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Deckers Outdoor (DECK -3%) reported a solid Q1 (Jun) beat, but the stock is trading modestly lower after the footwear maker issued weaker-than-expected Q2 (Sep) guidance and delivered a smaller EPS beat than investors have grown accustomed to in recent quarters. Revenue increased 5.7% yr/yr to a record $1.02 bln for the June quarter, marking the first time Deckers has surpassed $1 bln in fiscal Q1 revenue, although sales were roughly just in-line with expectations following several stronger beats. Direct-to-consumer remained the primary growth engine, with total DTC revenue climbing 13% yr/yr as consumers continued to pay full price for both HOKA and UGG products.

• HOKA: HOKA revenue grew 7.7% to $703.5 mln, extending its leadership as Deckers' fastest-growing brand, although the growth rate moderated from the prior quarter. Management pointed to broad-based DTC strength and healthy demand for both flagship and newer product launches.
• UGG: UGG sales increased 4.9% to $278 mln, supported by balanced growth across wholesale and DTC channels, while international markets, particularly Asia, remained a standout contributor.
• Margin: Q1 gross margin improved 60 bps to 56.4%, helped by favorable channel and product mix, full-price selling, FX, and better closeout management; management quantified about 110 bps of benefit from full-price selling and brand mix, partly offset by roughly 150 bps of tariff headwinds.
• Timing vs. demand: Management repeatedly said HOKA's growth will not be linear because of its pull model and that international wholesale softness reflected logistics normalization after earlier shipments last year, while underlying demand signals, including record EMEA reorders, remained strong.
• Consumer demand: Management said consumer demand remains resilient despite a challenging retail backdrop and believes its product pipeline positions both HOKA and UGG for additional market share gains. However, Q2 EPS and revenue guidance came in below Wall Street expectations, tempering enthusiasm ahead of the important back-to-school season.

Briefing.com Analyst Insight

Deckers delivered another fundamentally solid quarter, but expectations had become exceptionally high after a long stretch of outsized earnings surprises. The combination of an in-line revenue result, a smaller-than-usual EPS beat, and softer Q2 guidance heading into back-to-school season was enough to trigger modest profit-taking despite management's continued confidence in consumer demand. Deckers continues to post healthy growth across both wholesale and direct channels while maintaining strong full-price selling. HOKA remains one of the strongest growth franchises in athletic footwear, although investors will be watching closely to see whether its growth reaccelerates after this quarter's moderation. After significantly outperforming the broader market over the past year, Deckers entered earnings with elevated expectations, leaving little room for even modest disappointments.