DECK - Earnings call transcript Q2 2020 | Deckers Outdoor Corporation

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Operator

Good afternoon and thank you for standing by. Welcome to the Deckers Brands’ Second Quarter Fiscal 2020 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. like recorded. everyone would call this I being is Instructions] to that remind conference [Operator now the will Investor I turn Relations Senior Erinn and Director, Kohler, Corporate Planning. call over to ahead. go Please

Erinn Kohler

us and today. Hello everyone you for thank joining

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

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

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

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

non-GAAP non-recurring into certain be our refer comparable year references not this taking there to are prior ongoing financial throughout that discussion that financial note results. results. account measures These charges maybe to to operating before Please measures results core believed non-GAAP for to

Our for adjusted not measures non-GAAP constant financial are currency.

not we posted and financial of adjustments prior under results on a year for website reconciliation quarter reported XXXX, fiscal the tab. any our for second do between our While release non-GAAP in earnings found can non-GAAP is that have GAAP the Investors the our be

With that, I now will Dave. to it turn over

Dave Powers

The Good afternoon, team for thank Erinn. today. strong has us quarter. joining Thanks, everyone you Deckers yet another and delivered

million. second year seen by of X% share revenue the These earnings in the above per $X.XX. UGG as delivered end to last the early fiscal increased strength the to of the quarter domestic came brands For above versus and of are as XXXX, in $XXX our through Gross XX% results due outperformance guidance margins the to brand well ONE ONE high related shipments business. HOKA range we

During quarter, the in key we continued our drive momentum to initiatives. second

online performance in investing boots to to our been UGG our our UGG expanded marketing strength and through I focused and results. was HOKA franchise fluff strong. on Deckers percentages, believe the As innovation, the commitment The increased these non-core is women’s execution key of men’s central by explosive have to team continued experience of growth, initiatives and high-teens the

growth line and of tier organization’s focus highlight results also discipline while levels drive top maintaining the profitability. our to Our healthy top

and from review of Koolaburra with the lifestyle highlights the now UGG group the the The brand will I fashion lifestyle brands. fashion group. starting consists quarter

as our the is within The in brands with targeted clean by trends. the by the product. In has been to targeted to our our to XX-year-old increase UGG well EMEA quarter driven sales key up in global UGG interest our powerful quarter XX another UGG, particular, by investments the versus year and acquisition high include wearing has Google prior versus we to increase marketing a region. and according health PR demographic. driven year the several marketplace. last in up domestically profile some strategy segmentation continued PR. XX% XX% plus This customer driven the U.S. in second by photographed For X% million domestic been in the brand, demographic which in $XXX have Thanks driven organic as seen celebrities of were digital offsets business strength allocation

has Classic built thoughtful From the take on of introductions differentiated campaign long our our point consumers in channel. steady no to women’s in combined launch vehicle plan UGG slowing experiencing product and is segmented increasing compelling has new younger Fluff consumers. team strong way a revolution team go non-core differentiated highlighting of of slipper brand a boots. online momentum from success fashion the done down. products been hybrid I classic is for in in offering. FM shows featured Due these Fluff addition wholesale optimizing with with perspective, management our women’s newly the a iconic UGG UGG design to the signs franchise’s Yeah delivering acquisition new FM continued a aimed launched believe new business also women’s distribution at a The Classic of has depth to which experiencing forward job products The the product a the styling. The our distribution. early The heritage Slide classic is with new of sandal tie for fantastic recent the business adoption lifecycle the product strategy,

am pleased the On men consumers double-digit brands. number male specific the being nation ever increase in the I with Neumel ugg.com new them half largest of our with campaign over which marketing to to the campaign, men’s a drove to of response the early side,

For the fashion represents ethos Sabbat, and partnered we and UGG actor brand convention campaign, of Luka culture. who the influencer, with defying changing

look the edition collection collaboration fashion with Tasmin updated features and Heron with second of young and Preston. Both benefits. and our campaigns slipper And collaboration quarter. male Mini increased The consumers. at and its the the third Classic styles, in from limited Neumel the two the new heels Neumel they released On are heritage marketing nation, designer, UGG featured forward drive I results aimed efforts to will consideration driving awareness

of front, region. international in early plan marketplace the the are EMEA a to we On our multiyear stages reset the in

strategy Elis focus partners As marketplace who in as marketplace marketplace, that years. consumer The with of be region. with currency in goal million $XX Overall, EMEA intended the key its Europe strategy enhance The launch as over We quarter the to revenue the brands by holiday the the of strategy past look estimated strategy, result for the of continued drive approximately reset best successfully these celebrate few a are over this to account domestic and the of family. clean the represent variety year. with been million a campaign. Look coming that success progress domestic similar is holiday end gift the fiscal consolidate the in total reminder, segments the encouraged launch campaign up to music of of the out implementation to holiday forward implemented has UGG on to experience the our experience. inventory This is in more to largest base the actions consumer of and UGG wholesale our we is provide I the headwind aims our working the Angeles $XX successful will UGG we differentiated we brand. the The to consumer to in in to weeks. strides in based this making a and am addition impact of for a ever Los believe remainder

