DECK - Earnings call transcript Q1 2019 | Deckers Outdoor Corporation

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Operator

Good afternoon, and thank you for standing by. Welcome to the Deckers Brands First Quarter Fiscal 2019 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. remind this to being call like recorded. would everyone conference that is I like call turn Kohler, would to I now the Relations Corporate Director, and over Planning. Investor Erinn to

Erinn Kohler

for today. joining Thank you, everyone, us

Dave Powers, Chief Fasching, On the Officer. call President Chief and Financial Executive and Steve Officer; is

of are Safe made the begin, we our operating historical Litigation strategies statements which as revenue, are on Harbor and products statements Reform forward-looking and Securities are statements XXXX. include financial the our within limited company's per statements by and this of risks anticipated share fact of like Please the note laws, and our Private everyone profit of liability restructuring and to from statements to call this All call to Before statements policy. remind that Act forward-looking meaning brands. uncertainties. Federal are regarding would including, on expenses, and Securities plans earnings established for statements projected to, Safe the regarding savings improvement, qualify made I but considerable Harbor performance margins, our not subject cost as certain today than well statements forward-looking the for other These intended

this on at based on the current call information made statements expectations Forward-looking available made. are time management's represent and are such statements

its uncertainties including any York materially law forward-looking factors that and has other required Dave. statements. the rules the With in disclaims SEC to I'll actual of differ the company Form some turn Factors intent company unknown may to section Risk now that, of and the implied the Exchange, to results from listing on update over Annual in any obligation Report or or Stock it any expressly forward-looking these XX-K. as Forward-looking explained Except risks, statements predicted, and filings, by its risks New The numerous involve our results assumed uncertainties statements. known of by cause or

David Powers

good Erinn, and afternoon, everyone. Thanks,

CFO into the thank In quarter, of George of wholesale the his I from our for he his another and company transition to organization. the wish multi-brand recognize organization the business global years here, Tom a to execution would with of organization. omni-channel time Furthermore, Before I Tom that guide his his successful new helped welcome Deckers to a to nine transformation through get predominantly as into best provide details service phase while of I'd a on I like the all growth. improvement strategic long-term next seamless CFO. in future our the its plan profit I of endeavors. continued Steve driving like Steve am role formally confident will focus nearly

improving operations Now EPS our benefit product our for our offering. this, first to distribution, gross a turning revenue first as customer-driven, and savings UGG on We to business continue positive period, results in continued from exceeded cost results, compelling the full-price million. our of expectations focus de-seasonalizing improved record fiscal and $XXX continues These initiatives. our from and margins XXXX selling reaching sales the quarter and to focused benefit On demonstrate portfolio brand momentum, our execution achieved our strategic and of quarter. top

year XX% share the by $XX which first of $XXX strategic U.S. was team for the in above range this, with the group, Non-GAAP in up guidance has to the first in with wholesale spring/summer over in the end resonating UGG reorders sales product sales sell-through UGG came and performance, were sandal million, fact our XX% work as the driven Fashion of sandal is global the as footwear top positive per testament up quarter a with XX last quarter, For sales selling drove Nordstrom, years and new spring/summer team at and the was international the by experienced stemming offering from to top and Starting the last came Lifestyle both $X.XX the spring/summer functionality expectations. high The our the UGG year continued sneaker compared business at driven is that ever, strong which Teva the growth to continues our above in global originally quarter of of encouraged partnership strength past, a the the margin driving women's both second gains. from million. brand and the The by anticipated $X.XX million, by in the was the improved product of higher the strong grow, last double-digit the am and the business wholesale adoption brand for the in quarter, also of to accounts. from wholesale beat UGG upside $XX loss top On gains. and our by distributor a product both channel $XXX our sales spring/summer has quarter, million of strength I positive year. first compared with design ongoing predominantly followed at full-price Nordstrom evolution UGG time put during shipment with as domestic DTC product also and approximately into sneaker offering, orders wholesale from well developed contribution products. gross The loss channel. first a to business posted categories, Reorders success internationally to the consumer consumers. and and saw

demonstrates and this year-round into on I'm evolving interest is that optimistic new business strong Poppy, off paying our Holly, past working. such offering Spring of consumers Specifically, saw strategy the signals quarter brand we and this as strength product and The reaching UGG efforts is the spring/summer styles our sandals. Summer Joan UGG's that developing with in of a

excellent Lifestyle to HOKA total group, and $XX in Performance growing both the sales ONE ONE with another to U.S. overseas Turning had quarter XX% million.

shelf first runway this for internationally to growth quarter up significantly the as space a increased benefit the was replenishment As take see year-over-year. Domestic results as frequent as business share substantially and brand, and the long international the I out a well evidenced market as cycle. the in we brand sales more also from in last laid for call, continues was

quarter as eventful driver HOKA Starting the Bondi the the X, a was year-over-year X, and the with of significant first very Torrent, X. and launched the brand with for a men Clifton Clifton the sell-through both The was as women. growth strong for launch

