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Dive Brief:
Despite challenges like tariffs and economic uncertainty, Deckers’ Q1 net sales rose nearly 17% year over year to $964.5 million, with Hoka up nearly 20% to $653.1 million and Ugg growing nearly 19% to $265.1 million.
Wholesale net sales rose 26.7% to $652.4 million while DTC barely budged, rising 0.5% to $312.2 million. Markets abroad outperformed the U.S., with international net sales up 49.7% to $463.3 million and domestic net sales down 2.8% to $501.3 million.
Gross margin shrank to 55.8% from 56.9% a year go, but net income rose more than 20% to $139.2 million.
Dive Insight:
Brick-and-mortar stores are proving to be especially important to wholesale and DTC, at least at Hoka, according to Deckers CEO Stefano Caroti.
“Retail performed better than e-commerce significantly,” he told analysts Thursday, though the company declined to be more specific.
“Our observations indicate that while consumers often search for deals online, brick-and-mortar stores remain the primary venue for full-price sales, aligning with the feedback received from our retail partners,” he said. “Our continued journey to thoughtfully expand wholesale doors plays well into this marketplace dynamic, providing Hoka the opportunity to build share and strengthen partnerships with key customers.”
“On a much smaller scale, we also continue to selectively expand our owned retail locations in key cities around the world,” he also said.
Sneaker style upgrades for Hoka’s Clifton and Bondi models are impacting DTC, according to emailed comments from Drake MacFarlane, research analyst at M Science: “The continued softness in the DTC channel reflects a degree of cannibalization by the wholesale channel.”
Retail partnerships are also dominating at Ugg, with wholesale there up 30% year over year in both the U.S. and abroad, and DTC there down 1%. International drove most of Ugg’s growth in the period, with the largest gains in China and the Europe, Middle East and Africa region. Men’s growth was almost double the brand’s overall growth in the period, with sandal sneaker styles the main driver.
Tariffs weren’t a major factor in the quarter because most of the merchandise sold in Q1 wasn’t subject to new levies, according to Chief Financial Officer Steven Fasching. Still, global trade policy has provoked enough uncertainty that the company is not providing guidance for its full fiscal year, he said.
If tariffs on goods from Vietnam rise from 10% to 20% as expected as of Thursday, the company could face $185 million of tariff impact to its cost of goods sold in fiscal year 2026, higher than the previous estimate for up to $150 million, he also said. The company hopes to recapture about $75 million via price hikes and “partial cost sharing with factory partners,” Fasching said.
Evercore ISI analysts led by Jesalyn Wong questioned whether those estimates are conservative enough, given that most of Deckers’ factories are in Vietnam; Evercore calculates a potential drag of 200 to 300 basis points.
M Science’s MacFarlane agrees that “Deckers’ margins will likely be impacted by tariffs, though given the rapidly shifting trade policies, it’s challenging from our side to fully gauge.”