Turning sales aligned to of to with prior gaining the million. brand in the share channel. wholesale second versus the growth $XX family the was Koolaburra, Koolaburra increased market global in year value domestic XX% quarter strategy

both few Koolaburra new fall, increased excited with includes remains The demand are and home brand targeted At of in in our this close distribution. this respective brand launch testing product experienced partners extensions also compelling conjunction products Having to positioned that, on demand channels some the to value be the family segmented of building well the feel capture our footwear differentiated the and are for Kohl’s. of near-term I their category UGG said We for partners. holiday which focus season licensed the quarter, launching existing a with through with second is the channel. with Koolaburra

Shifting group, and exceed to lifestyle Teva ONE which the performance is of ONE, comprised to Sanuk, continues HOKA HOKA expectations.

product new the brand’s experienced to across its HOKA sales $XX Similar quarter, well HOKA franchises growth strength success and balanced the by as a well internationally HOKA core and product both second with perspective, first million. the From as For channels. the direct-to-consumer both quarter, XX% increased wholesale with domestically, to brand in global is introductions.

the front, in athletes. was the franchise also and continued and new Rincon in the year-over-year. specialty evolution This the high silhouette July shoe, was accessible based are to evidenced meantime, brand. Bondi Rincon is consumers significant X bringing such the Carbon styles finding number with two growth HOKA becoming success brand best by to recently new On HOKA which as the experience is The Clifton the new according designed The for market with school released run expected of a HOKA but point. innovative the college NPD. price share terms August more cushion the of month lightweight and with in target to acquire typical to In

online of XX% successful being XX marketing was consumers XX-year-old to nearly campaign and demographic. those the Rincon with to XX% new represented quarter of in The coordinated consumers brand in the highly the

spring happy award. of Year Congrats Rincon is result this another of high X that strength and to new an the new choice indication launches by product World it Carbon terms In impressive Deckers. Runner’s at This editor’s of achievement. the our for single Gear product accolades am everyone recognition range the engine a yet and right every I to innovation of winning Magazine. to performance This is launched combining season, from Outside announce product, marketing with the the distribution. won from HOKA of innovative and direct winning involved developing These product XXXX the in

and summer. performance impressive million. momentum Teva franchises as sandal well X% for second sports in honor the was spring an revenue shoe the terms and much of in within spring market a so Shifting in to so brand an being the season New to able drive hurricane the in Times Teva global that heat. Teva The sales the had XXXX category to on called that regain season. one brand The to of as the share Vogue the to according to great York featured brand NPD. article of Congrats continued was of Teva in increased both universal season gave Teva spring number team quarter by title $XX

driving brand, encouraged last we campaign fall, nearly to in the year vehicle of the the Ember trends. according and see million. franchise XX% attributable continued acquisition increase to to to were sales to interest $XX marketing an has versus Yoga quarter is second Sling decline the Google the in franchise. are in a search Looking be Global for weakness Most corresponding the

decision during focus to made channel warehouse our noted we on healthier channels. As earnings have to the the exit price QX call, strategic full

volumes we in work to balance We exploring FY will but expect on decline continue brand healthier for avenues reposition focused it of marketplace. the as to remain the for sales ‘XX distribution

of All with plan conjunction on consumers marketing enabled global in investments. product strategic diverse great targeted building teams are and Brands marketing strides with in Deckers a increased compelling that mind making and

in look to forward strong brand, first marketing efforts front. in to drive that would performance I focus digital half Our PR progress and additional addition

an of negative to prior in was driven strength in mostly well the by well Teva. have UGG, of international drive versus rates. has by gains which as HOKA. second HOKA domestic as mix from HOKA aggregate, Moving to up quarter prior of with year wholesale brands HOKA year The internationally the E-commerce and the X% From sales year. gains margin sales and year direct second consumer led versus expansion due the Gains Global and and quarter. down channel DTC EMEA improved primarily X% in foreign versus the UGG prior region. continues international UGG the shifting HOKA channel currency driven a the been for DTC versus leading in as in profile. the DTC increased as increased our to been Teva gross last the expansion brand dynamics the X% In Koolaburra by wholesale are in Asia-Pacific slightly total reset performance exchange pressure to which the by channel perspective, strength comparable is

momentum I’m solid of quarter While of the the ever. second performance for on sale quarter, confident the largely team in third largest remains are Deckers our year. quarter delivering well our but with was back business, that recent positioned focused the half the we

quarter call on over fiscal as now our our in hand to outlook details well year. third provide for more full performance will second as quarter to Steve the the I Steve? financial

Steve Fasching

good and afternoon Dave Thanks, everyone.

As business and we tremendous mentioned, momentum in a Dave record have just quarter. second have the delivered

This the at while quarter have made progress levels of is delivering same improved the we yet time, in example our of brands another growing profitability.

