DECKERS OUTDOOR CORP

Previous wording

We are a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high-performance activities. We market our products primarily under six proprietary brands: UGG, HOKA, Teva, Sanuk, Koolaburra, and AHNU. We believe our products are distinctive and appeal to a broad demographic. We sell our products through quality domestic and international retailers, international distributors, and directly to our global consumers through our DTC business, which is comprised of our Company-owned e-commerce websites and retail stores. We seek to differentiate our brands and products by offering diverse lines that emphasize fashion, performance, authenticity, functionality, quality, and comfort, and products tailored to a variety of activities, seasons, and demographic groups. Independent third-party contractors manufacture all of our products.

Current wording

We are a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for both everyday casual lifestyle use and high-performance activities. We market our products primarily under five proprietary brands: UGG, HOKA, Teva, Koolaburra, and AHNU. We believe our products are distinctive and appeal to a broad demographic. We sell our products through quality domestic and international retailers, international distributors, and directly to our global consumers through our DTC business, which is comprised of our Company-owned e-commerce websites and retail stores. We seek to differentiate our brands and products by offering diverse lines that emphasize fashion, performance, authenticity, functionality, quality, and comfort, and products tailored to a variety of activities, seasons, and demographic groups. Independent third-party contractors manufacture all of our products.

Previous wording

Consolidated financial performance highlights for the three months ended June 30, 2024, compared to the prior period, were as follows:

Current wording

Consolidated financial performance highlights for the six months ended September 30, 2024, compared to the prior period, were as follows:

Previous wording

•Diluted earnings per share increased 87.2% to $4.52 per share.

Current wording

•Diluted earnings per share increased 51.9% to $2.34 per share.

Previous wording

CEO Transition. On February 1, 2024, Dave Powers announced his intention to retire as CEO and President of our Company, effective August 1, 2024. Following August 1, 2024, we expect Mr. Powers to continue to serve as a member of our Board, if elected by our stockholders at our 2024 Annual Meeting of Stockholders to be held on September 9, 2024 (Annual Meeting). Following a planned succession process, our Board appointed our Chief Commercial Officer, Stefano Caroti, to succeed Mr. Powers as CEO and President, effective August 1, 2024. The promotion of Mr. Caroti represents the culmination of our Board’s active engagement in a planned multi-year succession process. Mr. Caroti will also serve as a member of our Board if elected at the Annual Meeting.

Current wording

CEO Transition. Effective August 1, 2024, Dave Powers retired as CEO and President of our Company. Our Board appointed Stefano Caroti as CEO and President, to succeed Mr. Powers, effective August 1, 2024. At the Annual Meeting, Mr. Powers was elected to continue to serve as a member of our Board, and Mr. Caroti was elected as a member of our Board, effective September 9, 2024. The promotion of Mr. Caroti represents the culmination of our Board’s active engagement in a planned multi-year succession process.

Previous wording

Sanuk Brand Asset Sale. During October 2023, we announced that we intended to divest the Sanuk brand in alignment with effective resource allocation and the execution of our long-term objectives. Subsequent to June 30, 2024, we entered into an agreement pursuant to which the buyer agreed to purchase the Sanuk brand and certain related assets, which is expected to close in August 2024.

Current wording

Sanuk Brand Asset Sale. During the three months ended September 30, 2024, we entered into an agreement pursuant to which the buyer agreed to purchase the Sanuk brand and certain related assets which was completed on the Sanuk Brand Sale Date of August 15, 2024.

Previous wording

We expect our business and industry will continue to be impacted by several important trends and uncertainties, which have not changed since our 2024 Annual Report. Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further discussion. Refer to Part I, Item 1A, “Risk Factors,” of our 2024 Annual Report for detailed information on the risks and uncertainties that may cause our actual results to differ materially from our expectations.

Current wording

We expect our business and industry will continue to be impacted by several important trends and uncertainties, which have not materially changed from those included in our 2024 Annual Report. Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further discussion. Refer to Part I, Item 1A, “Risk Factors,” of our 2024 Annual Report for detailed information on the risks and uncertainties that may cause our actual results to differ materially from our expectations.

Previous wording

Our six reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, Sanuk brand, and Other brands, as well as DTC. Information reported to the CODM, who is our CEO, President, and PEO, is organized into these reportable operating segments and is consistent with how the CODM evaluates our performance and allocates resources.

Current wording

As of September 30, 2024, our five reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA brand, Teva brand, and Other brands, as well as DTC. Information reported to the CODM, who is our CEO, President, and PEO, is organized into these reportable operating segments and is consistent with how the CODM evaluates our performance and allocates resources.

Previous wording

Other Brands. Other brands consist primarily of the Koolaburra, as well as the recently launched AHNU brand. The Koolaburra brand is a casual footwear fashion line that uses plush materials and is intended to target the value-oriented consumer in order to complement the UGG brand offering. The AHNU brand’s footwear products fuse high-performance technology with timeless style crafted for everyday wear.

Current wording

Other Brands. Other brands consist primarily of the Koolaburra brand, as well as the recently launched AHNU brand. The Koolaburra brand is a casual footwear fashion line that uses plush materials and is intended to target the value-oriented consumer in order to complement the UGG brand offering. The AHNU brand’s footwear products fuse high-performance technology with timeless style crafted for everyday wear.

