Deckers Outdoor Corporation

Good afternoon, and thank you for standing by. Welcome to the Decker's Brand second quarter fiscal 2026 earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference call, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded. I'll now turn the conference call over to Ms. Erin Kohler, VP, Investor Relations and Corporate Planning. Please go ahead, ma'am.

Hello, and thank you, everyone, for joining us today. On the call is Stefano Carotti, President and Chief Executive Officer, and Steve Fashing, Chief Financial Officer. Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to respond to the dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy, tariffs, pricing actions, and mitigation strategies, and fluctuations in foreign currency exchange rates. Our current and long-term strategic objectives, including continued international expansion, the performance of our brands and demand for our products, anticipated impacts from our brand, product, marketing, marketplace, and distribution strategies, product development plans and the timing of product launches, changes in consumer behavior, including in response to price increases, our ability to acquire new consumers and gain share in a dynamic consumer environment, our ability to achieve our financial outlook, including anticipated revenues, product mix, margin, expenses, inventory levels, promotional activity, anticipated rate of full price selling, and earnings per share, and our capital allocation strategy, including the potential repurchase of shares. Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties, and other factors that may cause our actual results to differ materially from any results predicted, assumed, or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including in the risk factor section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements. On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through the current and prior reporting periods. The company believes that these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. Please review our earnings release published today for additional information regarding our non-GAAP financial measures. With that, I'll now turn it over to Stefano.

