Deckers (DECK) Earnings Call Highlights Powerful Momentum

Deckers Outdoor ((DECK)) has held its Q3 earnings call. Read on for the main highlights of the call.

Deckers Outdoor’s Earnings Call Signals Strong Momentum Despite Tariff Clouds

Deckers Outdoor’s latest earnings call painted a distinctly upbeat picture: record quarterly revenue and earnings per share, upgraded full-year guidance, and powerful performance from both HOKA and UGG. Management emphasized strong consumer demand, expanding margins, and a fortress balance sheet backing an aggressive buyback program, while acknowledging tariffs, higher inventory, and some timing noise as the main watchpoints rather than fundamental cracks.

Record Quarter Caps Broad-Based Revenue Growth

Deckers reported third-quarter revenue of $1.96 billion, up 7% year over year, marking another record period for the company. The gains were spread across brands and geographies, signaling resilient consumer demand even in a choppy macro backdrop. Management highlighted that this quarter is part of a broader trend rather than a one-off, with year-to-date revenue up 10% versus last year. The company’s two core engines, HOKA and UGG, continue to carry the portfolio as Deckers trims smaller, non-core brands.

HOKA Extends its Run as Growth Engine

HOKA delivered another standout performance, with Q3 revenue of $629 million, up 18% year over year, adding roughly $98 million in incremental sales. Growth was balanced, with direct-to-consumer up 19% and wholesale up 18%, underscoring both brand strength and channel health. Management reiterated a mid-teens growth outlook for HOKA heading into fiscal 2026, reflecting confidence in product innovation, expanded distribution, and growing brand awareness in performance running and beyond.

UGG Delivers the Biggest Quarter in its History

UGG posted a record quarter with revenue of $1.3 billion, up 5% year over year and marking the largest quarter in the brand’s history. Both direct-to-consumer and wholesale contributed, growing 5% and 4% respectively. Despite its maturity, UGG is still finding new legs through fresh silhouettes and product extensions, and its ability to grow at scale during peak season remains a key cash and profit driver for the group.

International and U.S. Markets Both Moving in the Right Direction

Geographically, Deckers showed healthy breadth: HOKA and UGG combined generated 15% revenue growth in international markets and 5% growth in the United States. Management called out a positive inflection in U.S. direct-to-consumer trends, while international demand remains robust as both brands deepen their presence across Europe and Asia. This balanced geographic mix helps mitigate localized macro softness and supports a multi-year expansion story.

Margins Surprise to the Upside, Profitability Stands Out

Profitability was a major highlight. Q3 gross margin reached 59.8%, beating expectations, and the company lifted its full-year gross margin outlook to about 57%, roughly 100 basis points higher than prior guidance. Operating margin guidance was also raised by about 100 basis points to roughly 22.5%. These improvements reflect strong full-price selling, healthy product mix, and tight marketplace management, which together are offsetting cost pressures, including tariffs.

Record EPS and Upgraded Earnings Outlook

Deckers posted diluted EPS of $3.33 in Q3, an 11% increase year over year and the highest quarterly EPS in its history. Year-to-date, diluted EPS is up 13% from the prior year. Reflecting this momentum, management raised its fiscal 2026 EPS guidance to a range of $6.80 to $6.85, representing 7–8% growth versus the prior year. The upgraded earnings outlook underscores both underlying business strength and the accretive impact of share repurchases.

Robust Cash, Aggressive Buybacks Support Shareholder Returns

The balance sheet remains a strategic asset: Deckers closed the quarter with approximately $2.1 billion in cash. The company repurchased about $349 million of stock in Q3 at an average price of $92.36 and has bought back roughly 8 million shares year-to-date, more than 5% of starting shares outstanding. With $1.8 billion remaining under its authorization and plans to repurchase more than $1 billion of stock in fiscal 2026, management expects buybacks alone to add more than $0.20 to EPS, signaling confidence in long-term value creation.

Growth Momentum Over the First Nine Months

The strong quarter fits into a solid year-to-date trajectory. Over the first nine months, total company revenue is up 10% year over year, driven by 16% growth at HOKA and 8% growth at UGG. Diluted EPS is up 13% over the same period, indicating that Deckers is not just growing the top line, but expanding profits even as it continues to invest behind its key brands and capabilities.

Product Innovation and Marketing Fuel Brand Heat

New products and marketing campaigns are clearly resonating with consumers. For UGG, the company cited strong response to styles like the Quill and Lowmel—both more than doubling revenue—alongside continued strength in the Classic Micro and growing men’s initiatives. HOKA’s line-up, including models such as the Gaviota 6, Arahi 8, Cielo X1 3.0, Mach 7, and Speedgoat 7, has helped keep the brand at the forefront of performance and lifestyle running. Layered on top are targeted marketing activations and ambassador programs that are building deeper engagement and brand equity.

Full-Price Sell-Through and Tight Marketplace Control Protect Margins

Deckers’ merchandising discipline is a key margin lever. Management reported high full-price sell-through across both brands, with top European HOKA customers averaging around 90% sell-through. This tight control of inventory and pricing has supported margin resilience and helped drive market share gains. HOKA, for example, is gaining share in the premium road running segment above $140, a space where pricing power and brand strength are particularly important.