XX UGG consumer basis guidance main of XX.X% its variance expectation an favorable and be of performance as brand. I in driven will above mix this points the with of DTC. brand freight improvement million, less the gross brand offset by was million by driven X% expensive the elements from direct including from you improvement was utilization anticipated, company HOKA million what million Revenue margin the we approximately than our margins balance the rates earlier result grew wholesale beyond the sales year coming some to versus were from an in to the and Overall, now total $XXX up with faster options, better mix of exceptional and of than high HOKA of with by the domestic channel $XXX And of closeout up to of end $XX wholesale our to range had guidance the higher the both last $XXX shipments was year growth over the expected to the results walk partially through penetration drivers on incremental of gross the last for with implied These wholesale channels e-commerce. savings quarter. the increasing

how beat to favorable of of guidance spend incremental per shipments and interest up came the gross savings from $X.XX share achieved timing of SG&A $X.XX to high the on to by from quarter brand, of reduced guidance the share our spend $XXX.X million. around marketing $X.XX year of of high $X.XX non-GAAP $X.XX of share as UGG closeout $X.XX. have in per all shares compared The investments second per and the last $XXX.X entries, to spend of $X.XX GAAP from versus well margins wholesale share a was terms $X.XX related tax quarter with performance, In end end lower $X.XX was HOKA This of our was and rate $X.XX, in range Spend by drive earlier the HOKA including $X.XX sales, from that a to awareness increased to compared of primarily offset earnings rate to second expense, from the UGG count freight up due extended quarter. in earnings higher the our the of reduced last and for GAAP product tax last last $XXX.X income. partially guided repurchase domestic year’s as dollar discrete brand, X.X%, last the earnings aligned been X.X% million margin place year’s of driven men’s This to to we offerings. increase in the put women’s UGG of year’s year’s resulted compared non-GAAP

quarter, shares we During of the price common total for X.X of an approximately company’s XXX $XXX.XX repurchased stock million average at million. a of the

As of share our $XXX available million September XXXX, repurchase remains under XXth, authorization.

million under $XXX year. million up at had in And $XXX Inventory at cash to our million year short-term same at last compared $XXX worth during strong the million balance September the million includes down X% as from which million as quarter. we shares credit from XXth $XXX September sheet was Our and last X.X% of $XXX million last second borrowings $XX equivalence time were remains of XXth year. line repurchasing to XX

achieved guidance, to the first first like Before year. to half moving half of the performance reiterate to our updated I’d on XXXX the compared in fiscal as last of

of Strong brands revenue. of representing with revenue, an a and leverage as driven portfolio of a key basis approach points operating increase with percentage prior achieved expense even our of were decreasing to million gross strategic Our in the year XX initiatives. versus a experienced we margins SG&A driving $XXX by delivered increase reinvestment disciplined X% XX.X%

All in leading share of last then versus earnings nearly first XX% in year. of to for and this, per first the operating income a the increase of year half half increase the XX%

due that X% outlook, be roughly Teva year. be provide offset and per of quarter third in to timing on expect with the be to pressures. Now the in expect with to third we QX to revenue the Koolaburra X% share our distributor business experienced the by of the Strong last be top UGG of brands, quarter flat as range the and is in this this strong elements, the in the to increase fiscal in sales the moving additional to growth international some anticipates color To to growth decline on brand on lower of HOKA for we $X.XX resulting we in the offset orders, million of $XXX which which in will both million of year-over-year the strength XXXX, range $XXX growth earnings the will with Sanuk, domestic $X.XX. largely a of to be EMEA in range

wholesale brand quarter compared expect third for to of the an as guidance, prior increase UGG to the equal and our promotional we global activity Within expecting are we cancellations two reorders years.

our updating are financial we XXXX, year fiscal For guidance.

year the raise HOKA quarter well to with second balance on to a be to strength of of as in of increasing performance an increase and are range We the million. range prior the $X.XXX the of the related the for see as $X.XXX This the billion from billion billion the our in sales increase $X.X brand. brand reflects now $X.XX momentum guidance that to continue the in billion to $XX we lift

well is HOKA in it beyond to But this outlook to for to for to incremental our original further year. increase the the expectations important with ability climb, inbound timing HOKA for of our chase limited mind that due Our have is continued revenue keep near-term inventory.

selling our year we fiscal As consistent with single-digit the for for for pivoted remains XXXX, into season our the growth. peak at to outlook full UGG UGG guidance have original low revenue brand, flat

assumes our unchanged the compared previously of promotional As half activity year. to year higher the mentioned back and outlook last remains level a as of for

still expected digits. outlook To up mid level for a remain full updated as the Teva is XX% in is be distributor HOKA summarize inclusive flat XX% EMEA of now year shift, high be UGG follows. is expected low-single up approximately the range. revenue flat to down expected be brand is to our in expectations to and at to the XX% to expected range, is Koolaburra the channel still mid grow in to Sanuk range the

our XX% Turning HOKA our to be added profile anticipated $X.XX expense SG&A margins lower percent reinvest are beat being half fixed by second the including be are partially a from than of favorable of is of share our spend gross increased in and the we tax quarter slightly support of remainder second margins. allowing second the sales from XX.X%. outlook. from key operating P&L, expected full $X.XX to expected by earnings are the in offset variable earnings with be continue expectations and $X.XX now of and the range expected a and revenue full approximately our to related for year, per raise rate increases us second $X.XX half are to as gross million the $X.XX to roughly expense to to approximately These to we in the additional share raising share in The year year initiatives on approximately per count shares a to quarter $X.XX shift of as the brand back to of $X.XX be updated XX.X% driven raised of share XX%, repurchase newly margins quarter sales higher XX.X

