Deckers Outdoor · 10-Q · Item 2 MD&A

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with our

condensed consolidated financial statements and the related notes included in Part I, Item 1, “Financial

Statements,” within this Quarterly Report, and the audited consolidated financial statements included in Part II, Item

8, “Financial Statements and Supplementary Data,” of our 2026 Annual Report, filed with the SEC on May 22, 2026,

which is available free of charge on the SEC’s website at www.sec.gov and our website at ir.deckers.com.

Certain statements made in this section constitute “forward-looking statements,” which are subject to numerous

risks and uncertainties. Our actual results of operations may differ materially from those expressed or implied by

these forward-looking statements as a result of many factors, including those set forth in the section titled

“Cautionary Note Regarding Forward-Looking Statements” and Part II, Item 1A, “Risk Factors,” within this Quarterly

Report.

Overview

We are a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories

developed for both everyday casual lifestyle use and high-performance activities. We market our products primarily

under three proprietary brands: HOKA, UGG, and Teva.

Our brands compete across the fashion and casual lifestyle, performance, running, and outdoor markets. We

believe our products are distinctive and appeal to a broad demographic. Our brands sell our products through

quality domestic and international retailers and international distributors in our wholesale channel, and directly to

global consumers through our DTC channel, which is comprised of an e-commerce and retail store presence. We

seek to differentiate our brands and products by offering diverse lines that emphasize fashion, performance,

authenticity, functionality, quality, and comfort, and products tailored to a variety of activities, seasons, and

demographic groups.

Financial Highlights

Consolidated financial performance highlights for the three months ended June 30, 2026, compared to the prior

period, were as follows:

◦Brand

◦Channel

▪Wholesale channel net sales increased 2.2% to $666,714.

◦Geography

•Gross margin increased 60 basis points to 56.4%.

•T3Income from operations as a percentage of net sales (operating margin) decreased 190 basis

•Diluted earnings per share increased 1.1% to $0.94 per share.

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Trends and Uncertainties Impacting our Business and Industry

Macroeconomic and Geopolitical Factors. T4We continue to be exposed to risks from evolving trade policies,

including existing and proposed tariffs, and other restrictions, affecting goods imported from certain regions where

we have a concentration of sourcing and manufacturing. There is significant uncertainty regarding the duration and

scope of current and proposed tariff regimes, as well as the amount and timing of receipt of refunds of previously

paid IEEPA tariffs. While we continue to pursue mitigation strategies, we do not expect these efforts to fully offset

the incremental impact of tariffs we expect to incur during the current fiscal year, excluding the impact of any

potential refunds of IEEPA tariffs.

We previously paid an aggregate gross amount of approximately $120,000 in IEEPA tariffs, for which we have

begun filing for refunds. The net effect that any tariff refunds may have on our condensed consolidated financial

statements may be less than the gross amount of IEEPA tariffs as a result of a number of factors, including

accommodations provided under cost-sharing arrangements with our independent manufacturers, income taxes

payable on refunds received, and other relevant factors. As of the date of this Quarterly Report, we have not

recognized any IEEPA tariff refunds or related interest in our condensed consolidated financial statements. If tariff

refunds are ultimately received or otherwise become realizable, such developments may affect our future results of

operations and cash flows and may be considered in connection with future business decisions. Refer to Part I, Item

1, Note 6, “Commitments and Contingencies,” within this Quarterly Report for further information on the IEEPA tariff

refunds.

Other Factors. Our business and industry are subject to several additional important trends and uncertainties,

which have not materially changed from those described in our 2026 Annual Report. Refer to Part II, Item 7,

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2026 Annual

Report for further discussion. Refer to Part I, Item 1A, “Risk Factors,” of our 2026 Annual Report for detailed

information on the risks and uncertainties that may cause our actual results to differ materially from our

expectations.

Reportable Operating Segments Overview

As of June 30, 2026, our three reportable operating segments include the worldwide operations of the HOKA brand,

UGG brand, and Other brands.

