Deckers outlines $5.35B revenue target and focuses on HOKA, UGG growth amid tariff pressures

Earnings Call Insights: Deckers Outdoor Corporation (DECK) Q2 2026

MANAGEMENT VIEW

* CEO Stefano Caroti opened by highlighting "Deckers delivered outstanding second-quarter results ahead of our expectations on both the top and the bottom line," citing a 9% revenue growth and a 14% increase in diluted earnings per share compared to last year. He emphasized international momentum, with HOKA revenue up 15% and UGG up 12% in the first half, and international regions delivering 38% revenue growth year-over-year. Caroti noted, "In the U.S., consumer sentiment is still under pressure, but we're encouraged by the signs of progress..."
* Caroti detailed HOKA's performance, stating, "Bondi, Clifton and Arahi have continued to deliver strong growth and impressive sell-through rates..." and outlined market share gains, regional expansions, and product launches such as Mafate X and upcoming releases for spring '26.
* On UGG, Caroti reported "Men's footwear achieved growth at twice the rate of the overall brand" and highlighted product innovation with the Mel franchise and Classic Micro. He noted, "wholesale sell-in was the driver for total UGG brand performance in the first half, which includes benefits from earlier shipments..."
* CFO Steve Fasching stated, "Second quarter fiscal year 2026 revenue came in at $1.43 billion, representing an increase of 9% versus the prior year," attributing growth primarily to HOKA and UGG, and outlined a 56.2% gross margin and a diluted EPS of $1.82 for the quarter. Fasching added, "We are now providing an outlook for our full year fiscal 2026 and expect total company revenue of approximately $5.35 billion...and earnings per share in the range of $6.30 to $6.39."

OUTLOOK

* Deckers projects full year fiscal 2026 revenue of approximately $5.35 billion, with HOKA expected to increase by a low teens percentage versus last year and UGG growing in the low to mid-single-digit range.
* The company expects gross margin of approximately 56% and operating margin of approximately 21.5%. Guidance assumes international to outpace U.S. growth and global wholesale to outpace DTC for the fiscal year.
* Fasching explained, "we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $150 million" and mitigation efforts to offset $75 million to $95 million.

FINANCIAL RESULTS

* Deckers reported second quarter revenue of $1.43 billion, up 9% year-over-year.
* HOKA revenue increased 11% and UGG revenue increased 10% for the quarter, with HOKA wholesale up 13% and DTC up 8%.
* UGG wholesale grew 17%, while DTC declined 10% due to shifts in consumer preference and earlier wholesale shipments.
* Gross margin was 56.2%, up 30 basis points from last year. SG&A was $477 million, 33.4% of revenue. The tax rate was 21.7%.
* Diluted EPS for the quarter was $1.82. Deckers ended the quarter with $1.4 billion in cash and equivalents and inventory of $836 million. The company repurchased $282 million in shares during the quarter.

Q&A

* Laurent Vasilescu, BNP Paribas: Asked about guidance adjustments for HOKA and UGG growth rates. Caroti responded that "we are anticipating a more cautious consumer as the full impact of tariffs and price increases will be felt here in the U.S.," while Fasching noted the guidance reflects "we are going to maintain these brands...in the marketplace that allows us to grow these -- grow these meaningful over a sustainable longer period of time."
* John Kernan, TD Cowen: Asked about the split between DTC and wholesale, and long-term margin structure. Fasching said, "we expect to continue to see improvements in Q3 and then further improvements in Q4" for DTC, and added, "we're going to continue to see tariff headwinds as we look into FY '27."
* Adrienne Yih-Tennant, Barclays: Sought clarity on price actions and DTC versus wholesale normalization. Caroti said, "we have premium brands and premium brands have more elasticity than other brands. And we've been very selective and strategic in our price increases."
* Samuel Poser, Williams Trading: Queried about order book health and consumer behavior seasonality. Fasching confirmed, "it's up, right? And that's why we're happy that we're seeing increases in order book."
* Jonathan Komp, Baird: Asked about HOKA product launch cadence and growth buckets. Caroti outlined, "We're focusing on a handful of categories for HOKA. It's performance run a trail, it's hike, it's fitness, it's a lifestyle. And over time, you also see apparel."
* Jay Sole, UBS: Probed on HOKA's transition year and tariff guidance. Fasching stated, "in a pre-tariff environment, we saw mid-teens and the fact now with a tariff imposed world in the back half, we're low teens."

SENTIMENT ANALYSIS

* Analysts expressed cautious optimism but pressed for clarification on guidance downgrades, margin pressures, and the impact of tariffs and consumer behavior, often referencing macro uncertainty.
* Management maintained a confident tone in prepared remarks, describing the brands as "well-positioned" and highlighting "strong demand," but adopted a more cautious stance during Q&A, frequently referencing consumer pressures and the impact of tariffs.
* Compared to the previous quarter, management shifted from emphasizing strong momentum and outperformance to more measured optimism, with increased mention of macroeconomic headwinds and consumer caution.

QUARTER-OVER-QUARTER COMPARISON

* The current quarter introduced formal full-year guidance, projecting $5.35 billion in revenue, whereas the prior quarter withheld guidance due to macro uncertainty.
* HOKA and UGG both delivered double-digit revenue growth, but the growth rates moderated compared to Q1.
* Management's tone has grown more cautious, with increased references to tariff impacts and a more conservative revenue outlook for HOKA and UGG compared to the framework cited in Q1.
* Analysts' questions in both quarters focused on channel mix, pricing, and inventory, but this quarter included more insistence on understanding the impact of tariffs and consumer elasticity.

RISKS AND CONCERNS

* Management cited ongoing macroeconomic uncertainty in the U.S. and the full impact of tariffs and price increases as primary risks to the outlook.
* Fasching warned, "our expectation of net tariff headwinds in the back half of fiscal year remain largely unchanged," and the 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."
* Analysts repeatedly raised concerns about tariff exposure, consumer demand, and the sustainability of premium pricing.

FINAL TAKEAWAY

Deckers management emphasized their confidence in the long-term growth prospects for HOKA and UGG, underpinned by robust international momentum and focused investments in brand-building and product innovation. While acknowledging headwinds from tariffs and a cautious U.S. consumer, the company reiterated its disciplined approach to managing for sustainable, profitable growth and its commitment to achieving the newly issued full-year guidance. The executive team stressed that both brands remain positioned to gain market share globally, supported by controlled channel expansion and ongoing product development.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/deck/earnings/transcripts]

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