future guidance repurchase. any as the effect XXXX as share third Our for well excludes of fiscal charges quarter and the non-GAAP any year potential

of have Additionally, year policy tariff to any the fiscal the been decisions topic forward. are impact mitigate tariffs that On from current able assess we to we that we material going believe XXXX. in impact continuing

factors of beyond to through, year providing yet As work estimate there still a impact we an on not the XXXX. are fiscal lot

to We within as can considerations costs that pricing are of options are continuing suppliers brands evaluating offset well our including power willing who conversations work with our potentially with as us. these increased

stated to is United global As production have a and created less of we shipped in current reminder, that States. XX% China than the our

During this sheepskin on an our we update period, also pricing. provide

in our half does We fiscal the for continue to as next This first component the are sheepskin delivering market fiscal sheepskin year gross margins. remain for sheepskin margin and in of the With in behind of we costs see gross our results outlined for costs constitute balance the prices our change stable our expectations not expect XXXX. guidance one us, only the we strong confident year. no

year guidance growth of revenue on XXXX. second the Our last versus top implies This X% growth in year. achieved is X% second to full of fiscal X% half the of half

on a into to And in summarize energy To of for X% focused peak To brands full us, put the holiday to there their the while would thank executing growth organization dedication this, day. projecting line is range achieve guidance, our team our now top we every delivering upcoming and strategies margin. ahead continued with work our the of in operating intention is like the are year the of I season. Deckers XX% X%

now that, Dave to turn I back for his closing will With remarks. it

Dave Powers

you, Thank Steve.

to of of using for across acquired thank to value would continued and can execution all I globe brand key portfolio. first the technology Deckers and This UGG talent includes and incremental progress innovation I strategies. our and building our develop our in this awareness drive to I devotion base the consumers, efficiencies advance tools to and the heat by employees made UGG back drive non-core, of half through and analytical our As HOKA initiatives. we’ve look opportunities add that on both connect to we to capabilities Men’s marketing investing year, brand Women’s how their the existing with the am strong delivering and like in encouraged in results

the the our Chairman call the have the turn to Mike Mike Q&A Board may I release in will would years this in for leadership I am press I past for role journey. have has capacity. thank and over and in great been Deckers John look has on to Board. organization. appointed with extremely remain as years has for before Devine like expertise John to as earnings Board the Mike the seen past Deckers on the working John earlier in this of Jones’ been from him for few partner you his afternoon, been transformational and Gibbons. his The I progress to assumes forward been grateful insight our eight this But and role Chairman. a instrumental has contributions the of to been and

as to continued stakeholders Operator? our excited support. call and that, I the now the like we their the thank opportunities With direction of for in am front always, would will Q&A. to of organization all us is open I about And headed. our

Operator

Thank you.

the Jonathan question-and-answer The of [Operator begin Please Instructions] today go now from will Baird. question We Komp comes session. first ahead.

Jonathan Komp

thoughts what next year. expect then to over were months third few that And conditions favorability? as the you. start I’m what curious, want the given UGG color, some you marketplace, updated drove Any in quarter, a maybe that. curious as how you maybe cycle Thank am called some you I look hear little last favorable out more earlier you what of to on I with the the just brand are know to seeing and deliveries. I

Dave Powers

Couple were of inventory opportunistic. But our accounts good. Dave. were little receiving for early some of open the setup we bit deliveries this The looks Jon, the quarter and earlier that. just took advantage to a is

season season, particularly the know, America working we clean of heard strong start warm in the in very you the the plans the efforts as in little clean of there had quarter. out is are sell-throughs are going some with up. you segmentation up channel a allocation in We’ve still marketplace a I Obviously, is in a in European that last the partners into good market younger really consumer, all, the lot set to a for been wholesale to the still poised of strategy our there going North a are bit reset offering, the year focusing the of in UK year inventory think the wholesale but we’ve consumer, increased As UK the into tightly, working feel I very coming and market. solid managing A accounts softness of diversification the by think with the malaise some diversifying the and product we macro still allocation and that investment, with way the Brexit design but going of have coming we’re key the all segmentation on but out the the going headwinds with position. been with a marketing on half back we in and

Steve Fasching

relatively our business, is so take to we that. This us. to ship ability Steve. just product channel why we’ll is customers wholesale advantage domestic on have UGG as Jon, is an which add It for on clean that it’s good we products, look and of at want the

than be resonating. said, signs product we down reset Dave as other international the this is will good at are that As and all but the point Europe

Dave Powers

Koolaburra of softness line that is hearing at partners and as channel in are our of a macro UGG, But some as tightly brands and managing about top level. news some We there the are Obviously there with with the far HOKA. softness wholesale particularly their some inventory. out

healthy still and demand We’re seeing good positioning.