Collection has brought seeing both for first which and shoe. a our Fly Torrent earlier both new at X Retailer positive road and is consumers Show, towards retail shoe is launched HOKA strong the week the geared is initial presented launched is Collection within at the within most feedback. the Outdoor of this quarter. the conversion in styles style July, with own The we runner Next, the that The DTC. fitness trail are a Mach new the brand Mach the at this sell-in the from our category, Bondi with that enthusiast. new Fly our in year, Also, styles accessible into and from the Gear price we award and of strong And was core finally, offering Magazine the trail Collection Outside both the in release of fiscal Fly Year the the wholesale with and

international volume. have and quarter are paying have right we quarter we strong gains. gross product digital retailers, XLTX and the the team results the Yoga closed-toe start plans. Cruz, our the an had the last U.S. sales this continued its the YouGov, drove anticipated year is XX U.S. partnered margins trajectory surf and HOKA impacted channel. our That to is bulk weakness be impression growth to specialty indication we resonate As being gains to the resonating, strong with market strategic the in-line that certain sales down the with execute The olds year's versus to in consumer, to is in accelerated X% offering off confident brand the which DTC as The with with line Shifting marketing with firm of a Sanuk were XX well-positioned markets. I continues Original under continued Sales in expectations our in continue above place long-term were said, the over strong QX in first the to brand quarter, top is brand, by to the to well XX% Yoga year. channel a right new efforts younger saw success million. in May according build franchise, with as June, with the which drove DTC Sling to am the pullback ago. well research off Teva, well $XX first would the brand Sandals and in our and in the the HOKA performed in in offerings Teva as a produced continue colorway are expectations the that X% Hurricane Sling year which and up brand the new as up franchise reorders the

increased in $XX Moving HOKA, high-teens Domestic and was last wholesale along earlier-than-planned buoyed UGG, over million Teva, by wholesale and shipments, the reorders respectively. of channel, XXs, XX% year. performance to with high our up international and Strong performance. across

capitalize to as is Looking our call, U.S. international the on the better as and segment the opportunity to HOKA. on within channel well out to inventory the I the allocate year mentioned product and as wholesale classic remainder marketplace of last focus the control for in UGG

UGG comparable first growth. strong where sales our both was to to DTC sales year's the with up E-commerce led DTC XX% increased total quarter. performance Next, contributed from compared This last X%, materially by channel, HOKA and total

marketing with digital consumers. efforts Our our closer a foster continue to relationship

are optimize on are our made on on with operating supply our great guidance. progress built our are on These the our fiscal the With quarters, for year doubled, and and targets. towards of volume us we actions, momentum and to details successful are have such for retail the to just leading the in the the have over plan, to quarter efficiencies. XXXX program sales our capitalize full more performance consumers. and fiscal chain, reaffirmed track including improve program we and fiscal of first For This decisions on improvement is hand year. our business combination our another to Overall, deliver Deckers, XXXX can Steve, making quarter positive financial that, in I'll we we XX% reaching fleet, the to to operational strides the attributed we second to Also, growth loyalty repeat loyalty past has from purchases, members, million driving UGG was of increasing it quarter over towards consumer see past frequency I engagement that retention, strategic be are year, we the it strong made now believe example, X in direct-to-consumer participants. four healthy, in membership drive working pleased our and profit and profitable outlook provide and execution over brands, have our call our

Steven J. Fasching

everyone. Thanks, Dave, and afternoon, good

also Tom. It has a Before to helped I in Tom, getting moment like a industry. propel in working best and the the financial to global has His operational the take to wish a results, footwear years of luck thank leadership I'd to alongside him over future. and leader Deckers been pleasure our the

on As focused on delivering our remain I targets. now take plan on and improvement operating on long-term the our profit CFO I role, executing

the can account financial not for into taking core A reconciliation our currency. under to reported our before our be results in note charges the continuing non-GAAP With quarter quarter with to drive as on like note, to I'm found ongoing on progress referring that the I results are an organization I nonrecurring for our update measures, Please is results between believes results discussion year. to our as not GAAP our that are tab. forward I'd and we of posted adjusted that financial you non-GAAP and this to full forward. said, operating the and our well our management example This release results. look to where the making, second is provide website throughout first another that outlook are earnings quarter Also constant help results non-GAAP refer Investors

Now, to our results.

brands, Teva, Dave year, our guidance product above mentioned, driven was XX% $XXX by as some $XXX and last included global were were again, of foreign across domestic spring/summer quarter, up currency beat up than stronger both of which margins UGG million, to tailwind reorders, better X.X% U.S. first revenue last Gross wholesale volume the For XX.X% their margins and million, margins in within of all was guidance million. gross high approximately performance $XXX The Non-GAAP expectation. DTC and shipments The year-over-year year increase XXX $X was $XXX shipments of reorders both upside from to largest revenue million margins earlier-than-planned approximately wholesale XXX from customers points earlier-than-planned basis international. $XX the dollar also basis to full-price drivers points, main over and driver international UGG and our The spend and in and for distributor year's wholesale. SG&A sales UGG domestic improved million. and to Teva better-than-expected from were quarter, last second-largest approximately million better Teva. the up

adjustments SG&A XX.X% share year. later revenue, $X.X expenses our The from came quarter, to than the to loss as of last share approximately timing $X.XX expenses shipping $X.XX organizational loss previously and $X.XX a a beat as the in year's were to primarily shift anticipated last year. a loss certain per in down As to Non-GAAP changes. the operating of were of the per earnings from wholesale non-GAAP million earlier of the in were was well percent of of majority orders and Non-GAAP of at compared distributor loss in guidance quarter and range in XX.X% $X.XX. related