HOKA Brand. The HOKA brand is an authentic premium line of year-round performance footwear, which offers

enhanced cushioning and inherent stability with minimal weight. Originally designed for ultra-runners, the brand now

appeals to world champions, tastemakers, and everyday athletes. Expansion into additional product categories,

elevated marketing campaigns, and investments in brand experiences, coupled with strategic marketplace

presence; have fueled both domestic and international sales growth of the HOKA brand, which has quickly become

a leading brand within run and outdoor specialty wholesale accounts and is growing across its global marketplace.

The HOKA brand’s product line includes running, trail, hiking, fitness, and lifestyle footwear offerings, as well as

apparel and accessories.

UGG Brand. The UGG brand is one of the most iconic and recognized footwear brands in our industry, which

highlights our successful track record of building niche brands into lifestyle and fashion market leaders. Born on the

California coast to warm surfers after they caught and rode the waves, we create iconic products and experiences

that are made for people to feel comfort, softness, warmth, and confidence. With loyal consumers around the world,

innovative products, and elevated storytelling, the UGG brand has proven to be a highly resilient consumer-focused

line of premium footwear, apparel, and accessories that has driven both domestic and international sales growth

with year-round product offerings that appeal to a growing global audience and a broad demographic.

Other Brands. Other brands consist primarily of the Teva brand. The Teva brand’s products are built for a range of

outdoor pursuits and include a variety of footwear options, from classic sandals and shoes to boots.

The Other brands reportable operating segment includes financial results of brands for which standalone operations

have been phased out in the prior fiscal year as described in the section titled “Reportable Operating Segment

Overview,” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of

Operations,” of our 2026 Annual Report.

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Use of Non-GAAP Financial Measures

We disclose supplemental financial measures calculated and presented in accordance with US GAAP; however,

throughout this Quarterly Report, including within our condensed consolidated financial statements, we provide

certain financial information on a non-GAAP basis (non-GAAP financial measures). We provide non-GAAP financial

measures and information that may assist investors in understanding our results of operations and assessing our

prospects for future performance, which primarily consist of certain constant currency measures and total segment-

level financial information.

We believe presenting certain financial and operating measures on a constant currency basis is important as it

excludes the impact of foreign currency exchange rate fluctuations that are not indicative of our core results of

operations and are largely outside of our control. We calculate our constant currency non-GAAP financial measures

for current period financial information, such as total net sales using the foreign currency exchange rates that were

in effect during the previous comparable period, excluding the effects of foreign currency exchange rate hedges and

remeasurements in the condensed consolidated financial statements. We also report comparable DTC sales on a

constant currency basis for DTC operations that were open throughout the current and prior reporting periods, and

we may adjust prior reporting periods to conform to current period accounting policies. The information presented

on a constant currency basis, as we present such information, may not necessarily be comparable to similarly titled

information presented by other companies, and may not be appropriate measures for comparing our performance

relative to other companies. Constant currency measures should not be considered in isolation, or as an alternative

to US dollar measures that reflect current period foreign currency exchange rates or to other financial or operating

measures presented in accordance with US GAAP.

We believe presenting certain segment-level operating measures, including total segment income from operations

and total segment SG&A expenses, is important because it allows for an evaluation of operating performance and

cost structure across brands. Our segment-level non-GAAP financial measures represent the results of operations

and expenses for our individual reportable operating segments and differ from our consolidated results because

they exclude certain unallocated enterprise and shared brand expenses. Our segment-level non-GAAP financial

measures should not be considered in isolation, or as an alternative to consolidated financial and operating

measures presented in accordance with US GAAP.

Seasonality

Refer to Note 1, “General,” of our condensed consolidated financial statements in Part I, Item 1 within this Quarterly

Report and to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of

Operations,” of our 2026 Annual Report for further information regarding the impacts of seasonality on our business.

