Ugg and Hoka continued to drive success at Deckers Brands in the fiscal 2025 third quarter, reportedly delivering the largest and most profitable quarter in Deckers’ history. Company CEO Stefano Caroti said on a conference call with analysts that both brands are creating unique and innovative products with purpose that are increasingly embraced by consumers worldwide.

For the second consecutive quarter, Deckers lifted its guidance after Hoka led all other segments of the business to a strong beat against Q3 expectations. However, Wall Street reacted negatively after the company pushed its sales guidance to 15 percent growth for the fiscal year ending March 31. While a boost from the company’s initial guidance back in May 2024 calling for 10 percent growth for the year, and a subsequent increase to 12 percent growth after the company reported Q2 results in October, Wall Street had higher expectations.

DECK shares were down in the mid-teens by late morning and down nearly 20 percent by mid-afternoon.

In addition to concerns about the lack of a more aggressive outlook for the fiscal year, analysts also appeared to be concerned about how long the 20+ percent growth trend at Hoka can continue as the Clifton, the brand’s strongest model, comes into its 10th iteration this spring and other strong styles like the Bondi get long in the tooth. The analysts see the days of Hoka growth trends of 40, 50 and even 90+ percent appearing even farther away in the rearview mirror.

Concerns over lower Ugg inventory to feed demand in the fourth quarter, and potential markdowns for Hoka ahead of new launches this spring, added to the cautious sentiment. Some analysts took issue with the mismatch between the company’s recent outperformance and its cautious forward outlook, sparking doubts about sustaining its momentum.

For example, the company saw 19.1 percent consolidated sales growth through the first nine months of the fiscal year but is only forecasting 15 percent growth for the full fiscal year.

Still, as the company looks ahead, the company issued guidance for the year that implies that Hoka’s fourth quarter will be the largest volume quarter for the brand ever with a forecast of 24 percent growth for the year.

But that argument didn’t stick with the call participants.

“3Q demonstrated Ugg/Hoka are in solid positions globally, however, lack of more meaningful Hoka upside in 3Q and mgmt tempering expectations around 4Q/F26 Hoka growth (tough comparisons/reduced wholesale door growth) makes F26 more uncertain (at least for now) and raises fears about slowing U.S. Hoka growth,” Citibank analysts said in a Friday morning note to investors.

Stifel’s Jim Duffy maintained a HOLD on Deckers shares, suggesting that, “DECK will likely again over-deliver on FY4Q though we see risk consensus Hoka expectations for FY26+ prove too ambitious. At the current valuation, slowing Hoka growth will be difficult for the stock to overcome. We remain impressed with business execution and strategies to manage the brands for the long-term but remain comfortable with below consensus FY26 estimates and our HOLD rating on DECK shares.”

On the other hand, Williams Trading’s Sam Poser told his clients to “Aggressively BUY the Weakness” in the stock.

“The increased FY25 guidance is, once again very conservative, is worse case scenario, does not reflect how well the scarcity model is managed within the Ugg and Hoka brands, and does not reflect how much incremental marketing for long term brand awareness, drives short term sales,” he said in a note early Friday morning.

For the Deckers management team, they focused on the quarter, highlighting a record third quarter performance with revenue growing 17 percent year-over-year (y/y) to $1.83 billion, gross margins improving to 60.3 percent, and diluted earnings per share increasing 19 percent to $3.00 per share.

“Once again, our brands were able to maintain a high degree of full price business, while competing with more promotional brands in the global marketplace, choosing to prioritize brand health,” Caroti said. “As we continue to manage and build our brands and business for the long-term, we’re even more encouraged by what Deckers has delivered over the last nine months.”

He pointed out the nine-month fiscal year-to-date performance compared to last year, with significant revenue growth in key areas, with Hoka increasing 29 percent, Ugg growing 15 percent, international markets rising 28 percent, and balance increases of 19 percent across the DTC and wholesale channels for the year-to-date period.

Third Quarter Brand Summary

Ugg Brand
Global revenue in the third quarter increased 16 percent y/y to $1.24 billion. From a channel perspective, Caroti said Ugg delivered balanced revenue growth of 16 percent versus last year across both direct-to-consumer and wholesale. Ugg DTC channel highlights in the third quarter included strong growth across all global markets, gains with new and existing consumers, as the brand experienced double-digit increases in both acquisition and retention, a 25 percent increase in Ugg Reward members and encouraging progress for Ugg Men’s, with growth outpacing total brand growth in the channel.