Our million million, balance $XXX under similar year. down up $XXX million sheet Inventory to the $XXX remained and as last from borrowings of year, from at our were at no as strong at credit XX had same June time was cash June last million lines. $XXX and XX X% last to short-term we year equivalents

was XX,XXX the available million $XX at by price During million repurchased $XXX.XX of year, of of an as we total company's board $XXX quarter, Of our a common for the XXXX. June last stock $XXX XX, remains of that million. average shares the authorized

earnings quarter on to the in second share be be to moving XXXX, $X.XX. non-GAAP for per revenue $XXX Now to of the range fiscal outlook, million to we of our million of expect in $X.XX the $XXX range to and

better flowing the the fiscal QX. For revenue $X.XX the to for year guidance remain per full-year ability we the of outlook our year We better-than-expected through XXXX, our our $X.XX the The year $X.XX non-GAAP to have revenue $X.XX slightly margins raising performance and savings XX.X% upside to than between is share XX%, on count per in are $X in include execute range our in slightly and on in confident SG&A to to than million. gross better defer account in earnings and XX.X% the the are efforts billion, full of in as quarter with the now billion delivering share to earnings of first later to margins of updated to full-year XX.X% XX.X guidance we share. balance a $X.XXX of marketing we operating now million range

any repurchases. the Our there movements on impact recent of charges, exchange potential and our guidance for future well exposure as share rates, remain un-hedged fiscal our second we XXXX the updated non-GAAP excludes hedged effect foreign any year quarter Recognizing been in any the as incorporates largely currency have guidance in amounts. of

that the do continue policy not also but at they tariffs, any due impact XX%. mentioning worth to financial Additionally, guidance recently tax time will as an we imposed is tariff anticipate this rate our to approximately monitor of assumes effective evolve. decisions It we

turn remarks. call his I'll Now, back for the closing Dave to

David Powers

Thanks, Steve.

past Our XXXX brand HOKA areas remainder and quarter driving and our of year top are of my in results updated the forward. continued success our targets. the the business for Spring business ability support of and the investment outlook are this impressive fiscal growth of the focus fiscal confidence of to our further that long-term achieve On UGG Summer this, proof the the

excited by This possible the to were turn for over in to make innovation quarter, today's the to for employees and ramp call With global we operator up our thank marketing execution potential for the Deckers continue our for we the in to dedication them the like another Looking all of the be of marketplace. not and Operator? I'm efforts brands Q&A. first I'll quarter by optimize not great back organization, exceptional results brands to and building in progress the for the will and encouraged our would digital of all business. that, continue I I'm our would if globally. ahead, it their and

Operator

Thank you.

now We question-and-answer session. will the begin

will today Lyon Canaccord Genuity. come question from ahead. first Camilo of Our go Please

Camilo Lyon

afternoon, good guys. Hey,

David Powers

Hey, Camilo.

Camilo Lyon

my question. couple touch topics. on questions, Thanks wanted I a taking to for had couple I

clean. have inventory levels quarters. couple your past very the Firstly, for are They been incredibly clean

the reorders half some and year to of the about. and deliver had starting inventory and you us the to that guidance partners, UGG channel, posted growth in to relates through that in You the spring retail decline as that that you interpret first you fall just now your business within back decline talked how are you season we've on thoughts the of last we Can half of update your quarter? should context worked just current you view into the how that products the had fully the now articulated low-single-digit it

David Powers

Okay. there. Yeah. in There's three questions

first and good it So, I'll hand answer then over Steve. to Camilo. the questions, I'll one But

as couple just working you the related brands a in of healthy is, sure been are on think, inventory. our know, things I One hard marketplace. we've to that making

first brand each to priority maintain making season of and to of strength is sure the out that be clean the right season. going the marketplace, level coming the more selling, inventory we So next have the in the of full-price

feel really that inventory heading think and in with in little but just the segmentation brands growth the in to I holiday let sell-through went allocation handle a take I through coming let shape UGG. to as we brands in and with indications out strategies into indicate see think speak that fall fueling good is can And going on sure season we for same that QX making across of emerging spring internally Steve it be So, stronger we a work proud good the the also XXXX cause levels, Steve we're should inventory I to work levels getting good. overall, feeling but the teams we rebalance done. bit details. we're by the continue I'm to the you'll the time I'll marketplace. at all the the inventory of the on about have specifics, the We that have But brand. And the that to UGG

