DECKERS BRANDS SECOND QUARTER FISCAL 2027 EARNINGS CALL - DECKERS OUTDOOR CORP

Explicit Guidance:

• Fiscal 2027 Full-Year Revenue: $5.70–$5.725 billion (previously implied growth; HOKA high single-digit %, UGG low single-digit %).
• Fiscal 2027 Full-Year Gross Margin: ~58.5% (includes ~$88 million IEPA tariff refund benefit); ex-IEPA, expected at ~57.0%.
• Fiscal 2027 Full-Year SG&A: ~35.5% of revenue (driven by disciplined cost management and reduced dollar spend).
• Fiscal 2027 Full-Year Operating Margin: ~23.0% (includes IEPA benefit); ex-IEPA, >21.5%.
• Fiscal 2027 Full-Year Effective Tax Rate: ~23%.
• Fiscal 2027 Full-Year Diluted EPS: $7.80–$7.95 (includes IEPA refund benefit and $1 billion in assumed share repurchases); ex-IEPA benefit, reflects 11.5% growth vs prior year.
• Q3 Fiscal 2027 Revenue Growth: Low single digits (UGG low single-digit %; HOKA low to mid-single-digit %).
• Q3 Fiscal 2027 Diluted EPS: $3.52–$3.60 (includes ~$0.24 IEPA benefit).
• Capital Allocation: Targeting $1 billion in share repurchases for Fiscal 2027; $4.4 billion remaining authorization as of Sept 30, 2026.

Business-Segment Outlook:

• HOKA: Expects acceleration in Q4 driven by global product launches (Bondi 10, Mach Pro, Mock 8); anticipated to outperform in wholesale while U.S. DTC faces promotional pressure.
• UGG: Anticipates strong holiday season momentum with "Gift the Feeling" campaign; expecting "buy-now" consumer behavior to drive peak season demand.
• Product Pipeline: HOKA launching Bondi 10 (Jan 2027, $115–$325 price points), Mach Pro (Apr 2027), and Mock 8 (Fall 2027); expanding price architecture with FlyPace ($115) and Bondi Ultra X ($325). UGG expanding lifestyle through Lomel, Golden Star Evelina, Zora, and Quill, plus heritage styles (Sambar's Tall, Leg Warmer).
• Channel Performance: U.S. DTC expected to underperform wholesale due to promotional environment; International (APAC/EMEA) remains a growth driver. Wholesale channel expansion in U.S. and Europe expected for Spring/Fall 2027 to capture share below $120 price point.

Market and Competitive Outlook:

• Consumer Behavior: Shift toward "wear now" purchasing, concentrated traffic on promotional events, and prioritization of products with immediate utility.
• Promotional Environment: Anticipate continued high promotional activity in U.S. athletic footwear; competitors driving "irrational pricing." Management expects marketplace to "clean up" in Summer/Fall 2027.
• Market Share: Strategy focuses on protecting premium pricing and brand health rather than chasing revenue; confident in gaining share in performance running and lifestyle categories through product differentiation.
• Inventory Dynamics: Transitioning from Bondi 9 to Bondi 10; planning to clear inventory of Bondi 9 via markdowns starting around Cyber Monday.

Macro / Industry Outlook:

• Tariffs/IEPA: Expecting $88 million net IEPA refund benefit in FY2027 (90% of submitted amounts received); excludes remaining unreceived amounts from guidance.
• Freight: Anticipating higher freight rates in Q3/Q4, partially offsetting IEPA benefits in gross margin.
• Consumer Sentiment: Economic pressure driving purposeful spending; consumers delaying purchases until closer to need.
• FX/International: Operating on constant currency basis for DTC; continued strength expected in international markets despite currency fluctuations.

Strategic Initiatives:

• Wholesale Expansion: Phased expansion of U.S. and European wholesale distribution starting Spring 2027, leveraging improved franchise segmentation.
• European Logistics: Corrective actions implemented for EMEA third-party logistics provider; ~$22 million revenue impact from delays in Q2 expected to be partially shifted or canceled, not fully recovered in Q3.
• Brand Investments: Increasing focus on digital presence, loyalty programs, and integrated marketing storytelling to improve conversion and efficiency.
• Corporate Governance: Adding Rati Sahiavesk to the Board (Dec 1) with digital innovation expertise; Lori Shanahan retiring.

Risks and Headwinds to Outlook:

• Consumer Demand: Persistence of promotional trends and consumer discount seeking could weigh on revenue.
• Supply Chain: Potential delays or cancellations of EMEA shipments; risk of rising freight costs.
• Competition: Intense promotional pressure in U.S. athletic footwear could erode full-price selling discipline.
• Product Execution: Risk that future product updates may not resonate as well as recent launches (e.g., FY2026 updates).
• External Factors: Foreign currency fluctuations, changes in trade policies, and timing of future tariff refunds.

Management Tone on the Future:

• Confidence: "Confident" in long-term brand health and runway; acknowledges "measured approach" to near-term growth.
• Discipline: Emphasis on "brand-led" strategy, refusing to chase revenue that dilutes brand equity or margins.
• Resilience: Highlights operating model flexibility and strong balance sheet as enablers for long-term value creation despite short-term headwinds.
• Outlook Adjustment: Guidance reflects a deliberate pivot to protect profitability over near-term top-line acceleration.

Miscellaneous:

• IEPA Tariff Refunds: Management explicitly excludes remaining unreceived tariff refunds from forward guidance but includes benefits received to date (Q2/Q3).
• Non-GAAP Metrics: Gross margin and EPS guidance provided on both GAAP and non-GAAP bases (ex-IEPA benefit) to isolate core operating performance.