Deckers Outdoor raised profit and sales guidance for its full financial year as growth at its Hoka brand accelerated and it announced better-than-expected group results in the second quarter ended Sept. 30.
Second-quarter revenues increased by 20.1 percent to $1.31 billion, above a $1.20 billion analyst consensus, with growth continuing to be led by Hoka. The brand’s sales surged by 34.7 percent to $570.9 million, after rising 29.7 percent in the first quarter, driven by full-price demand across multiple product categories and benefiting from a high number of new product launches during the quarter and earlier wholesale and distributor shipments. Sales of Ugg increased by 13.0 percent to $689.9 million amid broad-based demand and as the brand also benefited from earlier wholesale shipments in the US.
| Deckers Outdoor Corp. - Income | |||
|---|---|---|---|
| 2024 | 2023 | Change | |
| Quarter ended Sept. 30 ($thousand) | |||
| Net sales | 1,311,320 | 1,091,907 | 20.1% |
| Cost of sales | 578,048 | 508,888 | 13.6% |
| Gross profit | 733,272 | 583,019 | 25.8% |
| SG&A expenses | 428,186 | 358,402 | 19.5% |
| Income from operations | 305,086 | 224,617 | 35.8% |
| Total other income, net | -13,826 | -9,700 | -42.5% |
| Pre-tax | 318,912 | 234,317 | 36.1% |
| Tax | 76,591 | 55,770 | 37.3% |
| Net income | 242,321 | 178,547 | 35.7% |
| Total other comprehensive income, net of tax | 10,775 | -2,117 | – |
| Comprehensive income | 253,096 | 176,430 | 43.5% |
| Diluted EPS | 1.58 | 1.14 | 38.6% |
| Half ended Sept. 30 ($ thousand) | |||
| Net sales | 2,136,667 | 1,767,698 | 20.9% |
| Cost of sales | 933,395 | 838,255 | 11.3% |
| Gross profit | 1,203,272 | 929,443 | 29.5% |
| SG&A expenses | 765,379 | 634,090 | 20.7% |
| Income from operations | 437,893 | 295,353 | 48.3% |
| Total other income, net | -30,172 | -20,328 | -48.4% |
| Pre-tax | 468,065 | 315,681 | 48.3% |
| Tax | 110,119 | 73,582 | 49.7% |
| Net income | 357,946 | 242,099 | 47.9% |
| Total other comprehensive income, net of tax | 6,975 | -10,416 | – |
| Comprehensive income | 364,921 | 231,683 | 57.5% |
| Diluted EPS | 2.34 | 1.54 | 51.9% |
| Source: Deckers Outdoor Corp. | |||
Deckers now anticipates sales for the full year will rise by 12 percent to $4.8 billion, above a previous guidance of $4.7 billion. While management still expects Ugg sales to grow by a mid-single-digit percentage, it now sees Hoka sales rising by 24 percent compared to a previous forecast of 20 percent growth. Diluted earnings per share guidance was raised to a range of $5.15 to $5.25 after diluted EPS in the second quarter grew to $1.59 from $1.14 a year earlier, topping an analyst consensus of $1.24.
In September, the US group carried out a six-for-one share split to make the ownership of its stock more affordable and attractive to investors.
“Our powerful brands, coupled with our strategic marketplace management and robust financial profile gives us the conviction to achieve our updated outlook for fiscal year 2025 even in the face of macro pressures impacting the broader retail space,” said Steve Fasching, the CFO, in a conference call with analysts.
By channel, direct-to-consumer (DTC) sales increased by 19.9 percent to $397.7 million, as comparable sales grew by 17.0 percent. Wholesale sales climbed by 20.2 percent to $913.7 million.
Domestic sales at Deckers rose by 14.2 percent to $853.9 million in the quarter while international sales jumped by 33.0 percent to $457.4 million. “International is between two and three years behind the US, and we’ve adopted the same playbook internationally that has been so successful here,” explained Stefano Caroti, who was participating in his first conference call as CEO. He added that in the long term he ideally sees a 50-50 split between the US and international business.
The second-quarter gross margin widened by 2.50 percentage points to 55.9 percent, driven by reduced closeouts to the wholesale channel and a favorable brand and product mix given that Hoka, the group’s highest margin brand, and higher-margin products within both Hoka and Ugg contributed to a larger share of growth. These factors were partially offset by higher freight and channel mix with an increased proportion of distributor business resulting from earlier shipments. Operating income grew to $305.1 million from $224.6 million.
Deckers’ management expects that gross margin for the full year will now come in at 55.0 percent to 55.5 percent, up from guidance of about 54 percent previously, benefiting from the brand and product mix but partially offset by continued freight headwinds and expectations of a more promotional environment in the second half of the year compared to the very low levels seen in the year earlier. “We know things…are probably a little bit more challenged approaching this holiday season, generally macro speaking. And so we are being a little bit more cautious with our assumptions around the promotion that we anticipate we will see,” said Fasching.