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Results of Operations

Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025. Results of operations

were as follows:

Three Months Ended June 30,

Change

Amount

% (1)

Amount

% (1)

Amount

%

Net sales

Cost of sales

Gross profit

Selling, general, and

administrative expenses

Income from operations

Total other income, net

Income before income taxes

Income tax expense

Net income

Total other comprehensive income

(loss), net of tax

Comprehensive income

Net income per share

Basic

Diluted

(1) May not calculate on rounded amounts.

Net Sales. Net sales by brand, channel, and geography were as follows:

Three Months Ended June 30,

Change

Amount

Amount

Amount

%

Net sales by brand

HOKA brand

Wholesale

Direct-to-Consumer

Total

UGG brand

Wholesale

Direct-to-Consumer

Total

Other brands (1)

Wholesale

Direct-to-Consumer

Total

Total (1)

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Three Months Ended June 30,

Change

Amount

Amount

Amount

%

Net sales by channel

Total Wholesale

Total Direct-to-Consumer

Total (1)

Net sales by geography

Domestic

International

Total (1)

(1) The Other brands reportable operating segment for the prior period includes financial results for the phase out of the

Koolaburra brand and AHNU brand. Refer to the section titled “Reportable Operating Segments,” in Note 1, “General,” of our

consolidated financial statements in our 2026 Annual Report for further information.

Total net sales increased primarily due to higher net sales for the HOKA brand and UGG brand, partially offset by

lower net sales for the Other brands. Drivers of significant changes in net sales, compared to the prior period, were

as follows:

•T5Net sales of the HOKA brand increased primarily due to higher global net sales across both

channels, with diverse product adoption in the DTC channel, led by growth in our international

market as well as our domestic market. Wholesale channel growth was driven by higher sell-in in

the domestic market, partially offset by lower wholesale channel international net sales due to

planned shipment timing differences primarily from the transition of our European 3PL in the prior

period.

•Net sales of the UGG brand increased primarily due to higher global net sales largely balanced

across both channels, with international sales leading growth, supported by higher domestic sales.

This collective growth was driven by continued adoption for key franchises within our year-round

product offerings.

•Net sales of the Other brands decreased primarily due to the phase out of standalone operations of

the Koolaburra brand in the prior fiscal year, as well as lower domestic net sales for the Teva brand

as it refocuses its wholesale distribution with outdoor and premium retailers.

Supplemental Disclosure

•On a constant currency basis, net sales increased by 4.8% compared to the prior period.

•Comparable DTC channel net sales for the 13 weeks ended June 28, 2026, increased by 6.8%,

compared to the prior period.

•We experienced a decrease of 1.4% in the total volume of units sold to 14,500 from 14,700,

compared to the prior period. Units sold include all categories such as footwear, apparel,

accessories, home goods, and care kits across all brands. Percentages may not calculate on

rounded units. The prior period includes units sold by brands phased out in the prior fiscal year.

•As of June 30, 2026, we have a total of 212 global Company-owned retail stores (including 144

UGG brand retail stores and 68 HOKA brand retail stores), compared to a total of 191 global

Company-owned retail stores (including 143 UGG brand retail stores and 48 HOKA brand retail

stores) in the prior period.

Gross Profit. Gross margin increased to 56.4% from 55.8% compared to the prior period, primarily due to favorable

channel mix as DTC revenue growth outpaced wholesale revenue growth, favorable product mix and full-price

selling primarily for the UGG brand, favorable foreign currency exchange rate fluctuations, and better management

of product close-outs; partially offset by the net impact of incremental tariffs on domestic goods sold.

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Selling, General, and Administrative Expenses. Drivers of significant net changes in SG&A expenses, compared to

the prior period, were as follows:

•Increased payroll and related costs of approximately $12,500, primarily due to higher headcount led

by the HOKA brand, including for retail stores, along with higher unallocated enterprise and shared

brand expenses. The increase in payroll and related costs was comprised of approximately $11,100

of expenses specific to our brands, as well as approximately $1,400 of higher unallocated

enterprise and shared brand expenses.