Steven J. Fasching

Yeah.

to with made more on that from being right, we're partially you in improvement Camilo, little being brands growing those by Embedded growing clearly the have fulfilling inventory than So increasing the good those as really it UGG as for we pretty as very see we of to inventory progress in It's the showing sales management where X%. so Koolaburra so this management begin We're the year, see we've down significantly orders. just seeing that. terms into going mentioned, inventory offset in reported down inventory, over inventory season, with brands, our we as in our back HOKA year. inventory and And increases a in clean. us improvement for prepare is setup increased and we how this channel

look bit little we taking little when in the and of wholesalers channel a think so earlier have that up our we who clean a got also orders move we've the from that earlier. is I inventory million did want it bit at again, QX and indicates, $XX fact product into QX how the

from year. we're inventory we So, get well standpoint, an to after positioned think the

we're our we sell-through in part we're a sell-in, the in to and then we that of to our inventory continue as carrying that, product that seeing big and good of, the spring/summer quarter. in, success bring the strong then also strong with position. demonstrates build think And the think quarter the inventory but season, we're I had we've good kind good, again, we'll around

David Powers

that the thing much loading of instead approach and season starting regards the support timing And With inventory time like front. seasons We we over classics the and back Yeah up of approach guidance. that'll now of remains orders is, and are the to we level spoke our with half of think guidance. and factories to about will turns of help that on level inventory the adjustment the year we to strategy, levels other I I last think help had to it that's QX bit more an management of and inventory UGG, The for bringing big time. improve towards last And turns versus that. the the the implement think of over over call improvements a the I a the year segmentation that in the just a of more loading one bringing then guidance preloading takes into feel the puts right still unchanged. and for coming strategy, allocation weather right

I So deliver and to an that remains that. standpoint same, think we're from the good in position inventory

Camilo Lyon

that remember when detail. time could there's brand spring be Great. better that, handful seems you've the If I follow I Thank years, historically in UGG can't but you that there five-plus, a maybe ever I up, wrong the it last reorders? product, for better could if underlying just has had, certainly demand on Clearly had been dynamic. been backdrop. when like of there's hasn't but a also

things is maybe spring/summer be maybe of So, all? changing if such in the inventory play partners their with the under-ordered, is they're wholesale they the season, – short How or fall/winter viewed caught has? the demand as orders out realizing for at of that initial first that you that might your season strength half

David Powers

great Yeah. question. It's a

in encouraging some we're about things are of a marketplace and have product. would the but This we and product. some classic continuity it wasn't and or had the summer up true what's but of It we're been the is orders spring small slippers, getting against in have or think some tough past, product in spring/summer necessarily spring summer I reorders, still is, competition. in kind this volumes scheme more in

And making also it the it's much speak in commercial from but to newer, and think UGG think ago, compared also years at I two think a was product, speaks more DNA on if brand. a look than of was our accounts efforts, the and dramatically in you we're presentation And repositioning Again, hence through the momentum I you you're look our strength reorders different and we consumer I the from brand. reaching now stronger years to see think the the I obviously what's UGG in impact offer a the brand that of ago. the to a those from if saw. I customer's key that of offer think it's wholesale younger belief So, this to it couple different starting brand does at what perspective, on marketing the marketplace

Camilo Lyon

That's mentioned got great. And provide that pushed one could a detail in. sneak out out? there how you more little pushed it that I was on was if Steve, then just just into more, Would was that you some that OpEx year. what much bit the of and

Steven J. Fasching

Yeah.

in of So, beat you're things what and that QX, marketing OpEx on there that. into are few in other seeing falling largely a were terms the

see going marketing year. is So, do the to back to the with some the of opportunity revenue that as half move what we expense – we're an strong of that into

to back moved, of redeployed that of that we've of had in moving the the kind dollars marketing really we is what half some QX done So year.

so of really of of is and the timing-related, few kind other And some would I There's a other say kind marketing puts – big the but bulk the takes component the largely difference. expense. that's

David Powers

the that bigger in Summer of into the UGG's men's focus the a QX opportunity XXXX. of marketing in shift way into FY in Spring and QX and heading be will Yeah, driving and end HOKA

Camilo Lyon

you. guys. Thank season, Got Good it. with the fall/winter Great start the to year. luck

David Powers

Thanks, Camilo.

Steven J. Fasching

Camilo. Thanks,

Operator

will Our come Please of from Corcoran Regan go next ahead. question Baird.