In the Wholesale channel, Ugg said it experienced growth across all regions, with the majority of the increased revenue coming from international markets. Close partnerships with influential retailers continue to elevate the Ugg brand and enhance global exposure with target consumers. During the third quarter, I collaborated to create special corner shop takeovers with Selfridges in London and Nordstrom in New York City. Both of these partnerships were activated with on-site events and media that drove great brand buzz and connections with consumers.

“Altogether, this was a splendid quarter for Ugg, as the brand continues to perform in a league of its own,” Caroti contiuued. “Heading into the final stretch of fiscal ’25, Ugg is delivering on the objectives we set for the year, with balanced growth across channels driven by outsized growth from international markets and maintain strength in the U.S. We believe this special brand can continue to deliver sustainable growth through distinctive and ownable category segments that are uniquely Ugg.

Caroti also provided an update on the company’s Koolaburra brand.

“To maintain focus on our most significant organic opportunities, we’re planning to phase out the Koolaburra brand standalone product collections and operations,” he shared. “As part of this change, we expect to sunset koolaburra.com at the end of this fiscal year (March 31, 2025) and wind down Koolaburra in the Wholesale channel throughout the calendar year 2025.” He said the company will provide a more complete update on this forthcoming change during its May earnings call.

“Further on Ugg, I would note that the brand experienced a strong December selling period relative to our last year,” detailed company CFO Steve Fasching. “Our increased and earlier inventory position aided our ability to fulfill orders during the third quarter on key styles compared to the prior year. Recall that in the third quarter of last year, we sold out of key styles that were later fulfilled in Q4. While this dynamic was a tailwind to our third quarter performance this year, it is highly likely to have an adverse comparison impact on the Ugg brand’s current quarter.”

Caroti said he saw no limitations on the growth prospects for the company and provided an Ugg example to illustrate his point.

“Ugg is stronger than it’s ever been,” he said. “Ugg, remember, used to be a boot and a slipper brand, and now we’re playing in sneakers, we’re playing in clogs, we’re playing in sandals. So the brand is more solid and more balanced than it’s ever been across seasons, genders. All our genders are growing in double-digits. It’s been fantastic.

“And the Hoka brand has the potential of being one of the major players in the performance base,” Caroti continued. “So I think, yeah, aspirationally, we definitely want to get there over time.”

Hoka Brand
Hoka’s global revenue in the third quarter increased 24 percent y/y to $531 million. This came on top of 15.2 percent growth in Q3 last year. Still, the Q3 trend had the lowest growth trend for the year for the second consecutive year. The brand grew 29.7 percent in the first quarter and 34.7 percent in the fiscal second quarter. In the last fiscal year, the Q4 growth trend for the brand jumped to 34.0 percent, more than double the fiscal 2024 Q3 trend.

“From a channel perspective, Hoka delivered impressive revenue growth versus last year throughout the global marketplace as DTC increased 27 percent with strong growth across every region and wholesale grew 21 percent, primarily driven by outside increases from international distributor markets, as we prepare the marketplace for upcoming key franchise upgrades,” Caroti detailed.

Hoka DTC channel highlights in the quarter include accelerated growth in the APAC region, with China reportedly contributing the largest incremental dollar revenue of all international regions, persisting gains in consumer acquisition and retention, the latter of which was particularly strong, indicating a high degree of loyalty from existing consumers and increased mix of business from trail categories, which drove outsized growth in part due to the introduction of the Kaha Frost weather collection.

Caroti said the Kaha Frost collection features the Hoka brand’s first cold weather ready styles, including a $280 hiking boot and $200 slipper moccasin, both of which are trail-ready with a Vibram mega grip outsole.

“The consumer response was excellent around the globe, driving impressive sell-throughs and generating great breadth for the brand,” he shared.

“In the Wholesale channel, our primary focus during the quarter was to set the stage for the Bondi 9 launch by moving through existing inventory of the Bondi 8 while also driving high full-price sell-throughs across the lineup of innovative products we’ve introduced throughout the year,” the CEO continued. “As brand awareness and consumer appetite for Hoka continues to build, we’re excited to be adding select doors with our strategic partners worldwide in conjunction with the start of our Spring 2025 season.”

Teva Brand
Teva brand net sales decreased 6.0 percent y/y to $24.1 million in the fiscal third quarter.

Other Brands
Other brands net sales decreased 16.6 percent y/y to $28.0 million in the fiscal third quarter.

Direct-to-Consumer (DTC) net sales increased 17.9 percent to $1.01 billion compared to $858.1 million in the prior-year quarter. DTC comparable net sales increased 18.3 percent.

Wholesale net sales increased 16.2 percent to $815.8 million in fiscal Q3, compared to $702.2 million in the prior-year Q3 period.

