DECK Q1 Earnings Call: Sales Miss Expectations, Margin Expansion and Cautious Outlook

Footwear and apparel conglomerate Deckers (NYSE:DECK) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 6.5% year on year to $1.02 billion. Its non-GAAP EPS of $1 per share was 66.9% above analysts’ consensus estimates.

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StockStory’s Take

Deckers’ leadership attributed quarterly performance to the continued momentum of its two largest brands, HOKA and UGG, which each saw growth across channels and regions. While HOKA benefited from expanded wholesale distribution and new product launches such as the Bondi 9 and Clifton 10, direct-to-consumer growth in the U.S. was tempered by higher promotions on outgoing models and some softness in new customer acquisition. For UGG, strong wholesale demand for transitional and spring styles underpinned growth, though limited availability of key products in direct channels constrained sales. CFO Steve Fasching noted that gross margin improvement was driven primarily by higher levels of full-price selling within UGG and favorable product mix.

Looking forward, management emphasized that macroeconomic uncertainty and new U.S. footwear tariffs are likely to weigh on results in the coming quarters. Steve Fasching explained, “We believe there is potential to see demand erosion associated with the combination of price increases and general softness in the consumer spending environment.” The company anticipates that international growth—especially for HOKA—will outpace the U.S., while wholesale channels will drive more incremental gains than direct-to-consumer. Deckers also plans selective price increases and cost-sharing with suppliers to partially offset tariff impacts, but expects gross margins to face headwinds as a result. CEO Stefano Caroti reiterated a long-term focus on innovation and international expansion to support both brands despite near-term challenges.

Key Insights from Management’s Remarks

Management pointed to model transitions, shifting channel dynamics, and external trade policy changes as major factors shaping the quarter’s financial results and longer-term strategy.

• HOKA wholesale expansion: The brand saw continued growth in global wholesale distribution, with management highlighting that expanded retail partnerships and strong sell-through of new models like the Bondi 9 contributed to overall gains even as U.S. direct-to-consumer growth slowed.
• Product upgrade cycle: New iterations of key franchises (Bondi 9, Clifton 10) received positive feedback from consumers and partners, but transition periods involved higher promotional activity and lower average selling prices, especially in the direct channel.
• UGG’s diversification and men’s growth: UGG drove growth through new product categories, including men’s-focused styles and hybrid products. Management cited successes with men’s campaigns and higher sell-through of spring products in China, reflecting progress in broadening the brand’s appeal and seasonality.
• Tariff and cost pressures: Deckers is facing incremental costs from new U.S. footwear tariffs and higher freight rates. While only a small portion of production is sourced from China, management expects partial mitigation through price increases and supplier negotiations but anticipates some margin contraction.
• Inventory and supply chain management: The company intentionally increased inventory levels compared to last year to navigate potential tariff timing and a European distribution center transition, aiming to avoid supply disruptions during key periods.

Drivers of Future Performance

Deckers’ outlook is shaped by planned price adjustments, macroeconomic headwinds, and a continued push for international and wholesale-led growth.

• Tariffs and pricing strategy: Management expects new U.S. tariffs on footwear imports to increase costs, prompting a staggered implementation of selective price increases and cost-sharing with factory partners. However, they caution that not all incremental costs will be offset, and higher prices may impact demand, particularly in the U.S.
• International and wholesale momentum: The company projects that international sales, especially in Europe and China, will grow faster than domestic sales. HOKA’s expanding presence in overseas markets and additional wholesale partnerships are seen as main avenues for capturing new customers and mitigating U.S. softness.
• Product innovation and pipeline: Deckers is prioritizing ongoing product launches and upgrades across HOKA and UGG, including new performance models and lifestyle offerings. Management believes this will help maintain consumer interest and support growth across both established and emerging categories, even as the environment remains uncertain.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will closely monitor (1) Deckers’ ability to offset tariff-related cost increases through pricing and supplier negotiations, (2) trends in HOKA’s U.S. direct-to-consumer segment as new models gain traction and promotions normalize, and (3) the pace of international and wholesale channel expansion—especially in key markets like China and Europe. The success of upcoming product launches and supply chain adaptations will also be important indicators of execution.

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