•Increased other SG&A expenses of approximately $11,800, primarily due to higher IT expenses and

sales commissions. The increase in other SG&A expenses was comprised of approximately $7,400

of expenses specific to our brands, primarily for the HOKA brand and UGG brand, as well as

approximately $4,400 of unallocated enterprise and shared brand expenses.

•Increased advertising, marketing, and promotion expenses of approximately $10,300, primarily due

to higher promotional marketing expenses for the HOKA brand and UGG brand to drive global

brand awareness and market share gains, highlight new product categories, and provide localized

marketing.

•Increased rent and occupancy of approximately $8,400, primarily due to higher rent expenses

primarily associated with investments in the HOKA brand’s global retail store footprint.

•T6Increased net foreign currency-related remeasurement losses recorded in unallocated enterprise

and shared brand expenses of approximately $5,800, primarily due to unfavorable changes in

Asian, Canadian, and European foreign currency exchange rates against the US dollar.

Income from Operations. Income (loss) from operations by reportable operating segment was as follows:

Three Months Ended June 30,

Change

Amount

Amount

Amount

%

Income (loss) from operations

HOKA brand

UGG brand

Other brands (1)

Unallocated enterprise and shared brand

expenses (2)

Total

(1) The Other brands reportable operating segment for the prior period includes financial results for the phase out of the

Koolaburra brand and AHNU brand. Refer to the section titled “Reportable Operating Segments,” in Note 1, “General,” of our

consolidated financial statements in our 2026 Annual Report for further information.

(2) To the extent that consolidated SG&A expenses exceed reportable operating segment SG&A expenses, the costs are recorded

in unallocated enterprise and shared brand expenses. Refer to Note 10, “Reportable Operating Segments,” of our condensed

consolidated financial statements in Part I, Item 1 within this Quarterly Report for further information.

The decrease in total income from operations, compared to the prior period, was primarily due to higher SG&A

expenses as a percentage of net sales, partially offset by higher gross margins on higher net sales. The significant

driver of net changes in total income from operations, compared to the prior period, were:

•The increase in unallocated enterprise and shared brand expenses was primarily due to higher net

foreign currency-related remeasurement losses, as well as higher other SG&A expenses driven by

IT expenses, partially offset by lower variable 3PL service fees, along with lower depreciation and

related costs.

Total Other Income, Net. The decrease in total other income, net, compared to the prior period, was primarily due to

lower interest income driven by lower interest rates, as well as higher penalties and interest related to unrecognized

tax benefits.

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Income Tax Expense. Income tax expense and our effective income tax rate were as follows:

Three Months Ended June 30,

Income tax expense

Effective income tax rate

The net decrease in our effective income tax rate, compared to the prior period, was primarily due to non-recurring

discrete tax expense for unrecognized tax benefits in the prior period and changes in jurisdictional mix of worldwide

income before taxes.

Net Income. The decrease in net income, compared to the prior period, was due to lower operating margins on

higher net sales. Net income per share increased, compared to the prior period, due to lower weighted-average

common shares outstanding driven by stock repurchases.

Total Other Comprehensive Income (Loss), Net of Tax. The increase in total other comprehensive income, net of

tax, compared to the prior period, was primarily due to higher unrealized gains on derivative contracts, partially

offset by lower foreign currency translation gains relating to changes in the net asset position against European and

Asian foreign currency exchange rates.

Liquidity and Capital Resources

Our liquidity may be impacted by a number of factors, which have not materially changed from those described in

the section titled “Liquidity and Capital Resources” in Part II, Item 7, “Management’s Discussion and Analysis of

Financial Condition and Results of Operations,” as well as in Part I, Item 1A, “Risk Factors,” of our 2026 Annual

Report.