Tariffs Emerge as a Material Headwind

Tariffs are a growing drag on profitability. Management estimates the unmitigated tariff impact for fiscal 2026 at about $110 million. Through a mix of pricing actions and timing, the current net impact is expected to be roughly $25 million, but the burden is not evenly spread: Q4 is projected to absorb nearly the full 20% tariff rate, creating an estimated 200 basis-point headwind to gross margin in that quarter. While the company is actively managing this headwind, tariffs remain a notable swing factor for margins.

Inventory Build and Working Capital Considerations

Inventory stood at $633 million at December 31, up 10% year over year, including tariffs paid on inbound product. While the increase supports strong demand and ensures product availability, it also raises questions around working capital efficiency and potential risk if demand slows. Management framed the build as deliberate and aligned with growth, but investors will watch closely to ensure inventory remains healthy and does not require elevated discounting down the line.

Planned SG&A Deleverage as Investments Continue

Operating expenses were kept in check in Q3, with SG&A at $557 million, up 4% year over year and improving to 28.5% of revenue versus the prior year. However, the company expects slightly more SG&A deleverage in Q4 as it continues to invest selectively in growth initiatives, brand building, and infrastructure. While this will pressure near-term operating leverage, management positioned these outlays as necessary to support HOKA’s expansion and sustain UGG’s strength.

Higher Tax Rate Takes a Small Bite Out of Earnings

Deckers’ effective tax rate rose to 23.3% in Q3, up from 21.8% a year ago. The higher tax burden modestly offsets some of the underlying earnings strength, but remains manageable within the broader profitability profile. The company’s longer-term guidance embeds a tax rate around this higher level, suggesting investors should expect this as the new normalized run-rate rather than a transient spike.

Quarter-to-Quarter Timing Distorts Q4 Comparisons

Management cautioned that some UGG orders originally planned for the fourth quarter were pulled forward into Q3. As a result, Q4 revenue is modeled to be roughly flat year over year, more a reflection of shipment timing than underlying demand softness. This dynamic creates some quarter-to-quarter volatility in reported numbers, particularly for UGG, and investors may need to look at multi-quarter trends to get a cleaner read on the brand’s performance.

Smaller Brand Phaseout Weighs on Non-Core Revenue

Outside of HOKA and UGG, reported declines in other categories largely stem from the planned phaseout of the Koolaburra brand. This decision reduces revenue in non-core segments but simplifies the portfolio around the company’s highest-potential assets. The move underscores Deckers’ focus on concentrating capital and management attention on brands with the strongest growth and profitability profiles.

Vast Distribution White Space for HOKA

Despite its rapid growth, HOKA’s distribution remains underpenetrated, offering a long runway for expansion. In U.S. athletic specialty, HOKA is present in only about 25% of target doors; in European sporting goods, it reaches roughly 40% of intended destinations; and in Asia, including China, the brand is in less than one-third of its potential footprint. While ramping distribution at scale brings execution challenges, this white space is a key part of the company’s multi-year growth narrative for HOKA.

Tariff Policy Uncertainty Remains a Macro Risk

Beyond the currently modeled impacts, management noted that tariff estimates do not fully capture potential full-year scenarios if trade policy shifts or rates change. This leaves Deckers exposed to ongoing macro and policy risk that could materially influence margins in future periods. The company is using pricing, sourcing, and operational levers to mitigate these risks, but investors should treat tariffs as an ongoing wild card rather than a resolved issue.

Guidance: Higher Sales, Higher Margins, and Buybacks Power EPS

Deckers raised its fiscal 2026 guidance, now expecting revenue between $5.40 billion and $5.425 billion, with HOKA projected to grow in the mid-teens and UGG in the mid-single digits. Gross margin is guided to about 57%, up roughly 100 basis points from prior expectations, while SG&A is planned at around 34.5% of revenue, supporting an operating margin of about 22.5%, also up about 100 basis points. The company assumes an effective tax rate of roughly 23% and now sees diluted EPS in the $6.80–$6.85 range, a 7–8% increase versus last year. For Q4, HOKA is expected to grow 13–14%, with UGG approximately flat due to shipment timing, and gross margin is set to face an estimated 200-basis-point hit from the full 20% tariff burden. Deckers still plans to repurchase more than $1 billion of shares in fiscal 2026, enhancing earnings per share and underscoring management’s confidence in the long-term trajectory.

In closing, Deckers Outdoor’s earnings call showcased a company firing on multiple cylinders: record revenue and EPS, stronger margins, and powerful brand momentum at both HOKA and UGG. While tariffs, inventory levels, and timing shifts introduce some near-term noise and risk, the upgraded guidance, sizable cash hoard, and robust buyback plan frame a story of disciplined execution and sustained growth potential. For investors watching the intersection of consumer brands and premium athletics, Deckers remains one of the more compelling growth-and-profit stories in the sector.