode .

Operator: Good afternoon, and thank you for standing by. Welcome to the Deckers Outdoor Corporation second quarter fiscal 2026 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference call, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded. I'll now turn the conference call over to Ms. Erinn Kohler, Vice President, Investor Relations and Corporate Planning. Please go ahead, ma'am.

Speaker #1: 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 #1: 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.

Speaker #1: I'll now turn the conference call over to Ms. Erin Kohler, VP of Investor Relations and Corporate Planning. Please go ahead, ma'am.

Speaker #2: Hello and thank you, everyone, for joining us today. On the call is Stefano Caroti, President and Chief Executive Officer, and Steven Fasching, Chief Financial Officer.

Erinn Kohler: Hello, and thank you everyone for joining us today. On the call is Stefano Caroti, 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 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 #2: 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 .

Speaker #2: 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 #2: 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 dynamic macroeconomic environment and the impacts on our business and operating results , including as a result of changes to global trade policy , tariffs , pricing actions and mitigation strategies , and fluctuations in foreign currency exchange rates .

Erinn Kohler: 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 dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy, tariffs, pricing actions, and mitigation strategies, and fluctuations in foreign currency exchange rates.

Speaker #2: Our current and long term strategic objectives , including continued international expansion , the performance of our brands and demand for our products . Anticipated impacts from our brand , product , marketing , marketplace and distribution strategies , product development plans , and the timing of product launches .

Erinn Kohler: Our current and long-term strategic objectives, including continued international expansion, the performance of our brand and demand for our products, anticipated impacts from our brand, product, marketing, marketplace, and distribution strategies, product development plans and the timing of product launches, changes in consumer behavior, including in response to price increases, our ability to acquire new consumers and gain share in a dynamic consumer environment, our ability to achieve our financial outlook, including anticipated revenues, product mix, margin, expenses, inventory levels, promotional activity, anticipated rate of full price selling, and earnings per share, and our capital allocation strategy, including the potential repurchase of shares. Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made.

Speaker #2: Changes in consumer behavior, including in response to price increases. Our ability to acquire new consumers and gain share in the dynamic consumer environment.

Speaker #2: Our ability to achieve our financial outlook , including anticipated revenues , product mix , margin expenses , inventory levels , promotional activity , anticipated rate of full price , selling and earnings per share , and our capital allocation strategy , including the potential repurchase of shares .

Speaker #2: Forward-looking statements made on this call represent management's current expectations and are based on information available at the time. Such statements are made.

Speaker #2: 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: 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. 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. 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. 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. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through the current and prior reporting periods.

Speaker #2: 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 #2: 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 made during this call.

Speaker #2: Management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency.

Speaker #2: For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through the current and prior reporting periods.

Speaker #2: 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: 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. Please review our earnings release published today for additional information regarding our non-GAAP financial measures. With that, I'll now turn it over to Stefano.

Speaker #2: Please review our earnings release published today for additional information regarding our non-GAAP financial measures. With that, I'll now turn it over to Stefano.

Speaker #3: Thank you . Erin . Good afternoon , everyone , and thank you for joining today's call . Decker has delivered outstanding second quarter results ahead of our expectations on both the top and the bottom line .

Stefano Caroti: Thank you, Erinn. Good afternoon, everyone, and thank you for joining today's call. Deckers Outdoor Corporation delivered outstanding second quarter results ahead of our expectations on both the top and the bottom line. Specifically, in the second quarter, as compared to last year, we drove revenue growth of 9% and a 14% increase in diluted EPS. These results closed out a solid first half for Deckers Outdoor Corporation fiscal year 2026, with highlights that include total company revenue growing by 12%, Hoka revenue increasing by 15%, UGG revenue rising 12%, and diluted EPS growing by 17%. In the first half, our international regions remained the driving force behind UGG and Hoka revenue growth, increasing 38% versus last year. Year-over-year gains were led by the wholesale channel, in part from earlier shipment timing, while direct-to-consumer (DTC) also delivered strong growth for the first half.

Speaker #3: Specifically in the second quarter, as compared to last year, we drove revenue growth of 9% and a 14% increase in diluted earnings per share.

Speaker #3: These results closed out a solid first half for Deckers' fiscal year 2026, with highlights that include total company revenue growing by 12%.

Speaker #3: Hawkeye revenue increasing by 15% at Grosvenor, rising 12%, and diluted earnings per share growing by 17% in the first half.

Speaker #3: International regions remained the driving force behind Arc and Hoka . Revenue growth , increasing 38% versus last year . Year over year gains were led by the wholesale channel , in part from earlier shipment timing , while DTC also delivered strong growth for the first half .

Speaker #3: We continue to see progress from our brand-building and marketing investments in these regions, helping grow Hoka awareness and expand our mindshare with consumers around the world.

Stefano Caroti: We continue to see progress from our brand-building marketing investments in these regions, helping grow Hoka awareness and expand UGG mind share with consumers around the world. I could not be more pleased with how our teams are executing our strategy and connecting with consumers who are increasingly looking to Hoka and UGG for innovation and newness. In the U.S., consumer sentiment is still under pressure, but we are encouraged by the signs of progress we have seen in our business and have maintained our focus to ensure Hoka and UGG remain positioned for long-term success. The U.S. marketplace remains dynamic, with recent consumer trends indicating a heightened preference for multi-brand shopping experiences. We believe UGG and Hoka are prepared to acquire new consumers and gain share in this environment with consumers wherever they wish to interact with our brands.

Speaker #3: I could not be more pleased with how our teams are executing our strategy and connecting with consumers who are increasingly looking to Hoka and UGG for innovation and newness.

Speaker #3: In the U.S., consumer sentiment is still under pressure, but we are encouraged by the signs of progress we have seen in our business and have maintained our focus to ensure Hoka and UGG remain positioned for long-term success.

Speaker #3: The U.S. marketplace remains dynamic, with recent consumer trends indicating a heightened preference for multi-brand shopping experiences. We believe Hoka is prepared to acquire new consumers and gain share in this environment, with consumers wherever they wish to interact with our brands.

Speaker #3: As with strong brand partnerships with premium wholesalers, which help elevate our brands, we resonate with consumers with high-quality, distinctive products that provide a unique tactile experience.

Stefano Caroti: With strong brand partnerships with premium wholesalers, which help elevate our brands, UGG resonates with consumers with high-quality, distinctive products that provide a unique tactile experience. Hoka sees the highest consumer adoption when people can try its unique blend of technologies, geometries, and materials firsthand on their feet. We view this as a strategic opportunity to continue expanding our consumer base across both brands while maintaining this relationship through our direct-to-consumer business. This approach supports our long-term objective of achieving a balance of 50% between direct-to-consumer and wholesale channels. As we enter our historically largest fiscal quarter, our brand and global marketplace teams are focused on delivering profitable growth and building Hoka and wholesale for sustainable value creation. I'm confident that our solid foundation, sound financial discipline, and nimble operations will serve us well to continue executing against our long-term strategic objectives.

Speaker #3: Who can see the highest consumer adoption when people can try its unique blend of technologies, geometries, and materials firsthand on their feet.

Speaker #3: We view this as a strategic opportunity to continue expanding our consumer base across both brands while maintaining this relationship through our direct-to-consumer business.

Speaker #3: This approach supports our long term objective of achieving a balance of 50% between direct to consumer and wholesale channels . As we enter our historically largest fiscal quarter .

Speaker #3: Our brand and global marketplace teams are focused on delivering profitable growth in building . Again , Hoka for sustainable value creation . I'm confident that our solid foundation , sound financial discipline and nimble operations will serve us well to continue executing against our long term strategic objectives .

Speaker #3: Steve will provide additional details on our second-quarter financial results and an update on our latest fiscal year 2026 projections later in the call.

