Deckers(DECK) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics - SG&A expenses in Q1 were $337 million, up 22% YoY from$ 276 million, representing 40.9% of revenue compared to 40.8% last year [2] - Tax rate was 22.5%, up from 21.9% in the prior year, contributing to diluted EPS of $4.52, an 87% increase YoY from$ 2.41 [3] - Cash and equivalents stood at $1.44 billion as of June 30, 2024, with inventory up 2% YoY to$ 753 million [4] - The company repurchased $152 million worth of shares at an average price of$ 858.79, with $790 million remaining under the stock repurchase authorization [4] Business Line Performance - HOKA brand revenue increased 30% YoY to$ 545 million, driven by strong demand for key styles like Clifton and Bondi, as well as emerging franchises like Mach, Transport, and Kawana [88] - UGG brand revenue grew 14% YoY to $223 million, driven by strong full-price selling of iconic franchises and increased adoption of the Golden Collection [36] - HOKA's DTC revenue increased 33% YoY, while wholesale revenue grew 28% YoY, reflecting balanced growth across channels [35] Market Performance - HOKA experienced robust growth in international markets, particularly in China and EMEA, with DTC growth of 31% in the US and 21% internationally [62] - UGG saw strong DTC performance in both the US and international regions, with the Tasman franchise and Golden Collection driving year-round demand [37] Strategic Direction and Industry Competition - The company is focused on expanding HOKA's global awareness and market share, particularly in international markets, while enhancing DTC growth through consumer acquisition and retention [90] - UGG is leveraging collaborations and marketing activations to maintain consumer interest and drive year-round demand for its products [10][11] - The company is investing in innovation, with new HOKA styles like Skyward X and Cielo X1 performing well and driving incremental volume [88] Management Commentary on Operating Environment and Future Outlook - Management expects total company revenue to grow approximately 10% YoY to$ 4.7 billion in FY2025, with HOKA growing 20% and UGG growing in the mid-single-digit range [23] - Gross margin is expected to increase to 54%, up 50 basis points from prior guidance, driven by strong Q1 results [23] - The company anticipates a more normalized promotional environment in FY2025, with higher freight costs impacting margins in the remaining quarters [24] Other Important Information - The company divested the Sanuk brand, which has been removed from forward-looking guidance [41] - A 6-for-1 forward stock split has been approved, pending stockholder approval at the 2024 Annual Meeting [42] Q&A Session Summary Question: Capital Allocation Priorities - The company is focused on organic growth and maintaining a strong balance sheet, with share repurchases remaining a priority. Dividends and M&A are under discussion but no announcements have been made [33][56] Question: HOKA's Momentum and Distribution Strategy - HOKA's strong performance is attributed to its global multichannel strategy, with balanced growth across DTC and wholesale channels. The company is confident in achieving its 20% growth target for the year [38][50] Question: New Product Launches and Segmentation - HOKA's Mach 6 and Skyflow launches have been successful, with the Mach 6 becoming a top 5 revenue style. The company is focusing on segmentation to differentiate products across distribution points [19][52] Question: HOKA Apparel and Revenue Shape - HOKA's apparel launch, Airolite, is performing well in limited distribution. The company is investing in leadership and infrastructure to expand its apparel offerings [57][58] Question: Freight Costs and Margin Impact - Freight costs are expected to be a headwind for the remainder of FY2025, with a negative 80 basis points impact on margins [70] Question: Inventory and Order Book Trends - Inventory is up 2% YoY, with UGG in a strong position heading into the fall season. The company's order book reflects demand exceeding supply, indicating a healthy marketplace [130][133] Question: HOKA DTC Growth and International Expansion - HOKA's DTC growth is driven by strong performance in North America and international markets, with Asia showing promising growth potential [134][135] Question: Store Expansion Strategy - The company is taking a strategic approach to store expansion, focusing on flagship locations in key cities for UGG and a more aggressive retail build-out for HOKA in international markets [145]