Sources of Liquidity. We finance our working capital and operating requirements using a combination of cash and

cash equivalents balances, cash provided by operating activities, and repatriation of cash. We also have available

borrowing capacity under our revolving credit facilities. We believe our sources of cash and cash equivalents will

provide sufficient liquidity to enable us to meet our working capital requirements and contractual obligations for at

least the next 12 months and will be sufficient to allow us to pursue our business strategies and plans.

Cash and Cash Equivalents. As of June 30, 2026, and March 31, 2026, our cash and cash equivalents balance is

$1,602,589 and $1,907,249, respectively, the majority of which is held in highly rated money market funds and

interest-bearing bank deposit accounts with established national and global financial institutions.

Cash Provided by Operating Activities. For the three months ended June 30, 2026, and 2025, we generated

$47,904 and $36,146, respectively, of cash from operating activities. Refer to the section titled “Cash Flows” below

for further discussion on cash flows generated from ongoing operating activities.

Repatriation of Cash. Our cash repatriation strategy, and by extension, our liquidity, may be impacted by several

additional considerations, which include future changes to, or our interpretations of, global tax law and regulations,

and our actual earnings in various jurisdictions in future periods. During the three months ended June 30, 2026,

$250,000 of cash and cash equivalents was repatriated from an international subsidiary that was previously subject

to income taxes, and no cash and cash equivalents were repatriated during the three months ended June 30, 2025.

As of June 30, 2026, and March 31, 2026, we have $418,535 and $653,924, respectively, of cash and cash

equivalents held by international subsidiaries, a portion of which may be subject to additional foreign withholding

taxes if it were to be repatriated. Refer to Note 5, “Income Taxes,” of our consolidated financial statements in Part IV

of our 2026 Annual Report for further information regarding our cash repatriation strategy.

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Revolving Credit Facilities. Information about our revolving credit facilities available as of June 30, 2026, is as

follows:

•Primary Credit Facility. During the three months ended June 30, 2026, we made no borrowings or

repayments and there were no material changes to the terms, to the outstanding letters of credit, or

to the borrowing availability under our unsecured revolving credit facility disclosed in our 2026

Annual Report.

•China Credit Facility. During the three months ended June 30, 2026, we made no borrowings or

repayments and there were no material changes to the terms or to the outstanding bank

guarantees under our credit facility in China disclosed in our 2026 Annual Report.

•Debt Covenants. As of June 30, 2026, we are in compliance with all financial covenants under our

revolving credit facilities.

Refer to Note 6, “Revolving Credit Facilities,” of our consolidated financial statements in Part IV of our 2026 Annual

Report for further information regarding the terms of our revolving credit facilities.

Primary Cash Requirements. Our primary cash requirements include working capital, purchase obligations,

payments to fulfill operating lease obligations, capital expenditures and cloud computing arrangements, and our

stock repurchase program.

Working Capital. Our working capital requirements begin when we purchase materials and inventories and continue

until we collect the resulting trade accounts receivable. A significant portion of the UGG brand’s business has

historically been seasonal, with a higher concentration of net sales in the third fiscal quarter, which contributes to

variability in our working capital requirements and necessitates the use of available cash to build inventory levels in

advance of higher selling seasons. While the impact of seasonality has been partially mitigated by the increasing

contribution of HOKA brand net sales, which are generally more evenly distributed throughout the fiscal year, as well

as by the diversification and expansion of our year-round product offerings across our brands, we expect working

capital requirements to continue to fluctuate period to period.

Purchase Obligations. As of June 30, 2026, there were no material changes outside the ordinary course of business

to the purchase obligations disclosed in Note 8, “Commitments and Contingencies,” of our consolidated financial

statements in Part IV of our 2026 Annual Report. Refer to Note 6, “Commitments and Contingencies,” of our

condensed consolidated financial statements in Part I, Item 1 within this Quarterly Report for further information on

our purchase obligations.

Operating Lease Obligations. As of June 30, 2026, there were no material changes outside the ordinary course of

business to the operating lease obligations disclosed in Note 7, “Leases,” of our consolidated financial statements in

Part IV of our 2026 Annual Report.

