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    Deckers Outdoor Corp (DECK)

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    Deckers Outdoor Corporation is a global leader in the design, marketing, and distribution of innovative footwear, apparel, and accessories for both everyday casual lifestyle use and high-performance activities . The company markets its products under six proprietary brands, competing across various markets, including fashion, casual lifestyle, performance, running, and outdoor markets . Deckers' product offerings include premium footwear, apparel, and accessories, with a strong emphasis on resilience, comfort, and style .

    1. UGG - Offers a highly recognized line of premium footwear, apparel, and accessories, known for its resilience and broad demographic appeal .
    2. HOKA - Provides performance footwear with enhanced cushioning and stability, appealing to athletes and everyday users .
    3. Teva - Known for sport sandals and outdoor footwear, catering to active and outdoor enthusiasts .
    4. Sanuk - Focuses on casual shoes and sandals with an emphasis on comfort and sustainability .
    5. Koolaburra - Targets value-oriented consumers with casual footwear offerings .
    6. AHNU - Combines high-performance technology with style in its footwear products .
    Initial Price$162.62June 29, 2024
    Final Price$159.42September 29, 2024
    Price Change$-3.20
    % Change-1.97%

    What went well

    • Strong double-digit growth in Asia, particularly in China, where their brands are performing well despite challenging economic conditions, with Asia expected to continue growing at strong double digits.
    • The company aims for HOKA to achieve a 50-50 split between U.S. and international markets, indicating significant growth potential internationally as brand awareness is currently in the mid-20s internationally versus mid-40s in the U.S., with international markets 2-3 years behind the U.S.
    • High-priced Pinnacle products like the Cielo X1 and Skyward X have exceeded expectations, successfully entering the $200+ price point for the first time, contributing to top-line growth and improving the margin profile.

    What went wrong

    • Gross margins are expected to decline in the second half due to increased promotions and markdowns on key styles like the Clifton and Bondi, which could impact profitability .
    • Despite a 32% growth in HOKA during the first half, the company anticipates that HOKA's growth will decelerate in the second half, aligning with their forecast .
    • The company's international markets are 2 to 3 years behind the U.S., with challenges anticipated in regions like China due to a "challenging economic climate", potentially hindering growth .

    Q&A Summary

    1. HOKA Growth Guidance
      Q: HOKA guidance raised to 24%; expectations for second half?
      A: Management increased HOKA's growth guidance to 24% for the year, noting that while first-half growth was 32%, they anticipate a settling of growth in the second half as earlier wholesale expansion moderates. They remain confident due to better-than-expected performance and focus on controlled, strategic distribution.

    2. Margin Outlook
      Q: Are you seeing pullback in full-price selling affecting margins?
      A: Management is cautiously assuming increased promotions in the second half due to macroeconomic challenges. There is more product in the channel compared to last year, which may lead to promotions to manage inventory ahead of new product introductions in Q4 and Q1 FY'26.

    3. International Expansion
      Q: What's the outlook for HOKA's international growth?
      A: HOKA's international business is 2 to 3 years behind the U.S. but has significant upside. Management aims for a 50-50 split between U.S. and international sales in the long term. They are pleased with strong growth in Europe and are encouraged by progress in Asia and China.

    4. Inventory and Gross Margin
      Q: How will promotions and inventory affect gross margin?
      A: Management acknowledged a 70 basis point freight headwind impacting gross margin in Q2 but noted overall improvement due to product mix. They anticipate increased promotions in the second half, especially for key styles like Clifton and Bondi, to manage inventory and launch new models.

    5. Early Wholesale Shipments
      Q: Are earlier wholesale shipments affecting future quarters?
      A: Earlier wholesale shipments, particularly for UGG, contributed to higher growth in Q2 as partners wanted product sooner. This may impact the second half due to more inventory in the channel, but management remains disciplined in marketplace management.

    6. Performance in China
      Q: How is China performing amid tough conditions?
      A: Despite a challenging economic climate, the brands are performing well in China, connecting with consumers and communities. HOKA is now a top-five brand in major races, and there's increasing store footprint. Asia continues to grow at strong double digits.

    7. New Product Launches
      Q: What's the impact of new product introductions?
      A: The company delivered significant newness, including upgrades to major products like Bondi (launching in January) and Clifton (in April). They also introduced new styles in lifestyle and cold-weather categories, with positive trade reactions.

    8. Door Expansion Strategy
      Q: What's the strategy for expanding retail doors?
      A: Management is selective and diligent in expansion, focusing on productivity before adding doors. They continue to perform and open doors strategically with partners like Dick's Sporting Goods and Foot Locker.

    9. Demand Creation Spending
      Q: How are you investing in marketing for HOKA and UGG?
      A: The company is increasing marketing spend as a percentage of revenue, investing in demand creation for both HOKA and UGG. They are creating localized content to resonate with international consumers and leveraging gross margin improvements to fund this investment.

    10. Tariff Considerations
      Q: How are you considering potential tariff impacts?
      A: Management stated it's too early to assess potential tariff impacts given uncertainties, and any effects are not currently figured into guidance.