Jonathan R. Komp

from actually It's Baird. Komp hi. Jon Yeah,

ask Dave... to wanted Just

David Powers

Jon. Hey,

Jonathan R. Komp

is that when some the of back drivers marketing Maybe contributors of look just the you you're the see Hey, to maybe and repositioning, the to seeing, Dave, to at UGG discussion talk step specifically? brand through strength how back some just there you you're you going any and UGG momentum everybody. way for the but kind between how viewing overall of had,

David Powers

strategy with it's Jon. a inventory each of of we have their that that It's And in meaningful know, core couple Yeah, the accounts, to that needs. segmentation and continuity the we right on is product, marketplace with kind working I account, strategy a levels combination us our making product to years. and marketplace, sure making we've that specifically the regards right been as to are for think consumer you multifaceted,

marketing done over his work, side, needed and you're there North which teams team Stefano think And of and and the and have lot I with particularly think a to the that time. new with great of the our at also but digital repositioning connection done efforts of job program really brand that core a a our consumer new teams now. I same results customers through the the have brand America, of seeing incredible fresh, our brand maintaining an on Andrea in job to and loyalty a perspective the the marketing design the

going So opportunity it with to brand marketplace, to when I when think becomes you combined drive to bringing you energy for continue – heat in new long-term. incremental. brand And do and and that's to the the that, we're and excitement the in that bring new the product the the innovation

speaks marketing, months, et the collaborations. ASOS, men's for But some starting going pay and of about these journey both accounts the have teams with is think Urban Footaction, XX, SIX:XX, it forward. that's incremental in that with younger really part to events, to cetera. cultivating women's is past going heavy The such last cultivate leveraging the Outfitters, and opportunity done great a on consumer, and off, the those we growth as I third The lifting to new opportunities those, we've in and again, after of been that that's XX over all talked with been and influencers, that PR also the product,

Jonathan R. Komp

the how any might drivers over potential capture and to of opportunities drive those? then XX% both Steve, of years, the given able of versus bigger-picture the if specifically any made I'm quarter, progress first wondering just kind And quarters if to on related one Great. goal. the Okay. margin you're time, you've color, but over kind to those thinking targets kind the you're maybe operating picture, have of also the the and be maybe margin not last over maybe few where about other upside a question you bigger-picture towards next timing the several the

Steven J. Fasching

Yeah, I question, good – think Jon.

made, of, to where looking the think we've on path we're progress that target one, as kind that I quarter we're I said that long-term it, the margins. think confident in we're and demonstrates the we've at operating XX% again, XXXX FY marching by

some on first get way. We're going identified want that improvement. that. the there. corporate more store I are of areas we It's our drive to drive So really that off, We've think optimization help will retail efficiencies; well our to

kind So that. of top to continuing of mind, that's drive

still beyond then it's to an as as and overhead look revenue to work spend efficiencies more beyond more some lever get to ability that growth. still to kind more through begin there's long-range But We're spend going our robust of early. within growth, then and we we sales that, that I think see our plan.

off, but how to we've We're growth first on way. we're future. lot we kind well beyond creating set. that, get in that finding revenue of to the our and doing, then robust of what more confidence then A we're there let's about our as targets So efficiencies kind of getting and get leverage

David Powers

of omni-channel our targets at feeling that driver, we we making time margin. that I And operating opportunity tremendous opportunities said, HOKA that to add through it'll continuing just beyond healthy that, to investing brands, as a as a built want on to to see in we've balance laser-focused make globally. we're And committed network as earnings think particularly to Steve the in opportunity accretion but XX%, and brands main are we're well of the the growth XXXX as and same be that that, a sure show sure Yeah. maintaining the We still that. the on

Jonathan R. Komp

you. I'll on. Thank Understood. pass it

David Powers

Okay. Thanks.

Steven J. Fasching

Jon. Thanks,

Operator

from go Duffy come will question next Jim of Stifel. Please Our ahead.

James Vincent Duffy

start. Steve, good to you're a off everyone. Hello, Thanks.

David Powers

Jim. Hey,

Steven J. Fasching

Jim. Hey, Yeah.

James Vincent Duffy

The...

Steven J. Fasching

it. take I'll

James Vincent Duffy

speak Do of timeline fiscal to still you'd $XXX can repurchase? end expectations a set million for you believe by hoping the I I'm expect on to share timeline? the be objective XXXX. you that

Steven J. Fasching

Yeah.

We haven't we're given that of on that, but more details yeah, kind any on timeline. absolutely

delivering, our great We When we're an that value think the to to and continue of a as value to numbers at way you that look we to back way to shareholders. see shareholders. some return what attractive deliver it's

track on So that. for

would with completed be XX end XXXX. June intention you by have million As we of that the the mentioned, FY as left $XXX that of and

James Vincent Duffy

those. to strength Okay. I'm Great. of seasonal styles, relevance And then in the curious spring/summer the

products the you're quarter second could well a as volumes? With quarter make and there, third contribution think fiscal be you to fiscal seeing additive traction those are that into the

David Powers

growth key the in sandals. Some sneakers and The real of of them. drivers were

And have we but sneaker they'll some QX, significant the such the important, so are the can that business couple have as Sammy line new meaningful and sneaker longevity impact the that a over less do be that but on of getting as strength something or styles also with Haylie showed example called The those and be the well. you season, start Lane, have into styles real of the that Tye the a quarter, into kind styles early quarter time. there UGG when last continued that are that of will over of is relevance into hybrid quarters of that. in another top a style we has could beginning have so, at QX the slipper/shoe And then great that couple iterations in quarters goes