Jonathan Komp

about million I HOKA I’m basis, hear. just added on brand revenue though think longer investment the to the the trailing the support so? term of level which the any growth, the infrastructure even then the phase maybe breaking you of just XX Maybe is you’ve the of quite look kind team on $XXX as updated next some constraints impressive. inventory through to place encouraging to become that given less thoughts of to and over, one month and I when to as of That’s in growth, wondering

Steve Fasching

growth with brand of think profile in we’re to in innovation efficiencies the the able continue board organization, beauties our of to design, brand one the of brand, across last not and platform the the that and I distribution to dollar of to and improve across but over the been the positioned really created marketing sourcing capabilities on few of be well Deckers working support that obviously only just the that to HOKA the we’ve years is margin for growth the globally. hyper we’ve invest

it’s So our exceeding expectations.

little good a mode of in a but point. be chase in to on capture demand to inventory, bit we’re at able as this We’re shape

brand. are strong for We that continued planning in growth

beginning the going you’ll see as into ‘XX to opportunity. really and be it’s And growth able continue we the of that a guide so to FY global brand investment continued

As and very for you Japan we’re China know, growth really yet. started we DTC America but is after seeing and haven’t Europe, North strong brand, tremendous in still that going wholesale

the be and pleased excited XX to next the innovation very The it. is months the strong going pipeline acceptance very coming signs the X still we’re consumer. continue that and we coming in and momentum will feel demand continue invest So we’ll from in with that out the to to

Dave Powers

opportunity. international great And

Steve Fasching

Yes.

Dave Powers

Continuing opportunity international a lot that international on on more to and kind front. front resonate of brand that see an

Jonathan Komp

level? you to the kind about for a level XX% kind top be I you Great. high sort and or Steve thoughts of planning you’ve sustainable picture could algorithm reset a operating maybe trajectory the bigger forward just line are And even and of at if maybe think growth on this a Dave, just of to here, the last organization, any as the broader mid third to back single-digit of year any one going margin for growth company the

Steve Fasching

give brands think time, us, get I foreseeable global Yes. some down lot think the margin and that continuing can no this strong teams we wholesale this believe we’re for have looking for XX% discipline for that path. important marketplace hard and meaningful and We the we’re consumer very mid-single to our building of while back for partners for and future digits of level We healthy to continue the same our brands there’s and credit across we at their really worked sure. this then I point a in growth and the operating we

Jonathan Komp

you. the color. all appreciate I Okay. Thank

Steve Fasching

Thanks. thanks. Jon

Operator

ahead. Jim The next with comes question today from Please Stifel. Duffy go

Jim Duffy

from of me. Couple afternoon. Good Thanks. questions

I turn through do your the milepost look purposeful Dave, other in to come European progress When with European expect before know wanted out for side can to I U.S. business. you��ve the give with the the that. to first business? the The you about in you this us ask been market. some

Dave Powers

do multi-year before, of with strength real to now. said are strategy X North we concept where the we and really to took As of in America, have strategy get to a the which proof we it’s us X years

the versus amount off in price I the of of appropriate not in So point the then come a and have sales, This for the of the going each teams you’re ‘XX is the cleaner this sense inventory reset a account and of number view to we at out and we’re time is, the think seeing making I been into year Europe. that’s hard do. pulling position very working what part same we to much brand back creating consumer the product. the decision My and expect the marketplace with reducing that would is really footfall inventory projection The price position focused the after first on FY with on strategy allocation right is long-term the allocation been the on year UGG in better ‘XX. can there takedown really healthy sales and sure going more we’ll revenue chase a differentiated this start off chasing thing right end the that strategy and and have

Jim Duffy

good had you you have Dave brand? brand, shoes, the non-performance for ask wanted see the hiking talk category beyond about running little bit And with HOKA just a to opportunities you Opana running performance boot, Great. the the success HOKA can styles, about some

Dave Powers

an resonates the brand in the ultra and a top But wearing HOKA, across all performance-based the that run a as would running ride more for with casual that are is running on fashion perspective lot lifestyle consumer HOKA well. athletic of built being adopted all as and casual core being from consumer both are they’re of and boutiques our fashion is is first starting lightweight see importantly I thing some our product standpoint to globe The performance That cushioned again non-runner obviously people but of of kind the attributes which styles core you think very our our consumer hiking performance the average I or side said, exciting. from the target. of say in is the by the as

you’re I time. into so back they lot again because adopt are it consumers the it think how consumers at And more running also feels same and starting see of a to just love hopefully some getting those

Jim Duffy

you. Great, thank

Dave Powers

Yes.