Stefano Caroti: Steve will provide additional details on our second quarter financial results and an update on our latest fiscal year 2026 projections later in the call. Prior to that, I will share further details on first-half brand performance, as well as the forward direction we see for wholesale and Hoka. Starting with Hoka, global Hoka revenue in the first half increased by 15% versus last year. Performance was driven by consumer-loved updates to the brand's three largest road-running franchises: the Clifton, Bondi, and Arahi, as well as exciting updates in the trail category with the expansion and evolution of the Mafate franchise. Bondi, Clifton, and Arahi have continued to deliver strong growth and impressive sales rates for the brand as consumers embrace the significant enhancements implemented by our product team. The success of these top franchises helped Hoka gain market share.

Speaker #3: Prior to that, I will share further details on first-half performance as well as the forward direction we see for Hoka and UGG.

Speaker #3: Starting with Hoka Global , Hoka revenue in the first half increased by 15% versus last year . Performance was driven by consumer updates to the brand's three largest road running franchises , the Clifton , Bondi and Arahi , as well as exciting updates in the trail category with the expansion and evolution of the franchise , Bondi , Clifton and Arahi have continued to deliver strong growth and impressive success rates for the brand as consumers embrace the significant enhancements implemented by our product team .

Speaker #3: The success of these top franchises helped Hoka gain market share. According to Sakana, Hoka gained two points of market share in the overall U.S. road running category for the past rolling 12 months.

Stefano Caroti: According to Circana, Hoka gained two points of market share in the overall U.S. road-running category for the past rolling 12 months, ended September 25, and also outpaced the competition in Europe as one of the fastest growing road-running brands across Italy, France, and Germany for the first half of 2025. Beyond the success of top franchises, the Hoka team is making great progress developing product families deeply rooted in the brand's origins. We're leveraging a multi-layered approach to build recognizable icons that resonate across multiple categories and use cases, including dimensions of peak performance, everyday performance use, and versatile active lifestyle. The Mafate, Hoka's original shoe, is the latest example of how we are aligning our products within these key dimensions. Mafate X was created to deliver peak performance through maximum cushioning and carbon plate propulsion for agile long-haul efforts on the trail.

Speaker #3: Ended September 25th and also outpaced the competition in Europe as one of the fastest-growing road running brands across Italy, France, and Germany.

Speaker #3: For the first half of 2025, beyond the success of top franchises, the team is making great progress developing product families deeply rooted in the brand's origins.

Speaker #3: We're leveraging a multi-layered approach to build recognizable icons that resonate across multiple categories and use cases, including dimensions of peak performance, everyday performance, use, and a versatile active lifestyle.

Speaker #3: Dermovate Hoka's original shoe is the latest example of how we are aligning our products within these key dimensions. Mafate was created to deliver peak performance through maximum cushioning and carbon-free propulsion for agile long-haul efforts on the trail.

Speaker #3: B45 was upgraded to adapt to all types of trail terrain with premium performance, cushioning, and traction. The SP2 has been reintroduced from the archive with an updated aesthetic to achieve a contemporary active lifestyle look.

Stefano Caroti: Mafate Five was upgraded to adapt to all types of trail terrain with premium performance cushioning and traction. The Mafate Speed 2 has been reintroduced from the archive with an updated aesthetic to achieve a contemporary active lifestyle look. This product family has already contributed meaningful growth during the first half of the year and now accounts for a larger share of total brand revenue, supported by targeted marketing initiatives that have strengthened consumer awareness, visibility, and alignment with Hoka's brand heritage. We've previously discussed the importance of the UTMB World Series Finals in Chamonix, France, where Hoka is a title sponsor. The event includes seven races attracting top trail runners from around the globe and nearly 100,000 spectators.

Speaker #3: This product family has already contributed meaningful growth during the first half of the year and now accounts for a larger share of total brand revenue, supported by targeted marketing initiatives that have strengthened consumer awareness, visibility, and alignment with Hoka's brand heritage.

Speaker #3: We've previously discussed the importance of the UTMB World Series Finals in Germany and France, where Hoka is a title sponsor. The event includes seven races, attracting top trail runners from around the globe and nearly 100,000 spectators.

Speaker #3: Hoka reinforces its leadership at UTMB, and it was the top brand in overall shoe share, as well as among the top five finishers, including first-place finishes for Hoka athletes.

Stefano Caroti: Hoka reinforced its leadership at UTMB, and it was the top brand in overall shoe share, as well as among top five finishers, including first-place finishes for Hoka athletes Jim Walmsley, Francesco Puppi, and Martina Minarcic. Our marketing initiatives for the Hoka brand are designed to establish coherent product narratives that foster consumer engagement and encourage adoption across our portfolio. We're seeing traction with our approach to building product families that are supported by marketing investments. This approach will, over time, allow us to further segment and differentiate the marketplace. You will soon see this product strategy evolution come to life through the MOC franchise, where we recently introduced the X3 Peak Performer in the lineup, and in spring 2026, we'll be launching the MOC 7 and MOC Remastered for everyday road running and active lifestyle, respectively.

Speaker #3: Jim Walmsley, Francesco Puppi, and Martina Nazik. Our marketing initiatives for the Hoka brand are designed to establish coherent product narratives that foster consumer engagement and encourage adoption across our portfolio.

Speaker #3: We're seeing traction with our approach to building product families that are supported by marketing investments. This approach will, over time, allow us to further segment and differentiate the marketplace.

Speaker #3: You will soon see this product strategy evolution come to life through the mark franchise , where we recently introduced the X3 peak performer in the lineup , and in spring 26 , we'll be launching the Marc seven and Mark remastered for everyday road running and active Lifestyle , respectively .

Speaker #3: From an original standpoint, Hoka's performance in the first half was driven by the strength of our international business, where the brand continues to grow awareness and gain market share.

Stefano Caroti: From an original standpoint, Hoka performance in the first half was driven by the strength of our international business, where the brand continues to grow awareness and gain market share. We tailor our strategy for each region, taking into account the unique stages of brand distribution and awareness while staying attuned to evolving consumer preferences. What remains consistent is our focus to maintain high levels of full price selling as we continue to expand our presence within the premium and elevated marketplace. We're very pleased with Hoka brand's results across the board. Hoka has seen consistently strong gains across all international regions throughout the first half, with notable incremental revenue contributions from EMEA and China. In the EMEA region, Hoka is driving impressive results across all countries and segments of distribution, including market share gains and robust reorders with our specialty partners as we continue to drive double-digit growth.

Speaker #3: We tailor our strategy for each region, taking into account the unique stages of brand distribution and awareness, while staying attuned to evolving consumer preferences.

Speaker #3: What remains consistent is our focus to maintain high levels of full price selling . As we continue to expand our presence within the premium and elevated marketplace , and we're very pleased with Hoka Brands results across the board , hook has seen consistently strong gains across all international regions throughout the first half , with notable incremental revenue contributions from EMEA and China .

Speaker #3: In the EMEA region, Hoka is driving impressive results across all countries and segments of distribution, including market share gains and robust reorders.

Speaker #3: With our specialty partners . As we continue to drive double digit growth . Best in class sell through with our key supporting partners .

Stefano Caroti: Best-in-class sell-through with our key sporting goods partners, significant % gains with athletic and lifestyle specialty accounts, where we are just beginning to build our business, and broad-based strength in our direct-to-consumer (DTC) channel across Germany, France, Italy, and the UK, with our first German store opening in Berlin and a pop-up retail experience in Chamonix for UTMB. In China, the Hoka brand's premium positioning and product innovation continue to drive resilient consumer demand. Highlights include new store openings in key cities that are attracting strong consumer interest, substantial growth in loyalty membership, with particularly strong gains with females and younger consumers, industry-leading full price selling, and sales rates for wholesale exceeding the goals set for monobrand partner locations. As we navigate a dynamic U.S.

Speaker #3: Significant percentage gains with athletic and lifestyle specialty accounts, where we are just beginning to build our business, and broad-based strength in our DTC channel across Germany.

Speaker #3: France , Italy and the UK . With our first German store opening in Berlin and a pop up retail experience in Chamonix for Utmb in China , the Hoka brand's premium positioning and product innovation continue to drive resilient consumer demand .

