Deckers Outdoor Corporation (DECK) Q4 2025 Earnings Call Transcript

Deckers Outdoor Corporation (DECK) reported a record fiscal year 2025, with revenue up 16% to nearly $5 billion, a gross margin of 57.9%, and EPS increasing 30% to $6.33. HOKA's revenue grew 24% to $2.2 billion, while UGG increased 13% to $2.5 billion, with international growth outpacing U.S. growth for both brands. Due to macroeconomic uncertainty related to global trade policy, the company is not providing a formal outlook for fiscal year 2026, but anticipates a potential $150 million increase in the cost of goods sold due to tariffs, which it aims to partially mitigate through pricing strategies and cost sharing; Q1 2026 revenue is expected to be between $890 million and $910 million.

Analysis

Deckers Outdoor Corporation (NYSE:DECK) delivered a strong fiscal year 2025, with revenues increasing 16% year-over-year to nearly $5 billion, propelled by substantial growth in its HOKA and UGG brands, which saw revenues climb 24% to $2.2 billion and 13% to $2.5 billion, respectively. This robust top-line performance contributed to a significant 230 basis point expansion in gross margin to 57.9% and a 30% increase in diluted earnings per share to $6.33. While fourth-quarter fiscal 2025 revenue growth moderated to 6%, with HOKA up 10% and UGG up 4%, management attributed HOKA's slight U.S. direct-to-consumer (DTC) decline to factors including a consumer shift to in-store purchases for new models and increased promotions on outgoing styles, rather than a fundamental weakening of demand. Looking ahead to fiscal 2026, Deckers has refrained from issuing a formal full-year outlook due to considerable macroeconomic uncertainty, particularly concerning U.S. trade policy, which could potentially add up to $150 million to its cost of goods sold. The company intends to mitigate these tariff impacts through selective price increases and cost-sharing agreements with factory partners, but still anticipates absorbing a portion, leading to an expected contraction in gross margin from fiscal 2025's record level. For the first quarter of fiscal 2026, Deckers projects revenue between $890 million and $910 million, reflecting at least low double-digit growth for HOKA and at least mid-single-digit growth for UGG; however, gross margin is anticipated to decrease by approximately 250 basis points year-over-year, and diluted EPS is guided to $0.62-$0.67, reflecting initial tariff effects before the implementation of offsetting price actions. Despite these near-term headwinds, Deckers underscored its commitment to strategic investments in brand development, highlighting HOKA's rising global awareness (50% in the U.S., 30% internationally) and planned distribution expansion, alongside UGG's advancements in year-round product offerings and the men's market, all supported by a newly augmented $2.5 billion share repurchase authorization.

Key Decisions for Investors

• Investors should closely monitor the impact of U.S. trade policy and tariffs on Deckers' FY26 cost structure and gross margins, alongside the efficacy of mitigation strategies and their effect on consumer demand.
• It is crucial to track HOKA's U.S. DTC channel performance for a return to stronger growth post-Q1 FY26, and evaluate the success of its ongoing strategic wholesale expansion in acquiring new customers without material brand dilution.
• Consider UGG's continued brand evolution, focusing on its expansion into year-round products, growth in the men's category, and international market penetration as significant long-term value drivers.
• The increased $2.5 billion share repurchase authorization signals management's confidence and may provide support to the stock, warranting attention for its impact on capital allocation and shareholder returns.
• Weigh the robust FY25 financial results and compelling brand trajectories of HOKA and UGG against the cautious Q1 FY26 guidance and the tariff-related uncertainties impacting the full-year outlook before adjusting investment positions.