Operator

go Sam comes question with next ahead. Poser Please The Susquehanna. today from

Sam Poser

thanks afternoon last believe supposed expected from? you promotional questions. Because come in for Europe have Good my us activity I where of the the where this you promotional incremental taking to Could breakdown give and year. is

and can through you in expectation, I both So walk that QX QX? guess just

Steve Fasching

We with over guidance be Early our right? ahead Sam, season what shows that retailers clear so see see think consumer out, biggest is sell embedded. our through, level some the working how We’ll part with will in so inventory. still increased that year. we’re We’ll promotion we’ve us. wholesale signs of plays last it of of how up. we’re expecting The of the are good that’s

So and kind see happens little DTC in see but wait it’s a a that of of a kind our see of bit in factored kind is mostly wholesale business. you’ll we’ll and what it’s where with

Dave Powers

said that we in that Yes. And not to necessary do we’re as the expecting is you the ability side discussed if need business as into seasons wholesale America margin North the last more is do that right. and European to on if the have we to than to on probably have play upside the I the Sam, but to do think call, there sales in

Sam Poser

some you the give third idea what margin And expect in could gross quarter? you to of be the us

Dave Powers

guidance, in from it’s year. XX So we’re kind roughly basis our down about points implied last of

Sam Poser

international then switching you the there given of this sort also to looking Got you’re some forth. ahead? so I next year so at it. And and work that know look then close away on maybe you’re of more expenses, that stores expenses but of probably fall there markets expect are and there are some some idea model, ahead variable that the do should money of doing sort in Can you just us give

Steve Fasching

that is from of a given look expense kind kind we’ll anything the significant clearly now anything It’s out factor wouldn’t infrastructure work of ‘XX. I reduction, a We that the have. of we in haven’t right at, something that doing lot we’re with on

to once growth, So get will we we need back growth. infrastructure to support that

use So of infrastructure there will as we kind to growth lever able our International. to growth be return on the existing to

we standpoint fall from haven’t wouldn’t year given next expect a I on guidance that but significant off. So again,

how about about margin that question we margin earlier seen through P&L operating we at about the gross the look we’re a profile looking is then at spend to to around we’re our UGG of think come really how awareness efforts we to variable I have with we’re our build opportunity. as now going XX% lot and talking is shift appropriately with invest a brand the doing when so lot a with building building UGG HOKA, men drive things look marketing building more at to to And women’s well. as initiatives in awareness awareness spring-summer of that awareness the with still that we

Sam Poser

we you wholesale last you queue. give by lastly, expect brand two the I tax to have One, for Thank have could wait for or questions. rate you. sales the third the what us direct so don’t And the quarter? do

going So please. Thank it’s to forward, everything model you. easier

Dave Powers

we’re XX%-ish was QX. UGG tax think modeling the QX? it is rate be your question going And So just wholesale for fluctuations QX, in rate sorry, that some given QX – it QX there of was for breakout the second between but to and haven’t for be like kind we I then but roughly,

Sam Poser

For give back other us the but by for or and other out one model the second everything, really comes you the if the that DTC wholesale brand into would quarter breakout in queue, can one. it help the the for us could we

Steve Fasching

can that. I take Yes.

it wholesale? So you total in want

Sam Poser

No, wholesale was sale UGG was so this is this Teva wholesale and this, on. Sanuk like

Dave Powers

it. Got Sure.

UGG So Sanuk wholesale, was roughly around of million Koolaburra with XX, wholesale, was HOKA the was Teva and brand XX. brand X XXX, XX XXX was

Sam Poser

Thank you very much. success. Continue

Dave Powers

Thanks.

Operator

question Group. with ahead. today from Telsey next go comes Licero Please Advisory Ross The

Ross Licero

Thanks for the on congratulations taking and quarter. my questions

about been lot customer? Just for in had and how you’re market right a what can talk the a the you about messaging doing question, sustainability we’ve now, your to hearing it that

Steve Fasching

but specifics our Deckers excited to also we organization to put brand is and think I we I if there say activities and done some on great they question and marketplace taking there, both But consumer, out sustainability start each that that as the happening am brand unique in some periods probably that the each a is into of because being for space operational to is of the now all to the our an best you’re right for based have across it’s Deckers our I website. goals but going been planet, brands are they XX seriously. it’s around in of and a the that there is positioning marketplace approaches happening level over operate product have as Deckers months of guided I’ll the years but around to something focus X x conversations X to a more Deckers of and individual lot the and kind at brands sustainability That’s the this see ago the get call relevancy each efforts are couple last way can’t versus of brands that doing work making, X the that in work with the well. level is into improve

brand are X/XX that and short market I with term. the We we’re the product the think on standing will that doing some within the behind to evolution each global our it in they’re goals of see you bringing and work and continued

Ross Licero

a digits. you the men’s little men’s Thanks. can side, overall? we said But on on up more great. get Men’s double the And color were boots Okay,

Dave Powers

overall Men’s for UGG QX?

Ross Licero

Yes.

