DECKERS OUTDOOR CORP SEC 10-K Report

Deckers Outdoor Corp, a leading designer and distributor of innovative footwear, apparel, and accessories, has released its annual Form 10-K report, showcasing significant financial growth and strategic initiatives aimed at expanding its market presence. The report highlights the company's robust performance driven by its popular HOKA and UGG brands, as well as its future plans to enhance direct-to-consumer channels and international growth.

Financial Highlights

• Net Sales: $4,985.6 million, increased by 16.3% compared to the prior period, driven by higher global demand for HOKA and UGG brands.
• Gross Profit: $2,885.7 million, representing a gross margin of 57.9%, up from 55.6% in the prior period, primarily due to favorable brand and product mix.
• Income from Operations: $1,179.1 million, increased by 27.1% compared to the prior period, reflecting higher net sales at higher gross margins.
• Net Income: $966.1 million, increased by 27.2% compared to the prior period, due to higher net sales and operating margins.
• Diluted Earnings Per Share: $6.33, increased by 30.2% compared to the prior period, driven by higher net income and stock repurchases.

Business Highlights

• Revenue Segments: The UGG brand saw a 13.1% increase in net sales, driven by higher global demand across both wholesale and direct-to-consumer channels. The HOKA brand experienced a 23.6% increase in net sales, attributed to strong global demand for performance products across all channels. Other brands, including Teva and AHNU, saw an 8.6% decrease in net sales, primarily due to lower US sales and the impact of the Sanuk brand sale.
• Geographical Performance: Domestic net sales increased by 11.3%, while international net sales rose by 26.3%, indicating strong growth in global markets. The HOKA brand's international expansion contributed significantly to this growth.
• Sales Units: The total volume of units sold increased by 13.5% to 74,100 units, reflecting strong demand across all product categories, including footwear, apparel, accessories, home goods, and care kits.
• New Product Launches: The UGG brand expanded its product offerings with new spring and summer lines, as well as new categories for men's products, including slip-on shoes and sneakers. The HOKA brand continued to innovate with new performance footwear offerings in lifestyle, trail, and fitness categories.
• Future Outlook: The company plans to continue expanding its direct-to-consumer channel to increase its proportion of total net sales, focusing on enhancing consumer experience and brand loyalty. The HOKA brand will see further international growth through strategic retail store expansion and increased marketing investments to build brand awareness.

Strategic Initiatives

• Direct-to-Consumer Expansion: The company is focusing on expanding its direct-to-consumer (DTC) channel to represent a larger proportion of total net sales, which includes enhancing the consumer experience and increasing brand awareness globally.
• International Growth Strategies: The company is implementing international growth strategies for the HOKA and UGG brands, including selective expansion through wholesale partners and targeted retail store expansion.
• Capital Management: The company has a stock repurchase program with an approved authorization of $1,200,000, with $374,701 remaining as of March 31, 2025. During the fiscal year, the company repurchased 1,777,741 shares at a weighted average price of $149.62 per share. The company also maintains a five-year unsecured revolving credit facility with $400,000 available, of which $399,045 is unused. The company has not declared or paid any cash dividends since its inception.
• Future Outlook: The company plans to continue investing in its DTC channel and international growth strategies, particularly for the HOKA and UGG brands. It anticipates that increased sales in the DTC channel will positively impact gross margins. The company also plans to continue its stock repurchase program, with an additional authorization of $2,250,000 approved on May 21, 2025, to repurchase shares of its common stock. Capital expenditures for the next fiscal year are estimated to range from $120,000 to $130,000, primarily for expanding the HOKA brand retail store fleet and IT infrastructure improvements.

Challenges and Risks

• Market Risks: Rapid changes in consumer preferences in the footwear, apparel, and accessories industry could lead to decreased sales if the company fails to anticipate and respond to these changes. Economic conditions, such as inflation and interest rates, may also impact consumer spending on premium products.
• Operational Risks: The company relies heavily on independent manufacturers in Southeast Asia, primarily Vietnam, which exposes it to risks related to geopolitical tensions, natural disasters, and supply chain disruptions. Additionally, intense competition from established companies and new market entrants could erode market share and profitability.
• Regulatory Risks: Increasing expectations for ESG practices and potential new regulations related to climate change and sustainability could impose additional costs and operational challenges. The company must also navigate complex international trade policies and potential tariffs that could increase costs and disrupt supply chains.
• Emerging Risks: The company is transitioning to new warehouse management systems and expanding its distribution network, which could lead to operational disruptions if not managed effectively. The reliance on sheepskin for UGG products poses a risk if there are legal or social impediments to its use.
• Management Strategies: Management is focused on mitigating risks through strategic initiatives such as expanding the HOKA brand's global presence, enhancing inventory management, and investing in ESG practices. The company is also working to diversify its supply chain and reduce reliance on specific geographic regions to manage geopolitical risks.
• Market Risk Management: The company is exposed to foreign currency exchange rate fluctuations, which could materially affect sales and profitability. It utilizes hedging strategies to mitigate this risk but acknowledges that these strategies depend on accurate forecasts of sales and expenses, which are inherently uncertain.

SEC Filing: DECKERS OUTDOOR CORP [ DECK ] - 10-K - May. 23, 2025