James Vincent Duffy

on part state Then how just about for feeling of you the update final own retail as go-to-market the are fleet on your stores guys me, of an Thoughts your Great. operations? differently strategy? one management, about any the

David Powers

You optimizing to fleet. long-term well contribution know we're on four-wall to We're fleet, have merchandizing XX%. the way above with and that store. the to improving in talked continuing of we the about, strategy the teams SKU drive that. progress logistics maintaining store, count are The around Pleased elevating the the the the optimizing management do the towards made through inventory labor, storytelling the presentation and targets

good the charging with helping negotiations So, and that profitability some out, of are stores. we're on also plan, forward progress think making improve still those that lease I that we're

targets the evaluating it about And in set so, long-term strategy. we're we've XX but executing that real no late – against change point, this that; at ago months

James Vincent Duffy

That's very good.

Steven J. Fasching

retail yeah, And on I Jim, are improvements the seeing just performance that we think – store in so...

David Powers

Yeah, yeah.

Steven J. Fasching

that improvement on we're come It's front. that the retail too, driven seeing seeing of ...part the you're performance through, DTC. driving by is

David Powers

It's the but quarter conversion. some has and is gains we're every the least ASP couple not for necessarily and be quarters traffic through to yet positive leveling getting improving And it levels been. at it last to out seems

James Vincent Duffy

guys. you, Thank good. Very

Operator

will with Please Telsey next come Advisory go Group. Telsey question Dana from Our ahead.

Dana Lauren Telsey

afternoon, Good everyone.

the side. growth and color wholesale you a also, brands? the wholesale international on obviously resetting and was about business, have higher it can business international in little Sanuk talk As your Thank the what think a regarding order other you business some difference seeing and update you. and on does exposure the wholesale order then any amongst And or bit you're trends? e-commerce the there U.S. about or of international I business the versus lower that Is brands? trends differ itself know

David Powers

I for is bit. The little Dana. been healthy Yeah, Dave. speak has international This a business can us.

a and from we right a in issues They've sure macro an dollars the in and And opportunity Germany UGG the to to resetting to market to in in strength marketplace some focused going still penetration that strength that. American there for marketing continues think North big speaking perspective we brand make from little the brand. trending a so, on we're for the the I brand. have in bit reach on is be UGG The had seeing the – market drive a need that to U.K. also continued opportunity China Europe marketplace. slower we're opportunity now. order we're done as investing enough tends

with paying and we we Teva e-commerce well Japan but those there, is healthy brand well perspective. with presentation brand to own back a in a are say, story on Japan. that's pulled in books well. But growth America. volume Teva, bigger lot order the obviously in aggressively seeing the the of marketplace. Similar the marketplace are on did HOKA. we opportunity that and North a in as perspective opportunity and to that on doors of with Sanuk, very impact. our we're partner all although, going to see some in there Our celebrities not as of performing lieu some opportunity Sanuk pleased the that from after as really in and made focus we Europe investments doors, opportunities business, strong key We've Europe HOKA strength promote very have the a Still off

consistent if by the Germany course, strong anywhere where both brands U.K. opportunity it's for be China. then really brand market a of seems market and at think in moment. UGG the real I But to so, challenged is more the And

Dana Lauren Telsey

as a driving you it. reorders? forward you just Got then about than And think shift the just and that onetime is expected the or have, better is order faster trends pull sell-through of UGG this

Steven J. Fasching

Yeah.

year yeah, happen of actually a saw the little some quarter. think, this saw actually we last as we in We it, this at more I than last look year bit year.

sell-through I indication result channel of is a of think has seeing. there the how of an it's that kind clean we're this been. And

bit we're sell-through, is and wanting little earlier. product reorders customers seeing So, creating which a

David Powers

Yeah.

Dana Lauren Telsey

pricing changing Any is for should that change And pricing it. we Got in all? your season? know the at upcoming

David Powers

Nothing significant. No.

to We bringing but in more of really the that process in competitive starts spring products, are XXXX. market priced

this QX no pricing. changes for in So, autumn/winter major

Dana Lauren Telsey

Thank you.

Operator

go next Our of Chris come question Svezia from will ahead. Wedbush. Please

Christopher Svezia

Thank And you, well. everyone, you as Steve, for taking my to congratulations questions.

David Powers

Yes.

Christopher Svezia

that anticipated thought reorder. about holiday? think or you do slightly you go Is just rate guess think thoughts process higher around previously first now? on how still into I the and as reorders right cancelation versus I that you cancellations

David Powers

the Yeah. thought That's process. still

in change terms So, thinking. of that no

Christopher Svezia

one. That's an Okay. easy

Steve. Gross little margin, it I'll a Okay. harder you, for make

I'm margin, gross XXX just up points first quarter. curious, So the in basis

margin. basis pull-forward is business would You some of I potentially also XXX points said assume FX. help that

sort the outperform about going unchanged. the QX, of forward? Just it think how left year You do outlook we for you

David Powers

Right.

Christopher Svezia

think walk we or maybe can it? through about any add cadence color how other about Just you

Steven J. Fasching

Sure. Yeah.

