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Deckers Outdoor (DECK) is trading lower following its Q2 (Sep) results last night, though shares have pared steeper losses. The owner of HOKA and UGG reported EPS of $2.31, above expectations, although results included a $0.28 benefit from tariff refunds. Excluding this benefit, EPS of $2.03 still topped expectations. However, DECK reported a rare top-line miss, with revenue increasing 3.5% yr/yr to $1.48 bln. DECK also lowered its FY27 sales outlook to $5.70-5.725 bln from $5.86-5.91 bln, below expectations. The company raised its EPS outlook to $7.80-7.95, but that includes a $0.52 tariff benefit. Removing it puts underlying guidance at $7.28-7.43, slightly below its prior outlook.

• Growth at HOKA and UGG continued, albeit at a moderating pace. HOKA revenue increased 6.8% yr/yr to $677.2 mln, slowing from 7.7% in Q1. UGG revenue rose 3.5% to $786.4 mln, compared with growth of 4.9% in Q1. Both brands maintained healthy wholesale performance, but growth was increasingly pressured by weaker U.S. direct-to-consumer sales.
• The Direct-to-Consumer (DTC) business showed a notable reversal, with revenue declining 1.8% yr/yr to $387.5 mln after growing 13% in Q1. DTC comparable sales fell 6.4%, compared with 6.8% growth last quarter, reflecting weaker U.S. e-commerce demand as consumers increasingly sought discounts. Meanwhile, wholesale revenue increased 5.5% to $1.09 bln, supported by better-than-expected global sell-in and solid demand across multi-brand retailers.
• Promotional activity increased throughout the quarter, particularly in U.S. athletic footwear, pressuring DECK's online business as it maintained its emphasis on full-price selling rather than matching competitors' discounts. Management also noted that consumers are increasingly shopping around promotional events and purchasing closer to when they need products, particularly at UGG.
• Gross margin expanded 430 bps yr/yr to 60.5%, although approximately 310 bps came from tariff refunds. The underlying 120-bp improvement was supported by favorable full-price selling and product mix, reflecting DECK's decision to avoid aggressive discounting despite softer demand.
• The reduced FY27 outlook reflects continued pressure on U.S. consumer demand and a more promotional footwear market. For the December quarter, management expects low-single-digit revenue growth, including low-to-mid-single-digit growth at HOKA and low-single-digit growth at UGG.

Briefing.com Analyst Insight

Overall, DECK's Q2 performance echoes what many peers across the athletic footwear industry have been reporting, with elevated promotional activity and more selective consumer spending creating a challenging environment. However, DECK remains focused on preserving brand equity by prioritizing full-price selling rather than competing aggressively on discounts, which helped support underlying margin expansion even as top-line growth moderated. At the same time, consumers are becoming more deliberate with their purchases and concentrating shopping around promotional events, a trend particularly evident in the sharp reversal in DTC comparable sales. Encouraging wholesale performance and continued international growth suggest HOKA and UGG remain healthy brands, although the slowdown and reduced outlook raise concerns about near-term growth. Looking ahead, UGG's performance during the crucial holiday season and HOKA's upcoming product launches will be important in determining whether DECK can regain stronger sales momentum.