Speaker #3: Highlights include new store openings in key cities that are attracting strong consumer interest, substantial growth in loyalty membership with particularly strong gains among females and younger consumers.

Speaker #3: Industry leading full price selling and sell through rates for wholesale , exceeding the goals set for Monobrand partner locations . As we navigate a dynamic US marketplace , Hoka continues to gain market share in the athletic footwear category , and we remain dedicated to controlling distribution and driving a full model of demand .

Stefano Caroti: marketplace, Hoka continues to gain market share in the athletic footwear category, and we remain dedicated to controlling distribution and driving a pull model of demand. There are a number of positive signals for the Hoka brand's U.S. business that give us great confidence in the vast opportunities ahead for this brand, with wholesale sell-through increasing double digits in the first half, DTC delivering a sequential improvement from Q1 to Q2, maintaining a high-quality full price business, a strong spring/summer 2026 season order book, and positive feedback from retailers on our fall 2026 product line. Hoka is a disruptive and transformational brand with the ability to further capture billions of incremental global market share dollars. Across both domestic and international markets, we'll continue to uphold our disciplined approach to marketplace management by building our DTC business and carefully exploring potential expansion into attractive wholesale channels and partnerships.

Speaker #3: There are a number of positive signals for the Hoka brands US business . They give us great confidence in the vast opportunities ahead for this brand , with wholesale sales through increasing double digits in the first half , DTC delivering a sequential improvement from Q1 to Q2 , maintaining a high quality full price business , a strong spring summer 26 season order book , and positive feedback from retailers on our fall 26 product line , Hoka is the disruptive and transformational brand with the ability to further capture billions of incremental global market share dollars across both domestic and international markets .

Speaker #3: We will continue to uphold our disciplined approach to marketplace management by building our DTC business and carefully exploring potential expansion into attractive wholesale channels and partnerships.

Speaker #3: We're committed to building sustainable growth . For Hoka and are confident in the strategy we're executing . To achieve this goal . As we enter the second half of fiscal 26 , our priorities are driving healthy sell through and gaining market share , leveraging our enhanced DTC loyalty program to drive consumer engagement , preparing the marketplace for spring 26 updates to Gaviota , Mark and Speedgoat franchises and investing in marketing to build global Hoka awareness .

Stefano Caroti: We're committed to building sustainable growth for Hoka and are confident in the strategy we're executing to achieve this goal. As we enter the second half of fiscal 2026, our priorities are driving healthy sell-through and gaining market share, leveraging our enhanced DTC loyalty program to drive consumer engagement, preparing the marketplace for spring 2026 updates to Gaviota, MOC, and Speedgoat franchises, and investing in marketing to build global Hoka awareness. Moving on to the UGG brand. Global UGG revenue in the first half increased by 12% versus last year. The UGG brand's first half performance stayed consistent, fueled by our key brand initiatives. Top-performing styles remained in line with our 365 focus. Men's footwear achieved growth at twice the rate of the overall brand. International regions accounted for the lion's share of our growth.

Speaker #3: Moving on to the brand , global revenue in the first half increased by 12% versus last year . The brand's first half performance stayed consistent , fueled by our key brand initiatives , top performing styles remained in line with our 365 focus men's footwear achieved growth at twice the rate of the overall brand .

Speaker #3: International regions accounted for the lion's share of our growth . We are especially encouraged by the consumer response to newer products and expanded franchises aligned to our men's and 365 initiatives , including the franchise , which across sneaker , Chukka and Chelsea silhouettes has more than doubled versus last year .

Stefano Caroti: We are especially encouraged by the consumer response to newer products and expanded franchises aligned to our men's and 365 initiatives, including the MELL franchise, which across sneaker, chukka, and Chelsea silhouettes has more than doubled versus last year in the first half. The Classic Micro, our most versatile derivative to the original Classic boot, debuting as a top five style across direct-to-consumer (DTC) and wholesale, and also the Zora ballet flat, an unmistakable UGG version of the timeless silhouette that is significantly outperforming our expectations in its first month since launch. While these products have driven positive sell-throughs, I would note that wholesale sell-in was a driver for total UGG brand performance in the first half, which includes benefits from earlier shipments that were carefully curated in alignment with our marketplace management strategy.

Speaker #3: In the first half, the Classic Micro is the most versatile, derivative of the original Classic Boot. Debuting as a top five style across DTC and wholesale, we also have the Zora Ballet Flat, which is a recognizable UGG version of the timeless silhouette that is significantly outperforming our expectations in its first month since launch.

Speaker #3: While these products have driven positive seltzers, I would note that wholesale sell-in was the driver for total UGG brand performance in the first half, which includes benefits from earlier shipments that were carefully curated in alignment with our marketplace management strategy.

Speaker #3: These shipments have provided greater opportunities for consumers to discover wholesale points of distribution, which we believe, in combination with the shifts to consumer shopping habits, has put pressure on our DTC business near-term.

Stefano Caroti: These shipments have provided greater opportunities for consumers to discover UGG at wholesale points of distribution, which we believe, in combination with the shifts to consumer shopping habits, has put pressure on our DTC business near term. From a regional perspective, as anticipated, international markets are leading our growth, but we've seen a very strong order book conversion across all regions. The consumer response to our Fall 2025 collection has been very consistent globally, with consumers gravitating towards fresh seasonal colors and transitional newness such as the Classic Micro, Astro Melt, Peak Mod, and Zora ballet flat. This quarter, these styles saw gains as consumers preferred versatile buy now, wear now items. As we prepare to ignite UGG season, our teams have created cohesive brand stories with our iconic style and iconic design global marketing campaigns, aiming to generate excitement and drive consumer engagement.

Speaker #3: From a regional perspective, as anticipated, international markets are leading our growth. However, we have seen a very strong order book conversion across all regions.

Speaker #3: The consumer response to our Fall 25 collection has been very consistent globally, with consumers gravitating towards fresh, seasonal colors and transitional newness, such as the classic Micro Astro Peek mod and Zora Ballet Flat.

Speaker #3: This quarter . These styles saw gains as consumer preferred versatile buy now , wear now items . As we prepare to ignite season , our teams have created cohesive brand stories with our iconic style and iconic design .

Speaker #3: Global marketing campaigns aiming to generate excitement and drive consumer engagement . In August , iconic from the First Step campaign featuring Stefon Diggs , Sarah Jessica Parker and founder Brian Smith to celebrate the brand's legacy in September , I served as the official styling partner for Highsnobiety New York Fashion Week , opening ceremony party aimed at building fashion credibility with influential males .

Stefano Caroti: In August, UGG's iconic "From the First Step" campaign featured Stefon Diggs, Sarah Jessica Parker, and founder Brian Smith to celebrate the brand's legacy. In September, UGG served as the official styling partner for Highsnobiety's New York Fashion Week opening ceremony party, aimed at building fashion credibility with influential males. At the beginning of this month, to celebrate Paris Fashion Week, UGG took over the atrium of Galeries Lafayette to create a curated icons pop-up store. Tomorrow, UGG will launch an aspirational product collaboration with renowned Japanese fashion label Takai. These brand activations helped the UGG brand generate momentum with consumers, while at the same time maintaining cultural relevance. Our team will continue to build upon the compelling content we've created to elevate the brand and amplify key seasonal product stories. I'm confident that the global marketplace is well positioned for UGG season. Thanks, everyone.

Speaker #3: At the beginning of this month , to celebrate Paris Fashion Week , I took over the atrium of Galeries Lafayette to create a curated icons pop up store , and tomorrow I will launch an aspirational product collaboration with renowned Japanese fashion label Takai .

Speaker #3: These brand activations helped the brand generate momentum with consumers, while at the same time maintaining cultural relevance. Our team will continue to build upon the compelling content we've created to elevate the brand and amplify key seasonal product stories.

