Deckers Brands 4Q26 Immediate Call Postmortem

Double digit revenue growth with 20%+ EBIT margins and the stock trades at 13x on sandbagged earnings? Can the bears remind me once again why they hate this stock? Just kidding, already know they are pointing to the flattish domestic growth. As we have repeatedly said this year, always thought the real EPS number would end up at $7.00 for FY26 and amazingly that’s exactly what happened! There is a new statement about assumed share repurchases in guidance that am sure bears will attack – last time they gave initial full year guidance was two years ago and did not include share repurchases. But hard to hate that mid-year (FY28-FY30) outlook at this valuation level, even if it’s only low double digit EPS growth, because THEY ALWAYS CRUSH GUIDANCE! It is a fool’s errand to think this management team is setting too high of a bar.

Guidance does not include an assumed tariff refund and the current tariff rate to remain for full year. Of course, it wouldn’t – they always go way out of their way to set guidance as low as humanly possible. The have a “high degree of confidence” in their outlook - yeah, no shit.

For third consecutive year results have an ROIC above 35%. Nine consecutive fiscal years of revenue and earnings growth – wow, even I didn’t realize that. Certain bears think that makes an inevitable reversion to the mean even closer.

HOKA has a “unique” opportunity (eh not sure about that) to attract an ever larger global consumer base while focusing on performance but also through lifestyle. Bondi 7 was reintroduced this February as lifestyle. Had continued healthy gains in the US this quarter. The FY26 product upgrade significantly boosted global reach and appeal. All nine top franchises (six are $100+ million while the other three are close) have been updated since January 2025. Clifton 11 will be the big launch this year in July. Plan to selectively expand wholesale distribution in both US and international in FY27 – primarily through high quality sporting good and athletic specialty retail stores.

UGG primarily driven by diversified product mix and broader consumer engagement. 365 strategy gains traction with year-round products.Tasman remains most popular franchise. Low Mel and Golden collections accounted for half the brand’s growth last year, which is testament to success in the sneaker and sandal strategy. Men’s style’s accounted for more than 20% of the brand’s growth last year.

Laurent got them to say the US will continue to grow but international will grow at a faster pace. Steve said that he was “in line” with how they are looking at it when he proposed US up MSD and international mid teens.

Lejuez dug into HOKA in Q&A. Have a strong healthy order book for HOKA. Innovation stories across road and trail “very well received” by retail partners. Starting to see green shoots in the lifestyle business – this really seems to be the biggest incremental takeaway from today’s call TBH.

Expect 25 HOKA stores openings per year. Recently opened stores in Berlin, Milan, and especially China. Intend to grow faster in spring/summer than fall/winter.

See some level of SG&A leverage opportunity going forward but the operating margin will likely be a bit of a function around gross margin.

Largely most of the product for FY27 has already been bought but as move into next year will “be careful” in terms of input costs. “With strong brands we have pricing power”. Gross margin pressure in FY27 is more about inflation, higher input costs, and material upgrades – they are not assuming a more promotional environment. Feels like they need to tighten the answer to gross margin subject up a bit.

Patel asked the elephant in room question about domestic performance in 4Q. Nice work buddy, especially with the last question! Performance was positive – what you are seeing from a top line perspective is being impacted from discontinued brands (good point actually). Looking forward expect to see those positive trends continue.

*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. 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 Williams Sonoma and other retail/consumer research) at our website here: M Squared Capital

Originally posted on X and Substack.