Dave Powers

faster average overall than is so So average. is men’s just growing men’s more the other the than up than

Ross Licero

great. a Thanks lot. Okay,

Dave Powers

QX. on focused really It’s

the of positive very we our you’ve to script nation great, that response campaign their If very Neumel efforts kind Neumel in seen marketing campaign.

of we but the traffi, the on a happening really next brand bigger and months, winter you QX is the that’s of interest products, boots. see business should focused couple over Neumel and of the that said the driving impact product As

Ross Licero

thanks. great,

Operator

comes of go ahead. Please Paul Research. question next Citi The today Lejuez from

Paul Lejuez

relative channels by the trends you’ve margin itself. to a improvement about gross the was year of talk curious when kind Can the you would of you at percentage What if consider guess each I’m driver you and guys. quarter look seen the with look channel? year? this guys. lot Thanks curious inconsistency this Also you with channel of what weather inconsistent Thanks or percent out last assortment, how what was of weather-dependent your fluctuations versus would there it I at, most

Dave Powers

little a walk just maybe let the of out. walk bit, Yes, margin it kind you than through breaking me rather

at XX.X, we expansion. ago year this So year basis points through about XX XX.X, point of a the margin improvement, so were basis we’re XX improvement at

a away. more XX roughly was take XX basis wholesale points. The channel And point. have that that about had basis of out basis we mentioned, margin that’s we of achieving margin those we on to XX We growth as away on less the then better on take better efforts. so our part was had, I a because kind really And the FX of price XX close then driver as points. miscellaneous product work full increase promotion from So selling continue kind was mix, our basis just really of about margins stuff, better in other about

of So the on the that’s year-on-year. kind lock

Paul Lejuez

with channels both there? the you benefit price there? Were both selling before to channels in and referring Yes

Dave Powers

Yes, doing I mean could you where we’re closeout out.

some as have well of through. traditional as we selling reduced better where So online was closeout our

Steve Fasching

we’ve generally And to with probably exception reduce is question, to speaking, on years dependency what slippers the is of but our the the whole the for last regards weather-dependent the brand somewhat brand products. UGG weather-related been weather with over few cold doing

a women’s. and lot the we core classic, So reduced the boots example reliance brought men’s into across assortment fashion we have for more on

less I younger consumer business. diversifying is think classic product reliant the men’s some a less is on that weather-dependent into core toward the of you’ve seen the diversified

fashion be to something us new given it of the and gives evolve. this to the the more ability diversification brand, used channels, year fashion is think we’re board well at continue one-trick and kind only less that’s across and relevance going the across which and efforts, I us stronger last a pony, to consumers of all across the the classic diversification So year has weather-dependentcy that it’s served core

consumer we’re fashion from kind much of cold to So certainly I the weather still just beyond like just looking think we’re weather more it’s everybody else’s now product on that relevant dependent but for the is less product.

Paul Lejuez

though in as the inconsistent of actually even have those the So more been has a weather you seen business, consistency result strategies?

Steve Fasching

I would so. say

Dave Powers

other we’ve I seen would Absolutely. weather-dependent improvements in say categories.

Paul Lejuez

Got you, guys. luck. it. Thank Good

Steve Fasching

Thanks.

Operator

go The ahead. with Fargo. next question Please today comes Nikic Wells from Tom

Tom Nikic

Good would taking down questions. mean afternoon XX-ish said should down and one margins, for Quick function is that any quite bit. which my tariffs, of color basis amount of around you be in be QX basis would thanks QX think points a gross multi-year just that points, on a compares sort the the that I would Basically that be hard double is helpful. it

Dave Powers

Sure.

So you are right Tom.

combination will You’ve The the the how the year. at mentioned. point big half kind back last things have we you that a looking year. That the that numbers right. of the be we’re to of It’s is got comparison of

promotional saw we we what last assuming higher So half a than back year. are

a the price then the back you but more last taking season was we’ll back have is in some conservative look higher and that environment the impact into strong, with see what year, plays take-back, a at component there approach a half promotional why component the as but how the pretty biggest kind of then out normally of will saw you’ll half so be FX And of potential the we’re there tariff at do which as year piece. year we always have factored we half. As recall, this we slightly of incredibly we sell-through full is the see exceptional back not of

So how a our is, and in of the we’ll looking at it of what than what are see environment we back are in that’s more terms year around biggest be the how margin that right. half. And but saw the kind plays we of out will component it promotional last you assumption

Tom Nikic

Thanks. helpful. That’s

the range, to get Just footwear long-term picture interesting, going year, on about in the that to a sort of for it’s years? of multi-year $XXX guidance I any couple obviously to can next of base revenue million space, Is a based some could brand term in this more it’s think there stories give target, $XXX your you see HOKA, million of the growth sort one longer something the you potential in the

Dave Powers

is This Dave.

We beyond. XXX are has seeing say above we set we and will years, our strength FY of to right kind going over that see and the think this the that not X next the ready that into of do beyond and X prepared upside ‘XX give are I significant you’re now. guidance now, to million brand sights continuing

Tom Nikic

know just split another stages there. Got Could versus what sense give us And you’re a HOKA the of sort one brand? to on you for early international as it. HOKA, international is the I still domestic some quick

Steve Fasching

about domestic, it’s two-third Yes, still international. one-third

Tom Nikic

Alright. Thanks very much.

Dave Powers

Thank you. Okay.