Speaker #3: I'm confident that the global marketplace is well positioned for our season. Thanks, everyone. I'll now pass it off to Steve to discuss our second quarter financial results and provide an update on fiscal year 2026.

Stefano Caroti: I'll now pass it off to Steve to discuss our second quarter financial results and provide an update on fiscal year 2026.

Speaker #4: Thanks, and good afternoon, everyone. We are extremely proud of the results achieved in the second quarter and first half of our fiscal year 2026.

Steve Fasching: Thanks, Stefano, and good afternoon, everyone. We're extremely proud of the results achieved in the second quarter and first half of our fiscal year 2026. For the second quarter, Hoka delivered more balanced growth across wholesale and direct-to-consumer (DTC), led by the strength of international and included sequential improvement in U.S. DTC compared to the prior quarter, as we continue expanding the brand's presence to gain global awareness and market share. The UGG brand drove robust wholesale growth, also led by the strength of international, as we prepare the global marketplace for the brand's peak season. Our disciplined approach, flexible operating model, and strong balance sheet continue to position us favorably in a dynamic marketplace as we head into the second half of our fiscal year 2026.

Speaker #4: For the second quarter, Hoka delivered more balanced growth across wholesale and DTC, led by the strength of international markets and included sequential improvement in U.S. DTC compared to the prior quarter.

Speaker #4: As we continue expanding the brand's presence to gain global awareness and market share, the UGG brand drove robust wholesale growth, also led by the strength of international.

Speaker #4: As we prepare the global marketplace for the peak season , our disciplined approach , flexible operating model and strong balance sheet continue to position us favorably in a dynamic marketplace as we head into the second half of our fiscal year 2026 , we remain energized by the opportunities ahead for Hoka and UGG and look forward to further progress towards our long term vision for these consumer brands .

Steve Fasching: We remain energized by the opportunities ahead for Hoka and UGG and look forward to further progress towards our long-term vision for these consumer-loved brands. Now, let's get into the details of our second quarter results. Second quarter fiscal year 2026 revenue came in at $1.43 billion, representing an increase of 9% versus the prior year. Performance in the quarter was driven by Hoka and UGG, which increased 11% and 10% versus last year, respectively, with small offsets primarily from winding down standalone operations of smaller brands. For Hoka, wholesale remained the primary driver of growth, increasing 13% in the quarter, as the brand continues to experience strong sell-in and healthy sell-through with innovative and compelling products that are resonating with consumers. Hoka DTC grew 8% versus last year as international momentum carried through from the previous quarter, and we saw improvements in the U.S. business as anticipated.

Speaker #4: Now , let's get into the details of our second quarter results brand's . Second quarter fiscal year 2026 revenue came in at $1.43 billion , representing an increase of 9% versus the prior year performance in the quarter was driven by Hoka and Ugg , which increased 11% and 10% versus last year , respectively , with small offsets , primarily from winding down standalone operations of smaller brands .

Speaker #4: For Hoka , wholesale remained the primary driver of growth , increasing 13% in the quarter as the brand continues to experience strong sell in and healthy sell through with innovative and compelling products that are resonating with consumers .

Speaker #4: Hoka DTC grew 8% versus last year as international momentum carried through from the previous quarter, and we saw improvements in the U.S. business as anticipated for UGG. Growth was driven by wholesale increasing 17% in the quarter, which was partially offset by a 10% decline in DTC.

Steve Fasching: For UGG, growth was driven by wholesale increasing 17% in the quarter, which was partially offset by a 10% decline in DTC. Wholesale strength was driven by strong demand from our retail partners, including earlier demand, as well as European shipments that were pulled forward related to our upcoming third-party warehouse transition. UGG DTC was softer than anticipated, as we have continued to experience pressures from better in-stock positions with our wholesale partners due to increased allocations delivered earlier in the year in an effort to match the demand that has continued to build in recent years. A more challenging macroeconomic environment for the U.S. consumers, with shifts in consumer preference toward multi-brand in-store shopping experiences. Additionally, we believe these factors will continue to have an impact on UGG growth in the second half. Gross margin for the second quarter was 56.2%, up 30 basis points from last year's 55.9%.

Speaker #4: Wholesale strength was driven by strong demand from our retail partners, including earlier demand, as well as European shipments that were pulled forward related to our upcoming third-party warehouse transition.

Speaker #4: UGG, DTC was softer than anticipated as we have continued to experience pressures from better in-stock positions with our wholesale partners due to increased allocations delivered earlier in the year and an effort to match the demand that has continued to build in recent years. Additionally, we are facing a more challenging macroeconomic environment for U.S. consumers, with shifts in consumer preference toward multi-brand in-store shopping experiences.

Speaker #4: Additionally , we believe these factors will continue to have an impact on UGG growth in the second half . Gross margin for the second quarter was 56.2% , up 30 basis points from last year's 55.9% , second quarter gross margins compared to last year , benefited from price increases , favorable product mix , favorable foreign currency exchange rates and factory cost sharing with partial offsets from incremental tariffs on US goods and channel mix headwinds as a result of our price increases being implemented at the beginning of July in combination with actions to bring additional inventory in ahead of increased tariff rates being implemented , we saw a slight delay in the net headwind of tariffs and did not experience a meaningful negative impact in the second quarter compared to the prior year result .

Steve Fasching: Second quarter gross margins compared to last year benefited from price increases, favorable product mix, favorable foreign currency exchange rates, and factory cost sharing, with partial offsets from incremental tariffs on U.S. goods and channel mix headwinds. As a result of our price increases being implemented at the beginning of July, in combination with actions to bring additional inventory in ahead of increased tariff rates being implemented, we saw a slight delay in the net headwind of tariffs and did not experience a meaningful negative impact in the second quarter compared to the prior year result. However, this is unique to the second quarter, and our expectation of net tariff headwinds in the back half of fiscal year remained largely unchanged.

Speaker #4: However, this is unique to the second quarter, and our expectation of net tariff headwinds in the back half of the fiscal year remains largely unchanged.

Speaker #4: SG&A dollar spend in the second quarter was in line with expectations at $477 million, up 11% versus last year's $428 million. As we continue investing in key areas of the business, as a percentage of revenue, SG&A was 33.4% versus last year's 32.7%.

Steve Fasching: SG&A dollar spend in the second quarter was in line with expectations at $477 million, up 11% versus last year's $428 million, as we continue investing in key areas of the business. As a percentage of revenue, SG&A was 33.4% versus last year's 32.7%. Our tax rate was 21.7%, which compares to 24% for the prior year as a result of one-time benefits recorded in the quarter. These results culminated in diluted EPS of $1.82 for the quarter, which is $0.23 above last year's $1.59 diluted EPS, representing EPS growth of 14%. In terms of our second quarter performance relative to the guidance we provided in July, gross margin was the primary driver of EPS favorability.

Speaker #4: Our tax rate was 21.7%, which compares to 24% for the prior year, as a result of one-time benefits recorded in the quarter.

Speaker #4: These results culminated in diluted earnings per share of $1.82 for the quarter, which is $0.23 above last year's $1.59 diluted earnings per share, representing EPS growth of 14%.

Speaker #4: In terms of our second quarter performance, relative to the guidance we provided in July, gross margin was the primary driver of EPS favorability.

Speaker #4: Again , the better than expected gross margin result was largely driven by favorable timing of tariff related variables unique to the second quarter , with benefits of our pricing actions flowing through in advance of the full burden from increased tariffs .

Steve Fasching: Again, the better than expected gross margin result was largely driven by favorable timing of tariff-related variables unique to the second quarter, with benefits of our pricing actions flowing through in advance of the full burden from increased tariffs. Turning to our balance sheet at September 30, 2025, we ended September with $1.4 billion of cash and equivalents. Inventory was $836 million, up 7% versus the same point in time last year, and during the period, we had no outstanding borrowings. During the second quarter, we repurchased approximately $282 million worth of shares at an average price of $109.31. As of September 30, 2025, the company had approximately $2.2 billion remaining authorized for share repurchases.