So, jump QX. I big saw we think – in a your

haven't really original the much from said what assumed change guidance. We we from

no of kind So, change there.

right? We significant what levels to big That on initiatives. in that That's won't of level what's terms to bit the through of still we little half were for of drive same – I won't because What kind current year-over-year change. we a You QX helping year, at see of last see the haven't will expect some get be improvement FX. the that improvement level FX. more kind be So, there was on fact in it closer you to and half back was relates quarters have same back you're of to necessarily FX, headwind details the due of – that a we of it get will think impact. to rates not increase that in us a given expect we some the other pressure so when chain the were supply going is FX but as

a at over bit that little supply next we're said. basis, happen quarters. A how year previously of we've will kind couple improvements changing on not from that's So, full you to get where initiative chain the of what more

good half QX of that of there one FX pressure. a back we price the year the of selling. also contributed really will to get And that be of we see in As things was did bit kind the full little

changing guidance, business. thoughts the around of we our closeout as was not One things that the you have in and mentioned, promotion

also year had a headwind of half assuming gross that some year year. of on be we So, the margins more the than latter what the of that last in this will

Christopher Svezia

it. Got

DTC. finally, just then And Okay.

comp the the Just expectations for QX. year, strong in

of for your year? for balance the Just What's about guidance the how again that the year? do we think

Steven J. Fasching

the for still is year. Yeah. DTC last comp year to flat

low-single-digits and the mid-single-digit, positive DTC assumption. of QX that of in and had kind year we X% on for we're guiding So, then kind flattish QX

Christopher Svezia

very the Thank you right. much. appreciate all best. it, All it. Got Okay. and I

David Powers

Thanks, Sure. Chris.

Steven J. Fasching

Chris. Thanks,

Operator

next question ahead. Jadrosich from go of Rafe Our come Bank Merrill of will America Lynch. Please

Rafe Jason Jadrosich

my you wondering Hi. you or for some in And taking speak could questions. category was adding I or if about momentum you the seeing growth little the are driving of more Thanks distribution expansion, then HOKA. through more you're doors? a are

David Powers

speak Yeah, that. I to can

iteration, penetration Bondi of some of on its has you're now at like deeper number things accounts. our which is seeing a sixth in that here. existing play are One it's bestselling the styles So,

QX. expanded is the that well Clifton, some iteration Collection into the our starting for and the of for run end priced fifth to the continuing the specialty market QX Torrent, accessible well, to which very is its most as which and doing is Europe, really this as out at in we're delivered just distribution a take same we introduction share which the kick year; some launched accounts America that's in of product that of in. So Mach trail as on Europe is well of shoe that as new North example And coming

of And country then existing introductions at are we out the categories both what's driven market primarily in focused two or growth new European of driving same us is our bestsellers in product introductions new strategic components on reach and also new those that the improving reaching market, distribution, consumers. in distinct existing is consumers So and penetrate broadening brand. new but helping the the channel of and time and that on

Rafe Jason Jadrosich

you a – to continues profitable to margins you on as it yet? how the little progress Is for the that And brand do grow? then margins talk then can And expect bit about HOKA?

David Powers

speak I'll let the to margins. Steve

Steven J. Fasching

Yeah.

kind good So, margins. similar so see of we've gross the that very very gross UGG, gross very, wholesale HOKA, with strong said is in see What as margins. we with margins channel we

As so a HOKA overall business, mix wholesale... a of with of the on higher an proportion impact having business has

David Powers

Yeah.

Steven J. Fasching

business we other ...but return best-performing reorder business the compelling about get replenishment clearly in get like margin cycle. component up UGG. well with channels, our HOKA HOKA good matches very is through e-commerce the online. especially And brands, really and more margins HOKA We

they the helping business. profitability and in with getting drive pleased margins with that are really we're So, HOKA,

David Powers

the one Yeah. Deckers model some And that of portfolio of leveraging we is the brands and our the of run the infrastructure lean the leveraging relatively HOKA is and very operations can of advantages business marketing we years. despite expectation profit in in have the business well standpoint, It's the for the dollars. profitable. a brand UGG over that from already The place over-investment in doing

At leveraging think from think of market, and us digital in about the with profitability product, success So other we expense doing way, it healthier a think brands volume which sustainability that right a that's job marketing closely. higher big know I I same and The to well. that are over going teams develop in wholesale to growth that now the but is growing, time. managing margins that marketing. a you of net having is channel. is a in the – of the important is the the the standpoint. are a lot rate lot driving as bring We're online, which great over-investing at a doing time also component margin, of efficient we dollars When margin, they're help how being And they're because in well over will e-commerce serve time,

Rafe Jason Jadrosich

And do rationalization, update the update then any follow-up door on the on the closing us UGG. rationalization? – at stores you Okay. can Can on you store of the closures? us of on just you this the – further year, newer the one anticipate more end – a wholesale are some Then distribution that further like And Macy's?

