• Revenue: Increased 17% over last year to $1.8 billion.
• Gross Margin: Improved to 60.3%.
• Diluted Earnings Per Share: Increased 19% to $3.
• UGG Revenue: Increased 16% to $1.2 billion.
• HOKA Revenue: Increased 24% to $531 million.
• SG&A Expenses: $535 million, up 25% from last year.
• Cash and Equivalents: $2.2 billion as of December 31, 2024.
• Inventory: $577 million, up 7% from last year.
• Share Repurchase: $45 million worth of shares repurchased at an average price of $162.85.
• Fiscal Year 2025 Revenue Guidance: Raised to just above $4.9 billion, approximately 15% growth.
• Fiscal Year 2025 Earnings Per Share Guidance: Increased to $5.75 to $5.80.

• Warning! GuruFocus has detected 7 Warning Signs with LHX.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Deckers Outdoor Corp (NYSE:DECK) reported a record third quarter with revenue growing 17% year-over-year to $1.8 billion.
• Gross margins improved to 60.3%, showcasing strong pricing power and product mix.
• Diluted earnings per share increased by 19% to $3, indicating strong profitability.
• UGG and HOKA brands continue to drive success with UGG growing 16% and HOKA increasing 24% in revenue.
• The company raised its full-year revenue expectations to over $4.9 billion, reflecting a 15% growth, up from the prior guidance of 12%.

Negative Points

• Deckers Outdoor Corp (NYSE:DECK) anticipates a challenging fourth quarter due to inventory limitations, particularly for the UGG brand.
• The company expects more normalized markdowns and promotional activity in the fourth quarter, which could impact margins.
• Foreign exchange rates are expected to be a headwind in the upcoming quarter, affecting financial performance.
• Freight costs are anticipated to be a significant headwind in the fourth quarter, impacting gross margins.
• The company plans to phase out the Koolaburra brand, which may lead to operational adjustments and potential revenue impacts.

Q & A Highlights

Q: Stefano, can you discuss how you're managing the HOKA brand for long-term growth, especially in a promotional environment, and share any upcoming product launches? A: Stefano Caroti, CEO: HOKA is a transformational brand with potential to become a major player in athletic footwear. Our strategy focuses on building awareness, delivering innovation, and managing the marketplace for sustainable growth. We're pleased with the Bondi 9 launch and have upcoming launches like the Cielo X1 in February, Clifton 10 in April, and Mafate X in May. We aim for long-term growth rather than chasing short-term numbers.

Q: How did the 12% growth in the US compare to expectations, and what are the international growth prospects for Q4 and fiscal '26? A: Stefano Caroti, CEO: The US growth met expectations, and we anticipate international growth to outpace the US. Our goal is for international sales to eventually represent 50% of total sales. We expect this trend to continue into Q4 and fiscal '26.

Q: What are the opportunities to maintain or improve the operating margin while reinvesting in growth? A: Steven Fasching, CFO: Maintaining high margins is challenging due to inflationary and foreign exchange pressures. While we expect some headwinds, our scarcity model and full-price selling help sustain high margins. We'll continue to evaluate and manage these factors.

Q: Can you elaborate on the Clifton 10 launch and its impact on sales and margins? A: Steven Fasching, CFO: The Clifton 10 launch will be a phased rollout, with some sales in Q4 and continuing into Q1. The impact of sunsetting the Clifton 9 is included in our guidance, with anticipated closeouts affecting margins by about 100 basis points.

Q: What are the long-term growth prospects for Deckers, and could the company reach $7 billion to $8 billion in sales? A: Stefano Caroti, CEO: There are no limitations to our brands' growth. UGG is more balanced across categories, and HOKA has potential in the performance space. While we don't provide long-term targets, we aim to grow sustainably without compromising brand equity.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.