Speaker #4: Turning to our balance sheet at September 30th , 2025 , we ended September with $1.4 billion of cash and equivalents . Inventory was $836 million , up 7% versus the same point in time last year .

Speaker #4: During the period, we had no outstanding borrowings. In the second quarter, we repurchased approximately $282 million worth of shares at an average price of $109.31.

Speaker #4: As of September 30th , 2025 . The company had approximately 2.2 billion remaining authorized for share repurchases . Now moving into our forward looking update , we are now providing an outlook for our full year fiscal 2026 and expect total company revenue of approximately $5.35 billion , with Hoka increasing by a low teens percentage versus last year and UGG growing in the range of a low to mid single digit percentage , gross margin of approximately 56% .

Steve Fasching: Now, moving into our forward-looking update, we are now providing an outlook for our full year fiscal 2026 and expect total company revenue of approximately $5.35 billion, with wholesale increasing by a low teens % versus last year and UGG growing in the range of a low to mid-single-digit %. Gross margin of approximately 56%, as we anticipate headwinds from the impact of tariffs as this becomes material in the back half of this fiscal year, with partial offsets from our mitigation strategies and normalized levels of promotion in a more pressured macroeconomic environment. SG&A to be approximately 34.5% of revenue, reflecting our commitment to investing in the long-term opportunities of our powerful brands. This results in an expected operating margin of approximately 21.5%, which remains at a top-tier level of profitability relative to our peers. We are projecting an effective tax rate of approximately 23%.

Speaker #4: As we anticipate headwinds from the impact of tariffs, this becomes material in the back half of this fiscal year, with partial offsets from our mitigation strategies and normalized levels of promotion in a more pressured macroeconomic environment.

Speaker #4: To be approximately 34.5% of revenue , reflecting our commitment to investing in the long term opportunities of our powerful brands . This results in an expected operating margin of approximately 21.5% , which remains at a top tier level of profitability relative to our peers .

Speaker #4: We are projecting an effective tax rate of approximately 23%. Finally, we expect earnings per share in the range of $6.30 to $6.39.

Steve Fasching: Finally, we expect earnings per share in the range of $6.30 to $6.39. This guidance assumes a blended growth rate of approximately 9% from our two largest brands, as we have streamlined our brand portfolio to focus on our most profitable long-term opportunities and expect to yet again deliver record years for UGG and Hoka, each with annual revenues north of $2.5 billion and significantly contributing to our best-in-class profitability profile. Within this revenue guidance, we continue to expect international to outpace U.S. growth and global wholesale to outpace DTC for this fiscal year. Over the longer term, our focus remains to create a balanced business across regions and channels as we continue building our consumer base, bolstering connections with consumers through direct relationships, and capturing incremental market share for years to come.

Speaker #4: This guidance assumes a blended growth rate of approximately 9% from our two largest brands, as we have streamlined our brand portfolio to focus on our most profitable long-term opportunities and expect to yet again deliver record years for UGG and Hoka.

Speaker #4: Each with annual revenues north of $2.5 billion and significantly contributing to our best in class profitability profile . Within this revenue guidance , we continue to expect international to outpace US growth and global wholesale to outpace DTC for this fiscal year .

Speaker #4: Over the longer term, our focus remains to create a balanced business across regions and channels as we continue building our consumer base, bolstering connections with consumers through direct relationships, and capturing incremental market share.

Speaker #4: For years to come . Regarding tariffs , with timing related favorability seen in the second quarter , result and our expectation of tariff impact in the second fiscal half , largely unchanged , we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $150 million .

Steve Fasching: Regarding tariffs, with timing-related favorability seen in the second quarter result and our expectation of tariff impact in the second fiscal half largely unchanged, we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $150 million. Further, we now estimate that our mitigation efforts for this fiscal year will offset approximately $75 to $95 million of this pressure, including benefits from select, strategic, and staggered pricing increases, as well as partial cost sharing with factory partners. Please note this guidance excludes any unforeseen charges that may be considered non-recurring to our ongoing business or impact from any future share repurchases.

Speaker #4: Further , we now estimate that our mitigation efforts for this fiscal year will offset approximately 75 to $95 million of this pressure , including benefits from select , strategic and staggered pricing increases , as well as partial cost sharing with factory partners .

Speaker #4: Please note this guidance excludes any unforeseen charges that may be considered non-recurring to our ongoing business or the impact from any future share repurchases.

Speaker #4: Additionally , our guidance assumes no meaningful deterioration of current risks and uncertainties , which include , but are not limited to , further updates to imposed tariffs or other global trade policy changes in consumer confidence and recessionary pressures .

Steve Fasching: Additionally, our guidance assumes no meaningful deterioration of current risks and uncertainties, which include but are not limited to further updates to imposed tariffs or other global trade policy, changes in consumer confidence and recessionary pressures, inflationary pressures, fluctuation in foreign currency exchange rates, supply chain disruptions, and geopolitical tensions. Overall, our second quarter and first half fiscal year 2026 results illustrate the strong demand for our brands and strength of our disciplined model, giving us conviction to provide and achieve a compelling outlook for fiscal year 2026. We remain confident in the growth trajectory of our consumer-loved brands as our top-tier levels of profitability provide opportunities for targeted investments supported by our fortified balance sheet, all of which position us effectively to drive sustainable growth over the long term. Thanks, everyone. I'll now hand the call back to Stefano for his final remarks.

Speaker #4: Inflationary pressures , fluctuation in foreign currency exchange rates , supply chain disruptions , and geopolitical tensions . Overall , our second quarter and first half fiscal year 2026 results illustrate the strong demand for our brands and strength of our disciplined model , giving us conviction to provide and achieve a compelling outlook for fiscal year 2026 .

Speaker #4: We remain confident in the growth trajectory of our consumer brands as our top tier levels of profitability provide opportunities for targeted investments supported by our fortified balance sheet , all of which position us effectively to drive sustainable growth over the long term .

Speaker #4: Thanks, everyone. I'll now hand the call back to Stefano for his final remarks.

Speaker #3: Thank you Steve . Before we take your questions , I would like to highlight that our brands have continued to perform very well through the first half of this fiscal year .

Stefano Caroti: Thank you, Steve. Before we take your questions, I would like to highlight that our brands have continued to perform very well through the first half of this fiscal year. More importantly, we remain committed to supporting and strategically managing our brands to ensure sustained long-term growth. We believe that both Hoka and UGG are well positioned across the global marketplace as we enter the holiday quarter, and our teams are energized and hyper-focused to deliver our full-year guidance. Hoka has established itself as a prominent global performance brand, extending far beyond its disruptive origins. Hoka is just beginning to realize its full potential and capability to innovate, and we are excited to continue building this transformational brand. The UGG brand continues to inspire generations of consumers with its iconic products and its global appeal.

Speaker #3: More importantly, we remain committed to supporting and strategically managing our brands to ensure sustained long-term growth. We believe that both Hoka and UGG are well positioned across the global marketplace.

Speaker #3: As we enter the holiday quarter and our teams are energized and hyper focused to deliver our full year guidance . Hoka has established itself as a prominent global performance brand , extending far beyond its disruptive origins .

Speaker #3: Hoka is just beginning to realize its full potential and capability to innovate, and we are excited to continue building this transformational brand.

Speaker #3: And the brand continues to inspire generations of consumers with its iconic products and its global appeal . This powerful brand has established a unique position in the marketplace with a strong , loyal customer base and an ability to capture new audiences through compelling product evolution .

Speaker #3: These two premium brands maintain a strong commitment to their original values , consistently creating purposeful products while adapting to the evolving demands of their respective global customer base .

Speaker #3: We're very excited about the opportunities ahead and remain focused and disciplined on our approach to delivering long term , sustainable growth and value creation .

Speaker #3: I would like to sincerely thank all of our valued employees across the global deckers team for their continued commitment to our collective success .