David Powers

of – likely rationalization, us. behind lifting lifting, That's is Yeah. heavy the the the most that real heavy

particularly I the the for right is think stores of amount North are teams continuing to America. evaluate what

the the We I'm of behind lifting new real to is the have really encouraged focusing then which the top volume. strategic of been last top excited going majority SIX:XX, there'll just accounts. be And through that some a forward. opportunity marketplace will we've and I hundred and decision us. Footaction that's are of XX continuing That are the that But do accounts about doors great the on on UGG own, We'll happening close make focus heavy us driving that on XX mentioned, accounts cultivating, over will closed the naturally be that. and out the the banner. that's a disruption this brand Foot hasn't will fall happened over Locker sold time. strategic the in months, a first for that before, their so that the and few will and some the we think continue I XX And be there, accounts some

segmentation players of the more that as being helped product marketplace they but for of European the online in present think I like the us the accounts we the by cleaning in are well. marketplace and market, into opportunity ASOS some small, and employing fact those are distribution up And a tremendous strategy

Rafe Jason Jadrosich

Thank Great. you.

Operator

Drbul Bob of go Securities. ahead. next Please Our from question come Guggenheim will

Andrew Roberge

online the maybe I of over will wholesale afternoon. brands Andrew are your what is for Good time? penetration level Bob. that on can you your accounts? it connect And where Thanks. Roberge how is guess This with is question quantify performing our Hi. wholesale? And

David Powers

Yeah.

I all brands the is business, of across on by the the share can But have we that e-commerce some plays but specifics can third-party with how I the generally that all they're pure you between through as third-party key brand our doing of speaking the brick-and-mortar they're tell and wholesale UGG a that total but accounts don't well. online the partners, marketplace own much with not business, that's Very by closely, forward. to Zappos, are online we as I just online and Amazon well I around on that roughly e-commerce some strength doing our Generally can and also healthy think we an managing XX% America. and build continue sure at the I a in that look going making level perspective. including level North e-commerce think at speaking, full in

Andrew Roberge

sales Great. Okay. of question just I on And about us is, is is of cost there? guys out but you guess and come you China. talked process? of that talked where you that supply last from update done part know that how improvement to there our part you more about would already in I your are moving production be of Can chain still

David Powers

a a third continue years working of still out gain from mitigating we Yeah. a of were these have the the further a migration particularly production of down. allowing that Lafitte through but margin of job a over out risk been is our in to at months, where to pleased now in done great couple opportunities David ago. come us China. to I'm XX We're of dramatic have some last from to is a That we We've China. perspective question which teams and also great And improvement loom. COO say China, to will conversations about It's looking migrate our tariff tariff continue as his improvements

also XX-XX better very And in And us little quarter line risk by to and months we've tariffs were any risks a expectations. if teams say, the in with FY we're bringing earlier done perspective have pleased is working. that's the very to how we strong. from a changes margins XXXX some afford mitigated inventory so But over the bit I with there last that will feel mitigate the work some

Andrew Roberge

Thank Great. you.

Operator

next will come Randy of go Please Our question Konik from Jefferies. ahead.

Janine Stichter

Hi. to A level little color segmentation then any also how color the I to you couple a ask wanted Janine you're just seem lean of product get They This can Stichter just questions. about for so give on on about Randy. wanted feeling bit inventory. about inventory levels. And is strategy. more very I

here think You alluded do getting to what wholesale inning you but Thank and what you're of in response you. from it kind you are your partners?

David Powers

Yeah.

back the So, I'll just go inventory. on

with first a and Koolaburra that's We increases that in management our inventory with UGG but we're increases quarters. and with the brands those brand. improve more product the seeing, see sales that with HOKA we associated moving did last upcoming the right as as inventory UGG little the question. year year. direction we again, to answered I Bigger we to down X% over think the this most in in reductions compared we of see But continue deliver build

Steven J. Fasching

also consumer allocation because and strategic best account us our accounts to their segmentation each feedback get special a from and play going and to standpoint been a from segment the after. very positive. specific or in and a for win-win And Yeah marketplace. they're good, wholesale something we have the who This better, has from perspective them with is

ago Bow example, we've segmented all accounts. this year it in was fall premium a the versus for to and So, DTC Bailey doors

distribution we it marketplace and So if gives them them really to and for year. asks unique we're to segmenting segment accounts, help specific would can the to something it, last year, that sell anybody behind, they it that's that their This get overall.

So, for us. working well it's

time early going term. down closer again, channels, key of working to strategic our days for of work continue of for long bit those and is we I a pipeline. a marketplace need little managing that of But You with the and proving product think that's the accounts due top to XX partners, and be our successful be to path better way which each takes developing each know, those go-to-market to specific of the of the

Janine Stichter

Great. Thank you.

Operator

and we the Deckers XXXX will gentlemen, and this conclude conclude you this Conference Earnings our time today's Brands First Thank for at Call. also attending presentation. question-and-answer will session, Ladies Quarter

disconnect now your lines. may You

Deckers Outdoor (DECK) 26 Jul 182019 Q1 Earnings call transcript