Operator

Please Jefferies. question next from ahead. The comes Stichter go of Janine

Janine Stichter

Thanks my afternoon. good Hi, question. taking for

what’s more on there. the called one I a as margin, well, I think you driver understand Just is just to freight out going less gross expensive on trying

think I expensive use you’d expect last more driver of the freight that then in think year year. didn’t it second to margin it I was And out to a called quarter gross continue. you planning this

on about going So we structural at how how think looking there should that there and is anything continuing? you’re freight with

Steve Fasching

air way used freight. looking up last the more we we at freight year think are I to historically

gotten air better that’s we’ve in, bringing some alleviate think to in of product I at need freight. so bring help that

see HOKA. we’re bit in did we spikes this in where we We year inventory last have used more like largely as than year a little bringing demand

bringing in are been up a So level bring little also inventory inventory bring product bit little It’s schedule in. doing demonstrated a showing we margin are improvement, us by better better. earlier loading at job we and them, is we’ve that’s working I better us think helping helping how our our factories well. we with as bit It we’re as also

think improvements off. lot of I and through that kind seeing that we’re the we’re achieving, of pay the efforts margin a So

always to So, guidance it’s that quite not had use anticipated we our in use we’ll but would what QX. as we some did use much that at. didn’t freight. extent We in the we something as thought look continue some we’ll air nearly We and to

have and improved. question to So, things your changed

there will freight but job to some of of going of especially have when a where is to you’re hot General HOKA. cases kind you cost be product that’s down. better it, have not slightly brand demand a doing we’re overall and coming always think in use like I

Janine Stichter

the sounds franchise, growing it now, seeing can the is you still on booth than Fluff are helpful. the it where deeper her in you Thank in, year from acquire coming is penetration migrate one nicely franchise question a fuzz? then of how fluff more customer just and growth like accounts, as from. and outside accounts That’s buying that’s in you you. and the about talk are then there new already that that a Is seeing she And it you the other how

Dave Powers

question It’s of fronts. something we’re about really and great excited on a that it’s a number

consumer is are is purchases First and that attracting large first-time consumer we portion our younger to a a of website.

us it’s acquisition term. as as So a business long in short the as for and well serving vehicle the driving for

that accounts at use those it style is consumer partners we quite UK America, really efforts the that of going through as product some is like and continued the diversification China yet and and time. a in franchise and think we’re board in can North just back in for build on marketing that continue to the to this half the still reach distribution next but So but design and efforts efforts diversification places of outside using into where going demand strong for year is the year into very it’s the we resonating that least performing and key worth isn’t across well

Janine Stichter

you Great. much. very Thank

Dave Powers

Thank you.

Operator

go The Research. last Please Pivotal question today comes from Mitch Kummetz of ahead.

Mitch Kummetz

a U.S. pieces taking for would think could said I know equal Steve, the for that reconcile you think but flat you UGG up you that be I and my me, of I said questions. you couple Thanks hoping QX guidance reorders then I said for UGG’s of cancellation. was also

net last including So a year the positive, I know that was US.

order trying difference I’m the if how I DTC that side to understand into you you ago. the I’m just year to book a a there. but its lot QX stronger still to get reorder or that expect worse cancellations grow how the lot a trying understand than is going domestic or is of So

Steve Fasching

about missing the you I as might Yes. international The on piece, that’s is by that Europe as driven down a reset is international our the in talking UGG that currency be we’re wholesale think impact and well business.

Mitch Kummetz

to the than the would U.S. you worse cancellation I ago. expect international, but the U.S. that get specific to be in expecting mean, think U.S. the you’re I a I reorder year up, because piece

if So NBTC I it seems that’s book know and like the the with the or difference order don’t case.

Steve Fasching

number. we – it’s are small it’s Yes, up, a

Mitch Kummetz

the bps, Okay. also to then saying you’re expecting your, promotions. there in for understand QX puts it year or I this mean XX to is I down XXX down you’re gets of like than promotions say specific much and and margin last, yes? XX, gross XX trying down how is the you how know can is more And now to XXX you down takes elsewhere that promotions the much just

Steve Fasching

it. nailed You

because the than is promotion more down the have some we So offsets. total positive

Mitch Kummetz

DTC to comp? in about at way in one DTC Okay. Sam, the in when just queue, UGG plays quarter, looks one any performance there comp in UGG, the given down roughly reduction the store last can that model that Is the And of the it my was since you’re numbers quarter? was last speak then guess X% is maybe to the you in I am it up all I and just kind of like

Steve Fasching

did year call the was, it on we $XX DTC $XX A So million. just under XXX million. ago

up, the total all be brands. that now will DTC was So

Mitch Kummetz

mean lot I was of huge. a HOKA. was HOKA And e-commerce that up

the think specific, gave if maybe like to was by numbers XXX% in get the it up the that trying was did DTC DTC not? I looks I you you quarter, Hoka understand what just UGG like

Steve Fasching

some see fewer You retails more will the but in UGG as as was when and well the will DTC queue on it down the retail. out, comes be it down challenge

Mitch Kummetz

Thanks for Alright. help. Good Okay. luck. your

Steve Fasching

Okay.

Operator

as you for question-and-answer conclude today’s the session Thank This presentation. as does conference. our well attending

your lines. You may now disconnect

Deckers Outdoor (DECK) 24 Oct 192020 Q2 Earnings call transcript