Speaker #3: Thank you all for joining us today , and thank you to our shareholders for your continued support . With that , I'll turn the call over to the operator for Q&A .

Speaker #1: Thank you and everyone . If you have a question , please press Star One on your telephone keypad . We do ask that you limit yourself to one question and one follow up .

Speaker #1: Our first question comes from Laurent Vasilescu , BNP Paribas .

Speaker #5: Oh , good afternoon . Thank you very much for taking my question . Stefano , Steve , very glad to hear that you are reinstating guidance here .

Speaker #5: And I wanted to ask about that . Originally . Steve , the framework , I think on the fourth quarter call was calling for Hoka to grow mid-teens for this year , to grow around mid-single digits .

Speaker #5: I think last quarter , think there was greater confidence that framework with today's guide , you know , lower expectations on those two , on those two metrics , can you maybe just unpack that a little bit more ?

Speaker #5: I

Speaker #5: Is there just a degree of conservatism ? And I didn't hear anything about whether with regards to UGG , of the low to mid single , but do you think that's a factor playing into into your guidance ?

Speaker #3: Stefano .

Speaker #6: We have two of the healthiest brands in the global marketplace, with a very strong and loyal consumer base, and there really is growing global demand.

Speaker #6: Our first half demonstrates the strength of these brands . For the back half , we are anticipating a more cautious consumer as full impact of tariffs and price increases will be felt here in the US .

Speaker #6: Having said that, our brands are well positioned with the consumer as we approach the holidays. As we mentioned, we don't manage our business month to month or quarter to quarter.

Speaker #6: We build brands for long-term, profitable, sustainable growth.

Speaker #4: Yeah, this is Steve. I think just to talk a little bit about the guidance and kind of reorient everyone in terms of what we said at the beginning of the year.

Speaker #4: And you're right , we didn't give full year guidance . And the fact and appreciate your recognition of that , giving guidance . Now , I think is a demonstration of our confidence of how well our brands are performing in the marketplace and the continued path that we see on that part of the framework that we gave at the beginning of the year , really said if tariffs did not have an impact on consumers , how we saw kind of certain growth and we still believe that , right .

Speaker #4: But we do know and we are more currently seeing some impacts on the US consumer . So as US consumers are beginning to see some price increases , it is impacting their purchase behavior within the consumer discretionary space .

Speaker #4: And so as we now look out at the at the next six months to give the full year guidance , you know , our Hoka back half still is a low teen guide .

Speaker #4: So, in many respects, we're not off of what we originally thought. Maybe a little bit of a reduction, but we are now anticipating the impacts of tariffs.

Speaker #4: So I think that's a demonstration . Again that the brand continues to do better than what we thought in a tariff imposed environment .

Speaker #4: So we feel we feel good about that . To Stefano's point , we're going to manage these brands for the long run . We're not going to try to chase growth in a current period .

Speaker #4: That could be detrimental to the brand . And again , that is what our guidance reflects is we are going to maintain these brands .

Speaker #4: We're going to manage them in the marketplace . That allows us to grow these , grow these meaningful over a sustainable , longer period of time .

Speaker #4: And I think that is a bit of what you're seeing in our guidance. And, yeah, we do know that the revenue is below where the consensus was.

Speaker #4: We're taking into account a consumer who's a little bit more cautious. I think there is an opportunity that we could do better.

Speaker #4: Sure . And we'll see how the consumer shows up . And that's how we're looking at it from an inventory position . We have inventory that if the consumer shows up , we will be able to capture some upside to this .

Speaker #4: But we're confident again in how our brands are performing in the marketplace internationally and domestically . We know domestically that the US consumer is a little bit more pressured .

Speaker #4: So we're reflecting that in our outlook for the next six months . But again , our our positioning of the brands remains with long term sustainable growth in mind .

Speaker #4: And then just the other bit on the guidance, I think, again, we're showing a demonstration of how we can manage our business from an overall perspective.

Speaker #4: So even with a more conservative approach on some of the revenue guidance , we're still delivering profitability on a consensus bracketed for the full year .

Speaker #4: So again, I think we will continue to manage these brands in a healthy way and drive long-term sustainable growth.

Speaker #5: Very helpful . And then , Steve , just to understand a little bit more on the back half guide for Hoka low double digits , I know you don't guide anymore by quarter out , but any nuances we should consider just because there are some compares that we can look at between 3 and 4 ?

Speaker #5: Q I thought it was also interesting that you mentioned there's some positive reception regarding spring summer order books . Maybe . Can you unpack that a little bit more ?

Speaker #5: Thank you very much .

Speaker #4: Yeah , sure . I think in terms of how we're looking at the back half , more pressure in Q3 with more growth in Q4 .

Speaker #4: So, again, I think that's where we're going to see how the consumer shows up from Thanksgiving through the holiday season.

Speaker #4: That's one thing that we're going to keep a very close eye on . We believe our brands are positioned better than most , right ?

Speaker #4: If the consumer shows up, our brands are positioned to capture that demand. And so really, this is more about how does the consumer show up.

Speaker #4: So we're being a little bit more cautious with our third quarter growth , with a little bit more aggressive growth in the fourth quarter .

Speaker #4: And then to your point on the order book , and I'll let Stefano jump in here very confident with how things are shaping up and the consumer response to our product .

Speaker #6: Yes, I'm very happy with what the teams have done specifically in the U.S. market for Hoka. We're growing awareness and gaining share really across every country.

Speaker #6: But the specific to the US , the marketplace is clean , sell through is are stronger than sell in our full priced business is very very strong .

Speaker #6: Our key franchises, Clifton, Bondi, and Arohi, are performing well in the marketplace, and our most recent product launches have also performed well.

Speaker #6: And referring to challenger , the McCarthy family , 45 . Rocket , three rocket trail , our order books are healthy . We're gaining share in performance .

Speaker #6: When we're back to number one in our specialty, and we're well set up for the transition to these new models, I just mentioned.

Speaker #6: So our marketing has also been resonating, and we're seeing improvements in our DTC business. All is good on the side of the U.S.

Speaker #5: Wonderful . Thank you very much and best of luck with the holiday season .

Speaker #4: All right . Thanks ,

Speaker #6: Thanks a .

Speaker #5: Lot .

Speaker #1: The next question is from John Kernan, TD Cowan.

Speaker #7: Good afternoon. Thanks for taking the question.

Speaker #6: Hey , John .

Speaker #7: Steve, can you talk to the split between DTC and wholesale in Q3 and Q4 a bit more? DTC comparisons get a lot easier as you enter the fourth quarter.

Speaker #7: You did provide some some color to Lauren's questions . Just curious . The channel split between wholesale and DTC and what you're doing specifically to celebrate DTC .

Speaker #7: Same store sales or omnichannel comps , particularly in the in the US .

Speaker #4: Yeah, I think from a total company DTC perspective, we expect to continue to see improvements in Q3 and then further improvements in Q4.

Speaker #4: I think also important just to , you know , as you look at our growth and understand kind of what we said about this year , again , remember , as we're expanding wholesale , this year , we said much of that was going to come in the first half of the year .

Speaker #4: Right ? And that's what we've delivered . And more so and I think that's a demonstration of the strong demand that's out there for both brands .

Speaker #4: Is that , you know , our wholesale partners to get their hands on product earlier . They want it to be able to showcase product earlier .

Speaker #4: And so we were selling into that environment that has put some pressure on our first half DTC . So with expanded distribution , right .

Speaker #4: It's more a demonstration of the growth of our demand for our brands, and really a timing effect. And so, it's not an indication of things kind of slowing down for the brand.

Speaker #4: And from a demand perspective , they are still increasing . And on a full year basis it still has increased . But as we've shipped more of that in the first half of the year , you're just seeing kind of a timing flow of that .

Speaker #4: And so in respect to that , that's where we'll see a little bit or expect a little bit more DTC growth on a percentage basis in the back half , a little bit more in Q3 , a little bit more in Q4 .