Thank you, Erin. Good afternoon, everyone, and thank you for joining today's call. Becker has delivered outstanding second quarter results ahead of our expectations on both the top and the bottom line. Specifically in the second quarter, as compared to last year, we drove revenue growth of 9% and a 14 percent increase in diluted earnings per share. These results closed out a solid first half for Decker's fiscal year 2026, with highlights that include total company revenue growing by 12 percent, whole car revenue increasing by 15 percent, ag revenue rising 12 percent, and diluted earnings per share growing by 17 percent. In the first half, Our international regions remain the driving force behind UGG and HOCA revenue growth, increasing 38% versus last year. Year-over-year gains were led by the wholesale channel, in part from earlier shipment timing, while BTC also delivered strong growth for the first half. We continue to see progress from our brand-building marketing investments in these regions, helping grow HOCA awareness and expand our mind share with consumers around the world. I could not be more pleased with how our teams are executing our strategy and connecting with consumers who are increasingly looking to HOKA and UGG for innovation and newness. In the U.S., consumer sentiment is still under pressure, but we're encouraged by the signs of progress we've seen in our business and have maintained our focus to ensure HOKA and UGG remain positioned for long-term success. The U.S. marketplace remains dynamic, with recent consumer trends indicating a heightened preference for multi-brand shopping experiences. We believe Agenhoka are prepared to acquire new consumers and gain share in this environment with consumers wherever they wish to interact with our brands. As we have strong brand partnerships with premium wholesalers, which help elevate our brands, Ag resonates with consumers with high-quality, distinctive products that provide a unique tactile experience. Hookah sees the highest consumer adoption when people can try its unique blend of technologies, geometries, and materials firsthand on their feet. We view this as a strategic opportunity to continue expanding our consumer base across both brands while maintaining this relationship through our direct-to-consumer business. This approach supports our long-term objective of achieving a balance of 50% between direct-to-consumer and wholesale channels. As we enter our historically largest fiscal quarter, our brand and global marketplace teams are focused on delivering profitable growth in building Agenhoka for sustainable value creation. I'm confident that our solid foundation, sound financial discipline, and nimble operations will serve us well to continue executing against our long-term strategic objectives. Steve will provide additional details on our second quarter financial results and an update on our latest fiscal year 2026 projections later in the call. Prior to that, I will share further details on first half brand performance as well as the forward direction we see for HOCA and UGG. Starting with HOCA. Global HOKA revenue in the first half increased by 15% versus last year. Performance was driven by consumer-loved updates to the brand's three largest road-running franchises, the Clifton, Bondi, and Arahi, as well as exciting updates in the trail category with the expansion and evolution of the Mafate franchise. Bondi, Clifton, and Arahi have continued to deliver strong growth and impressive sell-through rates for the brand as consumers embrace the significant enhancements implemented by our product team. The success of these top franchises helped Hoka gain market share. According to Cercana, Hoka gained two points of market share in the overall U.S. road running category for the past rolling 12 months, ended September 25, and also outpaced the competition in Europe as one of the fastest growing road running brands across Italy, France, and Germany for the first half of 2025. Beyond the success of top franchises, the Hoka team is making great progress developing product families deeply rooted in the brand's origins. We're leveraging a multi-layered approach to build recognizable icons that resonate across multiple categories and use cases, including dimensions of peak performance, everyday performance use, and versatile active lifestyle. The Mafate Hoka's original shoe is the latest example of how we are aligning our products within these key dimensions. Mafate X was created to deliver peak performance through maximum cushioning and carbon plate propulsion for agile long haul efforts on the trail. Mafate 5 was upgraded to adapt to all types of trail terrain with premium performance cushioning and traction. And then Mafate Speed 2 has been reintroduced from the archive with an updated aesthetic to achieve a contemporary active lifestyle look. This product family has already contributed meaningful growth during the first half of the year, and now accounts for a larger share of total brand revenue, supported by targeted marketing initiatives that have strengthened consumer awareness, visibility, and alignment with HOKA's brand heritage. We've previously discussed the importance of the UTMB World Series Finals in Chamonix, France, where HOKA is the title sponsor. The event includes seven races, attracting top trail runners from around the globe, and nearly 100,000 spectators. Hoka reinforced its leadership at UTMB, and it was the top brand in overall shoe share, as well as among top five finishers, including first place finishes for Hoka athletes Jim Walmsley, Francesco Puppi, and Martina Minarczyk. Our marketing initiatives for the Hoka brand are designed to establish coherent product narratives that foster consumer engagement and encourage adoption across our portfolio. We're seeing traction with our approach to building product families that are supported by marketing investments. This approach will, over time, allow us to further segment and differentiate the marketplace. You will soon see this product strategy evolution come to life through the mock franchise, where we recently introduced the X3 peak performer in the lineup, And in spring 26, we'll be launching the Mach 7 and Mach Remastered for everyday road running and active lifestyle, respectively. From an original standpoint, whole car performance in the first half was driven by the strength of our international business, where the brand continues to grow awareness and gain market share. We tailor our strategy for each region, taking into account the unique stages of brand distribution and awareness, while staying attuned to evolving consumer preferences. What remains consistent is our focus to maintain high levels of full price selling as we continue to expand our presence within the premium and elevated marketplace. And we're very pleased with Hoka Brand's results across the board. Hookah has seen constantly strong gains across all international regions throughout the first half, with notable incremental revenue contributions from EMEA and China. In the EMEA region, Hookah is driving impressive results across all countries and segments of distribution, including market share gains and robust reorders with our specialty partners as we continue to drive double-digit growth. Best-in-class sell-through with our key sporting good partners, significant percentage gains with athletic and lifestyle specialty accounts, where we are just beginning to build our business, and broad-based strength in our DTC channel across Germany, France, Italy, and the UK, with our first German store opening in Berlin, and a pop-up retail experience in Chamonix for UTMB. In China, the Hoka brand's premium positioning and product innovation continue to drive resilient consumer demand. Highlights include new store openings in key cities that are attracting strong consumer interest, substantial growth in loyalty membership with particularly strong gains with females and younger consumers, industry-leading full-price selling, and sell-through rates for wholesale exceeding the goals set for monobrand partner locations. As we navigate a dynamic U.S. marketplace, HOKA continues to gain market share in the athletic footwear category, and we remain dedicated to controlling distribution and driving a pole model of demand. There are a number of positive signals for the HOKA brand's U.S. business. They give us great confidence in the vast opportunities ahead for this brand, with wholesale sell-through increasing double digits in the first half. DTC delivering a sequential improvement from Q1 to Q2, maintaining a high-quality full-price business, a strong spring-summer 26 season order book, and positive feedback from retailers on our fall 26 product line. HOKA is a disruptive and transformational brand with the ability to further capture billions of incremental global market share dollars. Across both domestic and international markets, we'll continue to uphold our disciplined approach to marketplace management by building our DTC business and carefully exploring potential expansion into attractive wholesale channels and partnerships. We're committed to building sustainable growth for HOKA and are confident in the strategy we're executing to achieve this goal. As we enter the second half of fiscal 26, our priorities are driving healthy sell-through and gaining market share, leveraging our enhanced DTC loyalty program to drive consumer engagement, preparing the marketplace for spring 26 updates to Gaviota, Mach, and Speedgo franchises, and investing in marketing to build global HOKA awareness. Moving on to the ag brand. Global ag revenue in the first half increased by 12% versus last year. The ag brand's first half performance stayed consistent, fueled by our key brand initiatives. Top-performing styles remained in line with our 365 focus. Men's footwear achieved growth at twice the rate of the overall brand. International regions accounted for the lion's share of our growth. We are especially encouraged by the consumer response to newer products and expanded franchises aligned to our men's and 365 initiatives. including the Mel franchise, which across sneaker, chukka, and Chelsea silhouettes has more than doubled versus last year in the first half. The classic micro, our most versatile derivative to the original classic boot, debuting as a top five style across DTC and wholesale, and also the Zora ballet flat, an unmistakable version of the timeless silhouette that is significantly outperforming our expectations in its first month since launch. While these products have driven positive sell-throughs, I would note that wholesale sell-in was the driver for total UGG brand performance in the first half, which includes benefits from earlier shipments that were carefully curated in alignment with our marketplace management strategy. These shipments have provided greater opportunities for consumers to discover UGG at wholesale points of distribution, which we believe, in combination with the shifts to consumer shopping habits, has put pressure on our DTC business near-term. From the regional perspective, as anticipated, international markets are leading our growth, but we've seen a very strong order book conversion across all regions. The consumer response to our Fall 25 collection has been very consistent globally, with consumers gravitating towards fresh seasonal colors and transitional newness, such as the classic micro, astromel, peak mod, and Zora ballet flat. This quarter, these styles saw gains as consumer preferred versatile buy now, wear now items. As we prepare to ignite UGG season, our teams have created cohesive brand stories with our iconic style and iconic design global marketing campaigns, aiming to generate excitement and drive consumer engagement. In August, UGG's iconic From the First Step campaign featuring Stefan Diggs, Sarah Jessica Parker, and founder Brian Smith to celebrate the brand's legacy. In September, I served as the official styling partner for High Snobiety's New York Fashion Week opening ceremony party aimed at building fashion credibility with influential males. At the beginning of this month, to celebrate Paris Fashion Week, I took over the atrium of Galerie Lafayette to create a curated icons pop-up store. And tomorrow, I will launch an aspirational product collaboration with the renowned Japanese fashion label, Takai. These brand activations help the ag brand generate momentum with consumers while at the same time maintaining cultural relevance. And our team will continue to build upon the compelling content we've created to elevate the brand and amplify key seasonal product stories. I'm confident that the global marketplace is well positioned for ag season. Thanks, everyone. I'll now pass it off to Steve to discuss our second quarter financial results and provide an update on fiscal year 2026.