    Guidance Changes

    Annual guidance for FY 2025:

    • Revenue growth: Approximately 12% to $4.8B (raised from approximately 10% to $4.7B )
    • HOKA: Expected to increase approximately 24% (raised from approximately 20% )
    • UGG: Mid-single-digit growth (no change from prior guidance )
    • Gross margin: 55% to 55.5% (raised from approximately 54% )
    • SG&A: Approximately 35% of revenue (raised from 34% to 34.5% )
    • Operating margin: 20% to 20.5% (raised from 19.5% to 20% )
    • Effective Tax Rate: 23% to 23.5% (raised from 22% to 23% )
    • Diluted EPS: $5.15 to $5.25 (lowered from $29.75 to $30.65 )
    NamePositionStart DateShort Bio
    Dave PowersChief Executive Officer, President, DirectorJune 2016Dave Powers was appointed as CEO in June 2016 and joined the Board at that time. He was appointed President in March 2015. He announced his intention to retire effective August 1, 2024 .
    Stefano CarotiChief Executive Officer, PresidentAugust 1, 2024Stefano Caroti was appointed Chief Commercial Officer in April 2023. He will become CEO and President effective August 1, 2024. He has over 32 years of industry experience .
    Steven J. FaschingChief Financial OfficerJune 2018Steven J. Fasching was appointed CFO in June 2018. He has over 30 years of experience in financial and strategic planning .
    Angela OgbechieChief Supply Chain OfficerJune 2022Angela Ogbechie was appointed Chief Supply Chain Officer in June 2022. She has extensive experience in global demand planning, logistics, distribution, and fulfillment .
    Thomas GarciaChief Administrative Officer, Secretary2021Thomas Garcia joined Deckers in 2009 and was promoted to Chief Administrative Officer in 2021. He oversees Legal, ESG, Strategy, and Communications .
    Anne SpangenbergPresident of Fashion LifestyleJuly 2022Anne Spangenberg was appointed President of Fashion Lifestyle Group in July 2022. She has over 25 years of experience in global consumer-focused omni-channel retail .
    Robin GreenPresident of HOKAFebruary 2024Robin Green was appointed President of HOKA in February 2024. She has over 20 years of experience in the global consumer products landscape .
    1. With earlier wholesale shipments contributing to revenue growth in Q2, how do you anticipate this will impact your third-quarter growth, and are you concerned about potential pull-forward effects that might soften future results?
    2. Inventory levels increased 7% compared to last year; how are you managing the risk of excess inventory, especially considering uncertainties in consumer demand and the potential for a more promotional retail environment in the second half?
    3. Given the expected moderation in UGG's growth to mid-single digits after achieving 13% growth in the first half, what factors contribute to this deceleration, and could there be upside potential based on new product introductions?
    4. With plans to expand HOKA's distribution through opening more doors, how are you ensuring that this expansion doesn't dilute the brand's premium positioning and cannibalize existing channels?
    5. Considering the possibility of future tariffs not factored into your current guidance, what strategies do you have in place to mitigate potential impacts on costs and margins if tariffs are implemented?
    Program DetailsProgram 1
    Approval DateJuly 27, 2022
    End Date/DurationNot specified
    Total additional amount$1,200,000
    Remaining authorization amount$671,785
    DetailsThe program may be suspended at any time at the company's discretion.

    Q2 2025 Earnings Call

    • Issued Period: Q2 2025
    • Guided Period: FY 2025
    • Guidance:
      • Revenue Growth: Approximately 12% above last year, reaching $4.8 billion.
      • Brand Growth:
        • HOKA: Expected to increase approximately 24%.
        • UGG: Expected to grow in the mid-single digits.
      • Gross Margin: 55% to 55.5%.
      • SG&A: Approximately 35% of revenue.
      • Operating Margin: 20% to 20.5%.
      • Effective Tax Rate: 23% to 23.5%.
      • Diluted EPS: $5.15 to $5.25 .

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2025
    • Guidance:
      • Diluted EPS: $29.75 to $30.65.
      • Operating Margin: 19.5% to 20%.
      • SG&A: 34% to 34.5%.
      • Effective Tax Rate: 22% to 23%.
      • Revenue Growth: Approximately 10% to $4.7 billion.
      • Gross Margin: Approximately 54%.
      • Brand-Specific Growth:
        • HOKA: Approximately 20%.
        • UGG: Mid-single-digit growth .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025
    • Guidance:
      • Revenue Growth: Approximately 10% to $4.7 billion.
      • HOKA Growth: Approximately 20%.
      • UGG Growth: Mid-single digits.
      • Gross Margins: Approximately 53.5%.
      • SG&A: Approximately 34% of revenue.
      • Operating Margin: Approximately 19.5%.
      • Effective Tax Rate: 22% to 23%.
      • Diluted EPS: $29.50 to $30.
      • Capital Expenditures: $115 million to $125 million .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      • Operating Margin: Approximately 20%.
      • Effective Tax Rate: Approximately 22%.
      • Diluted EPS: $26.25 to $26.50.
      • Full Year Revenue: Approximately $4.15 billion.
      • UGG Revenue Growth: Low double digits.
      • HOKA Revenue Growth: Approximately 25%.
      • Gross Margin: Approximately 54.5%.
      • SG&A: Approximately 34.5% of sales .