Speaker #4: And then with selling more in in the first half in wholesale , you're going to see kind of lower numbers as a result of having more product move in into the wholesale channel earlier in the year .

Speaker #7: That's helpful . Thanks . And you obviously called out the company's top tier profitability . I think you have the highest operating margin structure of anybody in the athletic footwear and apparel space .

Speaker #7: I'm just curious , as we look into next year , obviously tariff pressure is going to be pretty significant in the first half of the year .

Speaker #7: How do we put guardrails on the long term margin structure of the business , you know , or finishing this year around 21.5% is north of 20% plus operating margins .

Speaker #7: How do you look at the business long term?

Speaker #4: Yeah , it's a good question , John , and we appreciate it . Clearly . Right . What you're seeing . So last year we delivered exceptional levels again .

Speaker #4: This year, I think, in comparison to what others are saying, it's going to be another exceptional year, with half of the year being impacted by tariffs.

Speaker #4: Next year you're going to have kind of another half of year . So that will be a headwind to further margins . But again , and I think you can see as demonstrated by Q2 , how we manage our business .

Speaker #4: So we are continuing to organically grow our business . The demand for our brands continues to increase . And at the same time , we're doing , I think , a very good job of managing and uncertain , volatile environment .

Speaker #4: And you can see how we've mitigated some of those tariff impacts in Q2, where we earlier thought that we would see some headwinds.

Speaker #4: We were able to take some actions and mitigate some of that, and slow that improvement through. And that's what you're seeing on that gross margin.

Speaker #4: We will continue to operate in that disciplined approach . But yes , to your point , we're going to continue to see tariff headwinds as we look into FY 27 .

Speaker #4: We're not in a position yet to kind of give guidance on that. But yes, you will see further pressure.

Speaker #6: On financial profile will also allow us to invest in capabilities we're building , whether it's innovation or apparel or technology , digital .

Speaker #7: Got it . And then the gross margin pressure regarding to in the back half of this year , it's safe to assume at least that magnitude carries into the first half of next year .

Speaker #7: I would assume .

Speaker #4: Yep . Correct . If the tariffs stay in effect , the way they currently are , yes . Equivalent .

Speaker #7: Understood. Thanks. Yes.

Speaker #4: All right. Thanks, John.

Speaker #1: Up next, we'll hear from Adrienne Yee from Barclays. Good afternoon.

Speaker #8: This is probably for both of you . But Stefano and Steve can you talk about kind of the price actions that you have taken at both brands earlier in July , earlier in Back to school , it seemed like those price actions didn't have a lot of impact on the demand .

Speaker #8: But obviously that was kind of in the back to school time period . Is there something that you've seen either seltzer in the channel at your own DTC or maybe on the products that actually had those price increases ?

Speaker #8: That has given you a little bit more concern about the consumer . And then , Steve , my , my follow on is how are you thinking ?

Speaker #8: It's a really good point on more points of wholesale distribution , right . Because if more places to buy the product . But how are you thinking about when we kind of see a more normalization in the DTC versus wholesale balancing ?

Speaker #8: Thank you .

Speaker #6: Adrian , on the pricing question , we have premium brands and premium brands have more elasticity than other brands . And we've been very selective in strategic in our price increases .

Speaker #6: And we have not seen any issues . Shelters on key styles continue to be strong for both Hoka no no no issues . So far .

Speaker #4: And then on the wholesale question , it's a good one . And we appreciate you asking it . I think if you go back a year and a half or two years ago , we talked about how we are in the marketplace significantly under-penetrated in wholesale in comparison to many of our peers .

Speaker #4: So many of our peers are selling in a lot more points of distribution , wholesale distribution than we are . And , you know , we've talked about marketplace management for years now about how we do this .

Speaker #4: And this is how we lean into wholesale . And I know there's questions out there about , oh , their growth is coming through wholesale .

Speaker #4: Yeah . We're putting more shoes on feet . Right . And but we're doing it in a strategic long term way . Right .

Speaker #4: We're not chasing growth in a quarter or in a year, trying to blow out wholesale distribution just to show sales increases. This is how we're expanding our brand globally.

Speaker #4: And sustaining longer term growth over a longer period of time . Does it mean that we deliver slightly lower levels of growth rate in a current period , as we continue to expand , but are able to sustain longer term growth rates ?

Speaker #4: Yes . That's what we're doing . And so last year was a big year of wholesale expansion . We are in anniversary . And some of that this year , as well as some additional wholesale expansion this year .

Speaker #4: But that will begin to slow. It doesn't change our outlook on that balance that we talked about of getting to 50/50 wholesale to DTC.

Speaker #4: So we're still on that . You will begin to see wholesale growth . So a little bit and DTC again begin to pick up .

Speaker #4: But again this is about taking opportunities , increasing demand in the marketplace , giving consumers more points to purchase product and overall leading to more shoes on feet .

Speaker #4: And that's what we're building .

Speaker #6: Yes . And we operate in omnichannel model . And we have the ability to flex and react to consumer demand as needed .

Speaker #8: Yeah, very helpful. Thank you very much. Best of luck.

Speaker #6: Thanks .

Speaker #7: Thanks .

Speaker #1: The next question is from Samuel Poser from Williams Trading.

Speaker #5: Good afternoon . Thanks for taking my questions . I got a handful . Number one , you talked about the healthy Order book in for spring .

Speaker #5: I assume that's for both UG and Hoka. Can you define what that means, please?

Speaker #6: Can we provide those details? But we're very happy with the order book that we have for Spring/Summer '26 and the early reaction to Fall '26?

Speaker #4: Yeah . And I think , Sam , it's fair to say that it's up . Right . And that's why we're happy that we're seeing increases in order book .

Speaker #5: And and can you talk a little bit I'm going to get into a little bit of weeds here . Can you talk a little bit about like how how especially with the UGG brand , you know , sort of in and out of back to school , how you saw both in your own DTC and within your wholesale partners because you did a sales reports , how you saw that business like peak in Valley .

Speaker #5: And are you seeing any big differences between the peak like peaks and valleys versus last year ? And I mean , because I'm really I'm really wondering what sorry .

Speaker #5: Go ahead .

Speaker #6: No , it's a good question , Sam . What ? We're experiencing , and this is probably due to the consumer uncertainty in the US , deeper valleys and higher peaks , back to school , strong .

Speaker #6: And we anticipate to have a strong holiday season . But you know , September , October are typically not the strongest months in our space .

Speaker #5: And so that leads to are you are you is your guidance for the back half . And I guess particularly holiday is it is it more about what you saw in during back to school , or is it more about sort of what's going on right now ?

Speaker #5: Because , you know , given those peaks and valleys and given the fact that in your own DTC business , you'll do , you know , every day between Thanksgiving and Christmas , you'll do more business in a day than you basically do in a week .

Speaker #5: You know , July through probably the beginning of October . I'm wondering how much of this is just real option . You know , or , you know , my favorite saying .

Speaker #5: So I won't say that in front of everybody , guys , but you do live near the beach out there and I'm just wondering how much of it because , I mean , consumer seems to want your product .

Speaker #5: It seems to be , you know , and so the concern about the consumer , you know , seems like whatever they're buying your stuff at full price , you're not getting margin pressure , you're not getting those things .

Speaker #5: So the fact is , you know , they're not buying , you know , Joe's reboot brand . They you know , they generally want UGG and they're not buying champion sneakers because they want Hoka .

Speaker #5: And so either they want your brand or they don't. And you talked about the elasticity you had on price, which tells me that you actually believe that the consumers are buying your stuff regardless.

Speaker #5: So why so much caution around this macro consumer like , oh my God , the consumer in the US might be hurting , but they still seem to go to your brands , not to others .

Speaker #4: Yeah , I think Sam on that clearly our our guidance for the for the year , which is reflective of the next six months , is taking into consideration what we're currently seeing kind of right now .

Speaker #4: And so I think that's where the question is, right? It's not about a question of how we think our brands are placed in the marketplace.

