Deckers Brands: 2Q27 Immediate Call Postmortem

The story management wants us to hear is that the only meaningful problem is promotional activity in the broader US athletic marketplace that they will not participate in combined with consumer shopping closer to need with UGG. There is likely meaningful truth to both those topics, which you can see in both exceptional gross margin performance (ex. tariff refunds) and commentary from a wide range of retailers.

Didn’t we see this same kind of revenue guide down last year only for the company to ultimately hit its original expectation? Not saying that’s going to happen again this year, particularly due to warm winter expectations, but its kinda hard to see them guide revenue down yet again even despite that potential problem. Bears are going to be all over DTC weakness while completely ignoring margins going up.

“Continue to prioritize margin preservation and long-term value over chasing incremental near-term revenue that could dilute our brands.” – I know nobody believes this because nobody else actually does this, but there is a strong history towards this aspect at this specific company. Of course you can find HOKA product on sale at many third party retailers right now – the real question is how much inventory did they pump out?

For a company that rarely misses earnings (and didn’t this quarter, just revenue), they certainly came out swinging on confidence. Sounds like international remains extra strong and bookings of planned product launches is where primary confidence is coming from. Will be “very” clean of Bondi 9 when they introduce Bondi 10 in January. Poser was all over that topic in Q&A and they said Bondi 9 already pretty clean but markdown cadence will probably begin around Cyber Monday.

International remains a strength. APAC delivered highest percentage growth and meaningful contributor to total incremental growth. EMEA demand signals strong but shipping delays related to European 3PL transition was worth about $22 mm. Not a full shift into 3Q – some pushed out longer and some may get canceled. Guidance doesn’t assume recovery of all of it.

Playbook is: 1) robust innovation pipeline, 2) elevating marketing, 3) strengthening marketplace execution. Unfortunately, that’s what everybody says so nobody really cares about that entire section of the prepared remarks.

HOKA growth was driven by both wholesale (+9%) and DTC (+4%). High degree of full price selling. DTC results uneven across markets as US performance pressured by highly promotional environment. Core franchises performed well led by Bondi and introduction of Clifton Pro. Feedback that some franchise updates in CY26 did not resonate well – opportunity to improve starting in spring 2027. They then proceeded to talk about tons of stuff coming up over next few quarters: Bondi 10 (January), Mach Pro (April), Mach 8 – wholesale partners love, Fly Pace at $115 (sounds that’s why they went into Academy Sports), Bondi Ultra X in June at $325 – major leap forward in HOKA innovation.

HOKA updates in 2027 are more significant than what we have seen in 2026. Several retailers have hinted at this so it’s a difficult comment to ignore.

This comment about HOKA has me confused as am not aware they have a big business below $120. “Continue to gain share above $120 and continue to be the leading performance brand in the U.S. premium price point. Where they potentially lose share to others are the more compressed price points below $120 where the competition is greater.”

UGG is where the DTC problem came from with sales down 8% in that channel. Wholesale performance “healthy”. Pressure on consumers are prompting some to delay purchases to closer to need – that actually is a consistent message we here from most companies. Success in Low Mel, Golden Star, Zora, and Quill. 360 strategy is paying off. Moving deeper into UGG season – dunno about that given that this is supposed to be a warmer winter than normal (Super El Nino). Not making same assumption on reorders for UGG as last year - that’s actually quite encouraging.

SG&A below expectations reflecting cost management actions to better align spend with lower revenue growth. Marketing and technology remained the primary drivers of the y/y investment. Really seems like most people really don’t realize how much this company overspends when times are good and how much they can cut when they need to protect profitability.

Sole first in Q&A and asked the stupid but necessary question about “will we ever see sales like the LT algo again”. LT algo is based on a normal environment. This is not a normal environment so of course each brand will be below that rate. “Experience has taught all of us that the right approach in this environment is to continue to build your brands, keep inventory tight, and focus on full-price selling.” Hard to debate the full-price selling aspect given that gross margin ex tariff refunds was up impressively (120 bps). Pulling back from promotions in e-commerce is why they performed better from a margin perspective.

Laurent had nice question on revised guidance for channels. HOKA international still believe channel dynamic to be true but US has changed a little bit. Trying to remain as clean as possible in e-commerce platform. Don’t want to compete with wholesalers that are being even more promotional. Will see wholesale growth outpace DTC growth. Begs the question of why are they even shipping to wholesalers that cut price on their product?

The Burry curse strikes again – apparently, he sold his Lululemon earlier this month to roll that into Deckers. Really wish he would stay out of my industry. Probably will be the biggest bull signal ever when he capitulates.

*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends (not edited). Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Deckers Brands and other retail/consumer research) at our website here: M Squared Capital

We currently cover 20 companies in total but all work on Nike and Restoration Hardware will always be provided for free.

Originally posted on X and Substack.