Deckers’ Growth Engine Meets the Challenges of a Changing Trade Environment
Deckers Brands, the parent company of HOKA and UGG, opened fiscal year 2026 with an impressive performance, propelled by robust demand in international markets—most notably Europe and China. The company reported a 17% increase in net sales and a 24% rise in diluted earnings per share. At the same time, new tariffs—especially a 20% levy on goods from Vietnam—are reshaping the cost landscape and introducing a note of caution regarding full-year forecasts. This quarter underscores Deckers’ ability to expand its global reach, maintain operational discipline, and manage the twin challenges of accelerating brand growth while navigating rising costs and trade policy shifts.

Quantitative Review: Sales Growth, Profitability, and Channel Dynamics
Deckers reported net sales of $964.5 million, up 16.9% from the same quarter last year (constant currency growth was 16.3%). HOKA brand sales surged by 19.8% to $653.1 million, while UGG sales rose by 18.9% to $265.1 million. Other brands saw a decline of 19%, totaling $46.3 million. Gross margin for the quarter was 55.8%, down modestly from 56.9%, reflecting a shift toward wholesale, higher promotional activity, and increased freight costs, partially offset by favorable product mix and currency effects. Operating income reached $165.3 million, up from $132.8 million a year ago. Diluted EPS climbed 24% to $0.93, reflecting improved profitability across the board.

In terms of channels, wholesale sales rose 26.7% to $652.4 million, while direct-to-consumer (DTC) sales increased by just 0.5% to $312.2 million, including a 2.2% decline in comparable DTC sales. In the U.S., total sales decreased by 2.8% to $501.3 million, while international sales soared by 49.7% to $463.3 million—almost reaching parity with the U.S. market for the first time.

Growth Drivers: HOKA and UGG Lead the Global Push
The CEO highlighted that both core brands—HOKA and UGG—exceeded internal expectations, fueling strong momentum to start fiscal 2026. Despite ongoing global trade uncertainty, Deckers remains confident in the brands’ strength and the long-term strategic opportunities they present.

HOKA’s growth is driven by expanding wholesale distribution across Europe and Asia, and by steady penetration in the direct-to-consumer channel. In the U.S., HOKA continues selective expansion with a focus on opening new points of sale and building customer loyalty, particularly among new audiences. UGG delivered a record quarter, led by dominance in the wholesale channel and strict inventory management ahead of the fall season. Together, these two brands more than offset weakness in the rest of Deckers’ portfolio, underlining the company’s focused business model.

Cost Pressures, Operational Discipline, and Financial Strength
Selling, general, and administrative expenses (SG&A) rose to $372.6 million from $337.2 million a year ago, primarily due to increased marketing, the transition of a major logistics center in Europe, and the global retail expansion. However, SG&A as a percentage of sales declined from 40.9% to 38.6%, demonstrating Deckers’ operating leverage and disciplined cost management.

The company finished the quarter with $1.72 billion in cash and no debt, a significant increase from the prior year. Inventories stood at $849.4 million, reflecting expanded activity, seasonality, and preparation for future sales. Deckers repurchased 1.7 million shares at an average price of $109.84, totaling $183 million, with $2.4 billion still authorized for future buybacks.

Trade Headwinds: Tariffs and Cost Inflation
Deckers warned that the 20% tariff on imports from Vietnam—a critical manufacturing base—will increase the company’s cost of goods sold by approximately $185 million in fiscal 2026, up from a previous estimate of $150 million. The company intends to offset part of this increase through phased product price hikes and by sharing costs with suppliers and factory partners. Gross margin is expected to decline in the coming quarters, reflecting a timing mismatch between price increases and rapidly rising input costs, including freight and ongoing promotional activity.

For the second quarter, Deckers guided for net sales of $1.38–1.42 billion and diluted EPS of $1.50–1.55. The company did not issue a full-year outlook, citing persistent regulatory and economic uncertainty across its major markets.

Macroeconomic Context and Operating Realities
Deckers’ diversified revenue base—nearly one-third generated outside the U.S.—provides a buffer against local market slowdowns. Growth in Europe and China is offsetting softness in North America, with significant future potential for global expansion (especially compared to market leaders like Nike and Adidas). Despite the strong Q1 numbers, Deckers’ share price dipped in regular trading, reflecting investor anxiety over tariffs and the absence of full-year guidance. However, shares rebounded in after-hours trading as the market recognized the company’s brand momentum and solid financial footing.

Strategic Outlook: Managing Margins, Brand Investment, and Customer Engagement
Deckers heads into the remainder of 2026 from a position of financial strength, with accelerating international growth, robust demand for HOKA and UGG, and a positive outlook for global brand expansion. The main challenges will be to manage margin pressure from tariffs and rising costs, maintain DTC momentum, and continue investing in brand development and retail channels—all while carefully controlling inventory and operating expenses.

The company plans to gradually pass through cost increases to consumers, deepen its direct-to-consumer presence, develop new products, and maintain focused marketing to adapt to the unpredictable macroeconomic environment.

Conclusion: Record Quarter, but the Road Ahead Demands Agility and Brand Leadership
Deckers closed the first quarter of fiscal 2026 with robust sales and profit growth, led by international expansion and the continued rise of HOKA and UGG. Yet, escalating cost pressures and the uncertain global regulatory environment have prompted the company to withhold a full-year forecast. Provided Deckers can continue to manage costs, pass through price increases, and capitalize on international demand, the company remains well-positioned for future success—but the coming quarters will require nimble management, clear brand strategy, and an unwavering focus on innovation.