Capital Expenditures and Cloud Computing Arrangements. As of June 30, 2026, there were no material changes

outside the ordinary course of business to the capital expenditures and certain implementation costs for cloud

computing arrangements disclosed in the subsection titled “Capital Expenditures and Cloud Computing

Arrangements” within the section titled “Liquidity and Capital Resources” in Part II, Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations,” of our 2026 Annual Report. Capital

expenditures are recorded to property and equipment, net, in the condensed consolidated balance sheets and in

investing cash flows in the condensed consolidated statements of cash flows. Cloud computing arrangements are

recorded to prepaid expenses and other assets in the condensed consolidated balance sheets and in operating

cash flows in the condensed consolidated statements of cash flows.

Stock Repurchase Program. The Board last approved an additional authorization of $3,500,000 on May 20, 2026, to

repurchase shares of our common stock under the same conditions as our prior stock repurchase program. As of

June 30, 2026, the aggregate remaining authorization under our stock repurchase program is $4,711,416,. Our

stock repurchase program does not obligate us to acquire any amount of common stock and may be suspended at

any time at our discretion. Refer to Note 8, “Stockholders’ Equity,” of our condensed consolidated financial

statements in Part I, Item 1 and to Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds,”

within this Quarterly Report for further information regarding our stock repurchase program.

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Cash Flows

The following table summarizes the major components of our condensed consolidated statements of cash flows for

the periods presented:

Three Months Ended June 30,

Change

Amount

Amount

Amount

%

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

Effect of foreign currency exchange rates on

cash and cash equivalents

Net change in cash and cash equivalents

Operating Activities. Our primary source of liquidity was net cash provided by operating activities, which was

driven by our net income after non-cash adjustments and changes in operating assets and liabilities.

The increase in net cash provided by operating activities during the three months ended June 30, 2026, compared

to the prior period, was due to $24,837 of favorable changes in operating assets and liabilities partially offset by

$13,079 of unfavorable net income after non-cash adjustments. Changes in operating assets and liabilities were

primarily due to favorable impacts from (1) improved inventory levels reflecting more disciplined inventory

management, including higher beginning inventory levels in the prior fiscal year related to the transition of our

European 3PL; and (2) timing of payments on prepaid expenses and other current assets.

Investing Activities. The decrease in net cash used in investing activities during the three months ended June 30,

2026, compared to the prior period, was primarily due to lower purchases of property and equipment primarily

related to the timing of upgrades to our office facilities completed in the prior fiscal year.

Financing Activities. T7The increase in net cash used in financing activities during the three months ended June 30,

2026, compared to the prior period, was primarily due to a higher dollar value of stock repurchases.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in accordance with US GAAP requires

management to make estimates and assumptions that affect the amounts reported. Management bases these

estimates and assumptions upon historical experience, existing and known circumstances, authoritative accounting

pronouncements, and other factors it believes to be reasonable. In addition, management has considered the

potential impact of macroeconomic and geopolitical factors on our financial condition, results of operations, and

liquidity, including inflationary pressures, increased tariffs, the potential for refunds of previously paid tariffs, rising

supply chain costs, high interest rates, foreign currency exchange rate volatility, escalating global conflicts, changes

in discretionary spending, and recession risks. Although the full impact of these factors, including the amount,

timing, and realization of any tariff refunds, is unknown, management believes it has made appropriate accounting

estimates and assumptions based on the facts and circumstances available as of the reporting date. However,

actual results could differ materially from these estimates and assumptions, which may result in material effects on

our financial condition, results of operations, and liquidity. Refer to Note 1, “General,” of our condensed consolidated

financial statements in Part I, Item 1 within this Quarterly Report, for further discussion of our significant accounting

policies and use of estimates.

There have been no material changes to the critical accounting policies, or to the key estimates and assumptions,

disclosed in the section titled “Critical Accounting Policies and Estimates” in Part II, Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations,” within our 2026 Annual Report.

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