Deckers’ Q1 sales rising less than expected as tariffs start to bite

Deckers Brands forecasts sales in the first quarter, ending June 30, will rise to $890-$910 million from the $825 million reported the year earlier, falling below an analyst consensus for a top line of about $919 million.

Deckers says the first-quarter forecast factors in the impact of US import tariffs, whose full impact should come later this year. While management noted that the decision to provide quarterly guidance was unusual, it declined to provide its routine full-year outlook, given macroeconomic uncertainty tied to evolving trade policy, particularly the effect on US consumer demand of higher prices on a growing number of products.

“Our teams are closely monitoring changes to tariff policies and continue to evaluate levers to mitigate the impact on our business, including, but not limited to, flexing the pricing power of our brands, which we are assessing for strategic, selective and staggered implementation in the US market and negotiating cost sharing with our factory partners,” said Steve Fasching, the Chief Financial Officer, in a conference call with analysts on results for the fourth quarter ended March 31.

Fasching noted that Deckers traces less than 5 percent of footwear production to China, where US import tariffs currently stand at 30 percent, with the remainder coming from Southeast Asian countries, primarily Vietnam. For the full year, Deckers expects to face an increase in the cost of goods sold of up to $150 million based on current tariffs, although Fasching noted that tariffs could still change. Deckers expects to be able to mitigate about half of these costs.

“Even with these mitigation efforts, we expect to absorb a portion of the tariff impact as we do not anticipate that these actions will fully offset incremental costs in fiscal year 2026,” Fasching added. “We also believe there is potential to see demand erosion associated with the combination of price increases and general softness in the consumer spending environment.”

In the first quarter, Deckers anticipates that sales growth will be supported by an “at least low double-digit” increase in sales for its Hoka brand, while at Ugg, sales are expected to increase “at least mid-single digits.”

The gross margin for the quarter is expected to narrow by about 2.50 percentage points versus the previous year, because of higher freight costs, increased promotional activity from the “exceptionally low” levels of the previous year and channel-mix headwinds, with wholesale business growing faster than direct-to-consumer (DTC). Diluted earnings per share are expected to be $0.62-$0.67, down from a restated $0.75 the year earlier.

Fourth-quarter sales higher, driven by Hoka

In the fourth quarter, ended March 30, Deckers posted sales of $1.022 billion, up by a reported 6.5 percent and by 7.5 percent at constant currency rates. Hoka brand sales increased by 10.0 percent to $586.1 million, and Ugg brand sales rose by 3.6 percent to $374.3 million. Other brands saw sales slip by 6.3 percent to $61.3 million.

Wholesale sales increased by 12.3 percent to $611.6 million, while DTC sales fell by 1.2 percent to $410.2 million, reflecting a 1.6 percent comparable sales decline. Domestic sales were flat at $657.7 million, while international sales grew by 19.9 percent to $374.1 million.

The quarterly gross margin widened by 0.50 percentage points to 56.7 percent, thanks mainly to higher levels of price selling for Ugg and favorable brand and product mix, higher margin products within Ugg having driven a larger percentage of growth. This was partially offset by increased freight costs, currency headwinds and an unfavorable channel mix, as wholesale grew faster than DTC. Operating income rose to $173.9 million from $144.3 million, and net income to $151.4 million from $127.5 million, as diluted EPS increased to $1.00 from $0.82.

Fasching said that wholesale is likely to continue to outpace DTC in growth, particularly for the Hoka brand, “as we view increased awareness as an inflection point to strategically expand points of distribution for a growing consumer base to experience the brand.”

The impact of tariffs, higher levels of promotion and higher ocean freight rates in the first half are expected to result in a decline in full-year gross margin from the record high of 57.9 percent in fiscal-year 2025.

Before the tariff uncertainty, Deckers was projecting double-digit sales growth this year, with mid-teen growth from Hoka and mid-single-digit growth from Ugg. Sales in fiscal-year 2025 increased by 16.3 percent to $4.986 billion, with a 23.7 percent increase at Hoka and a 13.1 percent rise at Ugg.

Separately, Deckers also announced that it has appointed Cynthia Davis as the new Chair of its board of directors. The company noted that Davis, who joined the board in 2018, brings significant footwear and retail industry leadership experience, having served in several public company executive and board roles over the last three decades. She is replacing Michael Devine, who is retiring after 14 years on the board, including six as Chair.