Q1 2025 Earnings Summary
- Strong Brand Momentum with Confident Full-Year Guidance: Deckers remains confident in its full-year guidance, with strong brand performance and key product launches selling very strongly. The brands are "strong and in demand," and no major issues are anticipated for the balance of the year.
- Strategic Wholesale Expansion Driving Growth and Customer Acquisition: Fiscal year 2025 is "a year of wholesale growth," with Deckers expanding points of distribution and gaining shelf space, while maintaining balance with direct-to-consumer channels. This strategy helps to bring in new customers through wholesale, who then migrate to DTC, supporting sustainable, long-term growth.
- Innovation and New Product Launches Fueling Growth: The launch of new products like the Skyflow, featuring incredible innovation at a more commercial price point, is expected to add to key sellers and reduce reliance on existing franchises. Upcoming launches, such as the updated Bondi model in Q4, along with a new segmentation approach, are anticipated to drive growth and have received very strong responses from consumers.
- The company expects a more promotional environment going forward, which could pressure gross margins due to lower levels of full-price selling. ( , , )
- Freight costs are anticipated to become a headwind, with a negative impact of approximately 80 basis points on gross margin over the next three quarters. ( , )
- SG&A expenses are projected to increase as the company invests in marketing and infrastructure, potentially reducing operating margins. ( , )
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Capital Allocation Strategy
Q: How will you use your $1.4 billion cash balance?
A: We have a healthy cash balance of $1.4 billion , and our focus remains on organic growth with our existing brands like HOKA and UGG, as well as reactivating Teva. M&A is not currently on the radar due to integration challenges and valuations. While we are committed to share repurchases, we also consider issuing a dividend, which is discussed with our Board but nothing is announced yet. -
Revenue Guidance and Outlook
Q: How should we think about revenue growth for the rest of the year?
A: We're holding our full-year revenue growth guidance at 10%. Q1 was our strongest percentage growth quarter, and we expect growth rates to slow in the coming quarters due to tougher comparisons. However, we're still anticipating topline growth around 10% for the remainder of the year. -
Gross Margin and Freight Impact
Q: What impact will freight costs have on gross margins?
A: In Q1, we saw a 560 basis point increase in gross margin, with 80 basis points coming from freight benefits. However, freight is now becoming a headwind, and we expect a negative impact of 80 basis points on gross margin over the next three quarters. Additionally, margin expansion and brand mix contributed 250 basis points, and full-price selling added another 250 basis points in Q1. -
HOKA Growth Outlook
Q: Can you elaborate on HOKA's momentum and 20% growth plans?
A: Our HOKA brand continues to show strong momentum despite mixed industry data. We build brands for long-term health and focus on sustainable growth. FY '25 will be a year of wholesale growth for HOKA, with expanded distribution points while maintaining a balance with our direct-to-consumer (DTC) channel. We're not chasing numbers but aiming for sustainable, profitable growth. -
SG&A Investment Strategy
Q: Why are you increasing SG&A spending?
A: Margin expansion allows us to invest in building global brand awareness while still delivering exceptional profitability. We're investing in marketing to support new product launches and to drive global awareness, especially as competition increases. We're also building our teams and infrastructure to support continued growth. -
Distribution Expansion
Q: What new channels or partners are you pursuing for HOKA and UGG?
A: We're expanding with key partners domestically and internationally for HOKA, including DSG, JD in the U.S., Europe, and Asia, Intersport in Europe, Foot Locker, Topsports in China, and Sport Chek in Canada. We're also planning selective store openings for both UGG and HOKA globally, focusing on strategic growth. -
HOKA Apparel Expansion
Q: How is the HOKA apparel launch progressing?
A: The recent Airolite launch is performing well in limited distribution. However, creating a compelling and innovative apparel offering is a key priority. We see a tremendous opportunity to disrupt the apparel category and are investing in leadership and infrastructure to support these efforts over the coming years.