Speaker #4: We think we're again , positioned better than most in many cases , very well positioned . But we'll have to see how the consumer begins to show up .

Speaker #4: I think, you know, some of the economic signals are that consumers are beginning to see higher prices. Inflation is starting to affect them more in the U.S.

Speaker #4: And so there is some caution on our part as we take that into consideration . And again , we don't want to just chase sales because we want to achieve a higher number .

Speaker #4: We're about building brands for the long term , and so we don't want to do something in the quarter that could be detrimental to us in the longer term .

Speaker #4: So to your point , yeah , we're taking a little bit of caution in there . We don't know how the consumer is going to show up , but we do know if the consumer does show up , we're better positioned than most .

Speaker #5: And then last , thank you . And then lastly , Stefano with Hoka , are you are there are there any lower profile Max cushioning or , you know , are we going to see any evolution to lower profile shoes out of .

Speaker #5: Out of out of Hoka .

Speaker #6: Yes . You will see more lower profile solutions going forward . Ready for spring . We have the new Solymar that has been very well received .

Speaker #6: The new transport on a lower profile tooling. We have the figure two in lifestyle that is resonating and is slightly lower profile than what we had in the past.

Speaker #6: So you'll see a vast, more vast array of products going forward.

Speaker #5: Thanks very much . Have a great thanks .

Speaker #1: Then the next question is from Jonathan Komp from Baird .

Speaker #9: Yeah . Hi . Good afternoon . Thank you . I want to follow up on Hoka , hoping that maybe you can be a little bit more specific when you think about changes to the product launch plans into 2026 , just any more details on what we should expect broadly and then maybe for some of the key styles going forward , the big three , in terms of cadence and plans and then just bigger picture on Hoka .

Speaker #9: As you talk about having potential to add billions of revenue , yet can you give somewhat of a build up or some of the big buckets or growth opportunities that you see when you when you make that comment ?

Speaker #6: Yeah , let me start with the latter . So we're focusing on a handful of categories . For Hoka . It's performance running trail .

Speaker #6: It's hike , it's fitness , it's lifestyle . And over time you also see apparel . So those are the five key areas of growth for us .

Speaker #6: And then we compete in a half $1 trillion market . And there's plenty of upside for both in the US and internationally as we continue to grow awareness and consideration .

Speaker #6: We should continue to grow our brand in a healthy way . As regards regarding product product transitions , we have tightened inventory of Achaea , going style as we prepare for the upcoming launches of Gaviota , Mark transport and Speedgoat .

Speaker #6: So you should see experience less noise in the marketplace as we have less and tight inventories and in regards to cadence , you will see an update to our biggest franchise , the Clifton in fall 26 .

Speaker #6: So Clifton and Bondi will no longer overlap.

Speaker #9: Okay . That's helpful . Thank you Steve . One follow up then on margin it looks like you know the back half margin for operating margin pointed in the low 20% range .

Speaker #9: You know historically when the back half was in the low 20s, the full year margin was more in the high teens, you know, below 20% on an annual basis.

Speaker #9: Is that the run rate for the business currently , as we think about Annualizing , some of the second half pressures or how should we think about the back half margin guide in relation to the current annual run rate that you're performing at ?

Speaker #9: Thank you .

Speaker #4: Yeah , I think , John , just on that , as we look at the back half of this year in comparison to kind of last year , the declines that we're reflecting are really being driven by the tariffs .

Speaker #4: Right. So in terms of how we're running the business and how we think about margins and the margin profile of the business, really the change that you're seeing in the back half is tariff-driven.

Speaker #4: So that's what we expect . Again , based on the tariffs as they're imposed today .

Speaker #9: And just to follow up , given the discussion about maintaining premium positioning , it should we view that pressure and the unmitigated portion that you guided to for tariffs is that is that more temporary or is that a permanent step down on the margin that you're willing to to give up ?

Speaker #9: Essentially . Thanks again .

Speaker #4: Yeah . So the margin that the margin change that you're seeing between last year and this year is going to be driven by the tariffs .

Speaker #4: And then we'll see kind of if promotion changes. We do have an element of promotion assumed for the back half, so we'll see that again.

Speaker #4: The biggest driver being tariffs . That's the overall driver . But there is a level of promotion given the environment today that will again to the earlier question , I think that John asked is that that will also trickle into FY 27 .

Speaker #4: Again , we haven't given any update on 27 , but the first half will be pressured by that margin . But so there will be an overall headwind .

Speaker #4: We have done, I think, a very good job of mitigating that in Q2, and that's what you saw us deliver.

Speaker #4: We don't have the same levers necessarily going into the back half , nor will we have those levers kind of going into we were able to take advantage of , you know , inventory , inventory movements that now that the tariffs are fully into effect , you won't necessarily get that , you'll get that benefit into future periods .

Speaker #4: So, we'll continue to look, you know, as we talked about some of our mitigation strategies. We'll again continue to review pricing in response to an earlier question.

Speaker #4: We didn't really see much pushback on some of our price increases . So we'll always with a strong brand that's well positioned in the marketplace , will continue to evaluate levers that we have .

Speaker #4: But , you know , the way we're currently looking at it , we still have headwinds in the back half that will continue into FY 27 .

Speaker #1: And our final question today comes from Jay Sole from UBS .

Speaker #5: Great. Thank you so much for taking my question. Maybe, Stefano, first question for you is, you just...

Speaker #10: Think about calendar 25 for Hoka brand . Do you see this year's a little bit of a transition year where you had sort of the accelerated life cycles of Bonzai eight and Clifton nine , and then you have this tariff situation where next year , maybe it's sort of , you know , not a transition year where you have a lot of newness and clean inventories in the marketplace .

Speaker #10: And good brand momentum where you might see a , you know , a different kind of different kind of momentum unnaturally . And then I guess , Steve , the question for you is that I know this was asked on an earlier question , but the guidance before was , say , mid-teens for Hoka , assuming no tariffs .

Speaker #10: Now you're saying low teens are Hoka with tariffs. So if we had gone back to the beginning of the year and you would have given guidance for Hoka with tariffs, what would it have been?

Speaker #10: Or, without giving us maybe exactly what it would have been, with the guidance that you gave today, had been in line with that?

Speaker #10: Would it have been better than that , or was it worse than that ? Maybe you could just really just frame that for us .

Speaker #10: That'd be super helpful . Thank you so much .

Speaker #4: Yeah, sure. I'll start kind of with that question then. Stefano can kind of talk about a bit of the transition year of 2025.

Speaker #4: So to your point , if we look back , I think one way to answer your question is that you know , how we've seen Hoka perform , especially with the product transitions .

Speaker #4: We're very encouraged by the year . So to the point where in a pretty tariff environment , we saw mid-teens and the fact now with a tariff imposed world in the back half , we're low teens .

Speaker #4: I'm very encouraged by that because what it shows is that even in a tariff-imposed world, consumers are still showing up for our brands—probably a little bit better than what we may have thought at the beginning of the year.

Speaker #4: So, I think that speaks to how well some of our updates are resonating with consumers in the U.S. and globally, too. And you're seeing that in the global numbers.

Speaker #4: So where the tariff is impacting a U.S. consumer, I think we've seen a good response. And then we've seen a very good response from an international perspective, which gives us a view into that non-tariff imposed world of a consumer response.

Speaker #4: So having seen that be very positive , it's actually very positive on the brand , because I do think tariffs are having an impact on the US consumer .

Speaker #6: Yeah . And the question on transition . Yes . It's 25 is a bit of a transition year . We probably amassed a few too many big product launches in the first half of the year .

Speaker #6: And we didn't space them out enough . There were a few learnings from us . Us in the transition to the model . So I think it was a learning year for us and hopefully this will help going forward .

Speaker #10: Got it . Thank you so much .

Speaker #4: Great . Thanks , Jeff .

Speaker #1: Thank everyone that does conclude our question and answer session . This does conclude our conference for today . We would like to thank you all for your participation .