Q2 2025 Earnings Summary
- 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.
- 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 .
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Revenue Growth | Q2 2025 | ~10% growth | ~20% year-over-year, from 1,091.91MIn Q2 2024 to 1,311.32MIn Q2 2025 | Beat |
Gross Margin | Q2 2025 | ~54% | ~56% ((1,311.32M – 578.048M) / 1,311.32M) | Beat |
Operating Margin | Q2 2025 | 19.5% to 20% | ~23.3% (305,086/ 1,311,320) | Beat |
SG&A | Q2 2025 | 34% to 34.5% | ~32.7% of revenue (428,186/ 1,311,320) | Beat |
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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. -
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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. -
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.