Domestic net sales increased 11.5 percent to $1.17 billion compared to $1.05 billion in the year-ago period. International net sales increased 28.5 percent to $657.9 million compared to $511.9 million in the prior-year Q3 period.

Income Statement Summary
Gross margin was 60.3 percent of net sales in the fiscal third quarter, compared to 58.7 percent in the prior-year Q3 period, reportedly benefitting from favorable product mix, which were said to be primarily due to “higher margin products within Ugg driving a larger percentage of growth, reduced closeouts to the wholesale channel, higher levels of full price selling for Ugg and a small benefit from favorable foreign currency exchange rates.” The company saw partial offsets from higher freight costs and an increased discounting for Hoka as anticipated, primarily related to preparing the marketplace for key model upgrade.

“While we are proud to deliver this record gross margin, I would caution that the extremely high levels of full price selling and very low levels of wholesale closeouts are abnormal and not something we would normally expect to repeat going forward,” noted Fasching. “Further, though we experienced a small revenue and gross margin benefit from favorable foreign currency exchange rates in the third quarter, we have since seen rates move against us, and as a result, expect to face an FX headwind in the upcoming quarter.”

Selling, general and administrative (SG&A) expenses were $535.3 million in the quarter, compared to $428.7 million in fiscal Q3 last year.

Operating income was $567.3 million in Q3, compared to $487.9 million in the year-ago Q3 period.

Diluted earnings per share was $3.00 in the third quarter, compared to $2.52 per diluted share in the year-ago period.

As previously disclosed, the company effected a six-for-one forward stock split of its common stock during the second fiscal quarter. The share, per share, and resulting financial amounts in this press release have been adjusted to reflect the effectiveness of the stock split.

Balance Sheet Summary
Cash and cash equivalents were $2.24 billion at quarter-end compared to $1.65 billion at the prior-year quarter-end.

Inventories were $576.7 million at quarter-end compared to $539.0 million at the prior quarter-end.

The company had no outstanding borrowings.

Capital Allocation
During the third fiscal quarter, the company repurchased approximately 275 thousand shares of its common stock for a total of $44.7 million at a weighted average price paid per share of $162.85. As of December 31, 2024, the company had approximately $640.7 million remaining under its stock repurchase authorization.

Fourth Quarter Outlook
“For the Ugg brand, as planned, our improved product in-stock positioning versus the prior year allowed us to satisfy incremental consumer demand during our third quarter,” Fasching said, echoing Caroti’s comments. “While in the prior year, we ran low on product availability and continue to catch up to fulfill demand through Q4 last year. This year, we believe this demand was captured in Q3. Given how strong Ugg has performed year-to-date, we are limited in the fourth quarter by available inventory left to sell.”

For Hoka, the company’s guidance implies the fourth quarter to be the largest volume quarter for the brand ever. “This is on top of last year’s fourth quarter that included a significant amount of sell-in to wholesale accounts related to door expansion as we set up fiscal year 2025. And while this creates some year-on-year variations in the quarterly growth rates, we are still on track to achieve an annual growth rate of 24 percent.,” Caroti said.

Full Fiscal Year 2025 Outlook
The company’s full fiscal year 2025 outlook is forward-looking in nature, reflecting company expectations as of January 30, 2025, and is subject to significant risks and uncertainties that limit our ability to accurately forecast results.

The company said this outlook assumes no meaningful changes to its business prospects or risks and uncertainties identified by management that could impact future results, which include but are not limited to foreign currency fluctuations, changes in economic conditions, including consumer confidence, discretionary spending, and inflationary pressures; supply chain disruptions; and geopolitical tensions.

Full Year Outlook Assumes:

  • Net sales to increase approximately 15 percent to $4.9 billion.
  • Gross margin to be at or slightly better than 57 percent due in part to the strong gross margin achieved in the third quarter. “We recognize the exceptional levels of full price selling Ugg achieved in the third quarter and continued product mix benefits, but maintain our expectation for continued freight headwinds and a more promotional and closeout environment in the balance of the year as compared to last year’s unusually low levels,” the CFO stated.
  • SG&A is still expected to be approximately 35 percent, aligned with the commitment to continue investing responsibly to support the long-term sustainable growth of the business.
  • Operating margin to be approximately 22 percent.
  • Effective tax rate to be approximately 23.5 percent.
  • Increased diluted earnings per share to be in the range of $5.75 to $5.80 per share as a result of the improved revenue and gross margin expectations.

The earnings per share guidance takes into account the effectiveness of the stock split but does not take into account the impact from any potential future share repurchases.

Image courtesy Ugg/Deckers Outdoor