Deckers Soars on HOKA, UGG Blowout; Tariff Fears Shrugged Off

Deckers Brands (DECK) opened its fiscal 2026 with a high-energy sprint, powered by stronger-than-expected growth across its flagship HOKA and UGG brands. The company posted a 17% revenue increase to $964.5 million, easily surpassing the $900.9 million consensus. Diluted EPS rose 24% year-over-year to $0.93. Shares popped over 14% after hours, as investors welcomed not just the top-line beat but signs of resilience in the face of mounting macro pressures—namely tariffs and uneven DTC momentum. CEO Stefano Caroti struck a confident tone, emphasizing the strength of Deckers’ brand equity and international growth trajectory.

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HOKA remains the company’s main growth engine, delivering a 19.8% year-over-year increase to $653.1 million in revenue—well above analyst forecasts of low-double-digit growth. Despite softness in U.S. direct-to-consumer (DTC) performance, global wholesale surged 30%, and international DTC channels showed month-over-month improvement. Caroti said HOKA delivered “its largest quarter in history,” and emphasized strong performance across the brand’s three biggest franchises. UGG also surprised to the upside, notching 18.9% revenue growth to $265.1 million—handily topping expectations for mid-to-high single-digit gains during its seasonally weaker period. Other brands fell 19%, a minor blemish on an otherwise strong quarter.

On the channel front, wholesale sales grew 26.7% to $652.4 million, reflecting strong sell-through at full price across global accounts. DTC rose just 0.5% to $312.2 million, with comps down 2.2%—in line with cautious expectations. U.S. DTC remained soft, as previously signaled, but trends improved sequentially and the company noted progress in clearing legacy inventory. International revenue was the star geographically, jumping nearly 50% to $463.3 million, while domestic revenue slipped 2.8% to $501.3 million, reflecting macro pressure and slower DTC activity in the U.S.

Gross margin came in at 55.8%, a 110-basis-point decline from the prior year. CFO Steve Fasching attributed the contraction to unfavorable channel mix (wholesale growing faster than DTC), promotional activity in both HOKA and UGG, and elevated freight costs. The SG&A line also rose to $372.6 million (38.6% of revenue), driven by expanded marketing, logistics costs, and investments in new store openings across China and Europe. Despite these pressures, operating income rose 24.4% to $165.3 million, with net income hitting $139.2 million.

Deckers repurchased $183 million in stock during the quarter and ended June with $1.7 billion in cash and no debt. Inventory increased 13% year-over-year to $849 million, with management noting improved marketplace cleanliness for key HOKA models like the Bondi 8 and Clifton 9. CFO Fasching said the company is continuing to invest in innovation, with HOKA’s updated Arahi 8 running strong and future releases in the pipeline. Meanwhile, UGG’s strategy of product expansion beyond core sheepskin styles into sandals and sneakers—via PeakMod and 365 initiatives—appears to be gaining traction globally.

As for outlook, Deckers declined to offer full-year guidance for FY26, citing global trade policy volatility. However, it provided Q2 expectations: revenue of $1.38B–$1.42B (inline with the $1.4B estimate) and EPS of $1.50–$1.55, roughly in line with the $1.51 consensus. HOKA is projected to grow ~10% in Q2, with UGG expected to rise mid-single digits. Gross margin is anticipated to decline to 53.5%–54%, reflecting the ongoing tariff drag.

Speaking of tariffs, the cost impact is growing. Fasching disclosed that tariff-related cost pressure for FY26 has risen to $185 million from a prior $150 million estimate, driven largely by a 20% Vietnam duty rate. That’s a 370-bps gross margin headwind, though analysts believe the company has more mitigation levers than it publicly signals. Fasching also acknowledged that more pressure will hit in the back half of the year, and promotional activity could persist to maintain market share.

During the earnings call, analysts pressed management on DTC momentum, international sustainability, and margin trajectory. UBS’s Jay Sole asked about HOKA wholesale versus DTC balance, with management noting improved channel parity ahead and reiterating a mid-teens growth target for the brand in FY26. Barclays and Raymond James analysts drilled into gross margin pressures, inventory levels, and retail performance versus e-commerce. Fasching said physical retail stores are performing better than digital, and price increases are being executed selectively without major consumer resistance.

Despite those concerns, analyst tone leaned positive. UBS raised its price target to $158 from $144, saying the quarter reinforces DECK’s potential to command a 20x P/E multiple if HOKA and UGG continue outperforming. RAJA also upped its target to $137, noting that wholesale strength and innovation across both brands remain underappreciated.

In sum, Deckers started fiscal 2026 in stride, delivering a top- and bottom-line beat powered by HOKA’s largest quarter ever and an unseasonably strong UGG performance. Tariff-related margin compression looms, but with a clean balance sheet, a hot product lineup, and strong international momentum, the company appears well-equipped to navigate macro crosswinds. The reaction in the stock—a double-digit rally—suggests investors agree. Execution on DTC and tariff mitigation remain watchpoints, but the tone from both management and the Street suggests more upside ahead.