Footwear and apparel conglomerate Deckers (NYSE: DECK) reported revenue ahead of Wall Street’s expectations in Q2 CY2025, with sales up 16.9% year on year to $964.5 million. On the other hand, next quarter’s revenue guidance of $1.4 million was less impressive, coming in 99.9% below analysts’ estimates. Its GAAP profit of $0.93 per share was 36.6% above analysts’ consensus estimates.

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StockStory’s Take

Deckers’ first quarter results drew a significant positive response from the market, which management attributed to robust international expansion and strong wholesale momentum across its HOKA and UGG brands. CEO Stefano Caroti highlighted that both brands gained market share despite a challenging U.S. retail landscape, with HOKA’s performance particularly strong in Europe and Asia. Caroti noted, “Our brands gained market share while maintaining a high degree of full price integrity,” pointing to disciplined inventory management and successful new product launches as key drivers.

Looking ahead, management’s guidance is shaped by continued uncertainty surrounding global trade policy and the impact of new tariffs. CFO Steve Fasching cautioned that while selective price increases are being introduced to offset higher costs, the full effect of tariffs will be felt later in the year. He emphasized, “It will take time for the benefits of these actions to meaningfully impact our business,” underscoring ongoing investments in brand-building and operational flexibility as Deckers navigates evolving consumer behavior and increased cost pressures.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to international expansion, wholesale channel gains, and disciplined inventory management, even as U.S. consumer sentiment remained mixed.

• International markets outperformed: Both HOKA and UGG saw substantial growth outside the U.S., with EMEA and China delivering the largest year-over-year gains. Management cited record wholesale reorders in Europe and strong consumer acquisition in Asia as pivotal.
• Wholesale led channel growth: The wholesale channel was the primary driver of revenue, outpacing direct-to-consumer (DTC) sales. Management indicated that brick-and-mortar retail remains the main venue for full price sales, aligning with changing consumer preferences.
• Product pipeline momentum: Deckers launched updates to key franchises, including Bondi, Clifton, and Arahi for HOKA, with early feedback showing strong demand. The company also pointed to upcoming launches such as Mach 3 and Mafate 5 as evidence of a robust innovation pipeline.
• Inventory and promotional discipline: Management noted improvements in inventory management, particularly clearing older styles to make way for new launches. While promotions increased versus last year, they were described as normalized as compared to exceptional full price selling in the prior period.
• SG&A investments for brand building: Increased spend focused on marketing, global brand campaigns, and infrastructure to support international and DTC growth. Management stressed that these investments are deliberate to support long-term brand health and global expansion.
• Operating margin: Deckers reported an operating margin of 17.1%, up from 16.1% in the same quarter last year, reflecting improved profitability despite ongoing cost pressures.

Drivers of Future Performance

Deckers’ outlook is shaped by the interplay of tariff headwinds, pricing actions, and ongoing investments in brand development and international expansion.

• Tariffs and pricing adjustments: Management anticipates increased tariffs will pressure gross margins, particularly in the second half of the year. Selective and staggered price increases are expected to partially offset these headwinds, but the timing mismatch means margin recovery will be gradual.
• Continued wholesale and international focus: The company expects wholesale growth, especially in international markets, to continue outpacing DTC in the near term. Ongoing expansion with key retail partners and increased store openings in Europe and Asia are central to this strategy.
• Elevated brand investments: Deckers plans to maintain higher investments in marketing, retail capabilities, and product innovation, even as SG&A expenses rise. Management views these initiatives as essential for long-term market share gains, particularly as competition intensifies in the performance footwear segment.

Catalysts in Upcoming Quarters

In the quarters ahead, our analysts will watch (1) the pace and success of price increases as tariffs take effect, (2) the ongoing expansion and productivity of Deckers’ international wholesale and retail footprint, and (3) the ability to sustain demand for new HOKA and UGG product launches. We will also monitor the impact of increased marketing and operational spending on margins as the company navigates a more competitive and inflationary environment.

Deckers currently trades at $104, in line with $105.03 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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