Deckers Stock Down 6% Despite Q1 Earnings Beat, FY'27 Outlook Raised

However, investors remained cautious as the company projected lower second-quarter gross margin due to tariff and freight headwinds, and increased its tariff cost assumption for the remainder of fiscal 2027. Consequently, shares of the company lost 6.1% yesterday.

DECK’s Brand Momentum Led by HOKA & UGG

The HOKA brand remained the primary growth driver in the first quarter, with net sales increasing 7.7% year over year to $703.5 million, slightly missing our estimate of $705.3 million. Growth was driven by a 17% increase in DTC revenues, supported by continued strength in Europe, China, Japan and the United States. 

Management highlighted broad-based demand across franchise families, with Clifton, Bondi, Speedgoat 7, Mach 7, Mafate Speed 2 and Skyward contributing to growth. The company also noted encouraging early consumer response to the recently launched Clifton Pro, while healthy full-price selling and disciplined marketplace management continued to support the brand's performance.

The UGG brand delivered solid first-quarter results, with net sales increasing 4.9% year over year to $278 million, beating our estimate of $276.2 million. Growth was balanced across wholesale and DTC channels, with international markets, particularly Asia, leading performance. Management highlighted continued progress in its 365 and men's growth initiatives, supported by strong demand for the Lowmel family, Golden collection and Otzo Clog. The company cited encouraging consumer response to its spring apparel collection, particularly fleece products, reinforcing UGG's expansion as a year-round lifestyle brand.

Meanwhile, net sales from Other Brands declined 18.1% year over year to $37.9 million compared with our estimate of $37.5 million, primarily reflecting the continued phase-out of Koolaburra standalone operations.

Deckers’ DTC & International Businesses Drive Q1 Growth

Wholesale net sales increased 2.2% year over year to $666.7 million in the first quarter. Reported wholesale growth reflected planned timing differences that shifted certain international wholesale and distributor shipments to later in fiscal 2027 compared with the prior year. Management emphasized that underlying demand remained healthy, supported by higher U.S. wholesale sell-in, strong full-price sell-through and record reorder activity in the EMEA region. 

DTC net sales increased 13% year over year to $352.8 million, while comparable DTC sales rose 6.8%, driven by continued strength across both HOKA and UGG. HOKA's international DTC business continued to post robust growth in Europe, China and Japan.

From a geographic perspective, domestic net sales increased 3.2% year over year to $517.4 million. International net sales rose 8.4% to $502.1 million. Management noted that both HOKA and UGG continued to generate healthy demand across international markets, with Europe, China and Japan remaining key contributors to growth.

DECK’s Full-Price Selling Lifts Gross Margin

Gross profit increased 6.9% year over year to $575.2 million in the first quarter. Gross margin expanded 60 basis points to 56.4% and surpassed our estimate of 54.6%. Favorable channel and product mix, full-price selling, foreign exchange benefits and better management of closeout inventory more than offset a 150-basis-point tariff headwind. Closeout management contributed about 60 basis points to the year-over-year margin comparison.

Selling, general and administrative expenses increased 12.7% year over year to $419.9 million. As a percentage of net sales, SG&A expenses increased to 41.2% from 38.6% in the prior-year quarter. Higher spending reflected continued investments in marketing, technology, additional personnel supporting key growth initiatives, higher occupancy costs related to new HOKA stores and unfavorable foreign currency remeasurement.

Operating income declined 6% year over year to $155.3 million from $165.3 million in the year-ago quarter. The operating margin contracted to 15.2% from 17.1%.

DECK Maintains Strong Liquidity & Shareholder Returns

Cash and cash equivalents were $1.60 billion as of June 30, 2026, compared with $1.72 billion a year earlier. Inventories declined 4.9% year over year to $807.6 million, and the company maintained a debt-free balance sheet with no outstanding borrowings. Total stockholders' equity stood at $2.30 billion at the end of the quarter.

During the first quarter of fiscal 2027, Deckers repurchased approximately 3.3 million shares of its common stock for $338.2 million at an average price of $103.79 per share. The company noted that share repurchases continued to be an important component of its capital allocation strategy.

As of June 30, 2026, approximately $4.7 billion remained available under the company's existing share repurchase authorization.

Q2’27 Outlook for DECK

For the fiscal second quarter, this Zacks Rank #2 (Buy) company expects consolidated revenues to increase approximately 5% year over year. HOKA revenues are projected to grow at a high-single-digit rate, while UGG is expected to maintain its mid-single-digit growth rate. Other Brands revenues are expected to decline approximately 50% from the prior-year quarter, primarily reflecting the continued streamlining of the company's brand portfolio following the wind-down of the Koolaburra business.

Management indicated that second-quarter results will continue to reflect planned timing differences in the wholesale and distributor businesses, with some international shipments moving later into the fiscal year. Similar to the first quarter, these timing dynamics are expected to affect reported wholesale growth but do not reflect any change in underlying consumer demand. The company expects continued strength in its direct-to-consumer business, while emphasizing that HOKA and UGG will continue to experience healthy demand across regions and channels.

Gross margin is expected to decline year over year due to higher tariff costs and rising freight expenses. Selling, general and administrative expenses will remain elevated as the company continues to make first-half weighted investments in its strategic growth initiatives, including brand-building, technology and marketplace expansion. As a result, earnings per share are expected to be in the range of $1.73-$1.78.

Management also reiterated that revenue growth is expected to accelerate in the second half of fiscal 2027, primarily driven by the HOKA brand and the normalization of international wholesale and distributor shipment timing. The company noted that quarterly growth is not expected to be linear as it continues to prioritize a pull model of demand and disciplined marketplace execution to support long-term sustainable growth.

Deckers’ Fiscal 2027 View Reflects Higher Tariff Assumptions

For fiscal 2027, Deckers continues to expect consolidated net sales to be in the range of $5.86-$5.91 billion, representing high-single-digit growth from the prior year. HOKA revenues are still expected to increase at a low-double-digit rate, while UGG revenues are projected to grow at a mid-single-digit pace. Management continues to expect revenue growth to accelerate in the second half of fiscal 2027, primarily driven by the HOKA brand and the normalization of international wholesale and distributor shipment timing.

The company now expects gross margin to be slightly better than 56.5%, reflecting stronger-than-expected first-quarter performance. The updated outlook incorporates a higher forward tariff assumption of 12.5%, up from the previous 10% and continues to exclude any benefit from potential refunds of tariffs previously paid. Management indicated that it is pursuing tariff refunds but has not included any related assumptions in its fiscal 2027 guidance given the uncertainty around timing and recovery.

Selling, general and administrative expenses are still expected to be approximately 35% of net sales as Deckers continues investing in its long-term growth initiatives. Planned investments remain focused on strengthening the company's brand portfolio through marketing, expanding technology capabilities and data analytics, supporting key growth initiatives and reinforcing the foundation of the business. Management stated that these investments are intended to position the company for operating expense leverage beginning in fiscal 2028 and beyond.

Operating margin is now anticipated to be slightly better than 21.5%, reflecting the improved gross margin outlook. The company continues to project an effective tax rate of approximately 23% and has raised its fiscal 2027 earnings per share guidance to $7.35-$7.50, as compared with its prior outlook of $7.30-$7.45, driven by higher expected gross margin. The guidance also assumes share repurchases with a value equal to approximately 80% of projected fiscal 2027 free cash flow.

DECK Stock Past Three-Month Performance

Image Source: Zacks Investment Research

Shares of the company have lost 9.9% over the past three months compared with the industry’s 1.2% decline.

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