Previous wording

Refer to the “Reportable Operating Segment Overview,” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further discussion of our outlook on consumer demand drivers for our UGG, HOKA, Teva, Sanuk, and Other brands products.

Current wording

Refer to the section titled “Reportable Operating Segment Overview,” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further discussion of our outlook on consumer demand drivers for our products.

Previous wording

During the three months ended June 30, 2024, we opened nine new stores, which included six HOKA brand stores and three UGG brand stores, including a HOKA brand flagship store in New York City and a UGG brand flagship store in London, UK, respectively. As of June 30, 2024, we have a total of 172 global retail stores (including 32 HOKA brand retail stores and 140 UGG brand retail stores), which includes 89 concept stores and 83 outlet stores.

Current wording

As of September 30, 2024, we have a total of 178 global retail stores (including 139 UGG brand retail stores and 39 HOKA brand retail stores), which includes 92 concept stores and 86 outlet stores.

Previous wording

Refer to the “Reportable Operating Segment Overview” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further details on our DTC reportable operating segment, including retail store definitions.

Current wording

Refer to the section titled “Reportable Operating Segment Overview” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of our 2024 Annual Report for further details on our DTC reportable operating segment, including retail store definitions, as well as our former Sanuk brand. Refer to the section titled “Recent Developments” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” within this Quarterly Report, for discussion on the sale of the Sanuk brand.

Previous wording

On a constant currency basis, net sales increased by 23.0%, compared to the prior period. Further, we experienced an increase of 13.4% in the total volume of units sold to 12,700 from 11,200, compared to the prior period. Units sold represents all units related to the total net sales presented, inclusive of all categories such as footwear, apparel, accessories, home goods, and care kits. The prior period total volume of units sold for only footwear has been modified to conform to the current period presentation.

Current wording

Total net sales increased primarily due to higher global net sales across all channels for the HOKA and UGG brands. On a constant currency basis, net sales increased by 20.4%, compared to the prior period. Further, we experienced an increase of 19.0% in the total volume of units sold to 21,300 from 17,900, compared to the prior period. Units sold represents all units related to the total net sales presented, inclusive of all categories such as footwear, apparel, accessories, home goods, and care kits. The prior period total volume of units sold for only footwear has been modified to conform to the current period presentation.

Previous wording

•International net sales, which are included in the reportable operating segment net sales presented above, increased by 20.8% and represented 37.5% and 37.9% of total net sales for the three months ended June 30, 2024, and 2023, respectively. These changes were primarily driven by higher net sales for both channels of the HOKA brand, primarily in Europe and China.

Current wording

•International net sales, which are included in the reportable operating segment net sales presented above, increased by 33.0% and represented 34.9% and 31.5% of total net sales for the three months ended September 30, 2024, and 2023, respectively. These changes were primarily driven by higher global net sales across all channels for the HOKA and UGG brands.

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•Increased variable advertising and promotion expenses of approximately $15,800, primarily due to higher promotional marketing expenses for the HOKA brand to drive global brand awareness and market share gains, highlight new product categories, and provide localized marketing.

Current wording

•Increased variable advertising and promotion expenses of approximately $32,000, primarily due to higher promotional marketing expenses for the HOKA and UGG brands to drive global brand awareness and market share gains, highlight new product categories, and provide localized marketing.

Previous wording

•Increased other operating expenses of approximately $7,600, primarily due to higher infrastructure investments and related depreciation, and higher travel expenses, partially offset by lower legal expenses.

Current wording

•Increased other operating expenses of approximately $25,600, primarily due to higher contract expenses, legal expenses, and infrastructure investments and related depreciation.

Previous wording

•Increased payroll and related costs of approximately $24,900, primarily due to investments in talent for key functions for corporate and HOKA brand roles driving higher employee headcount and full-year costs for prior comparable period hiring.

Current wording

•Increased payroll and related costs of approximately $20,300, primarily due to investments in talent for key functions for corporate and HOKA brand roles driving higher employee headcount and full-year costs for prior comparable period hiring.

Previous wording

•Increased other variable net selling expenses of approximately $8,800, primarily due to higher rent and occupancy, materials and supplies, credit card fees, and warehouse expenses.

Current wording

•Increased other variable net selling expenses of approximately $11,300, primarily due to higher warehouse expenses, sales commissions and related fees, and credit card fees, as well as higher rent and occupancy costs related to HOKA brand growth.

Previous wording

•Increased net foreign currency-related losses of approximately $4,400, primarily driven by unfavorable changes in Asian and Canadian exchange rates against the US dollar.

Current wording

•Increased net foreign currency-related gains of approximately $19,500, primarily driven by favorable changes in Asian and European exchange rates against the US dollar.

Previous wording

•The increase in income from operations of HOKA brand wholesale was due to higher global net sales at higher gross margins, as well as slightly lower SG&A expenses as a percentage of net sales.

Current wording

•The increase in income from operations of HOKA brand wholesale was due to higher global net sales at higher gross margins, partially offset by higher SG&A expenses as a percentage of net sales.

Previous wording

•The increase in income from operations of the DTC channel was due to higher global net sales for the HOKA and UGG brands at higher gross margins, as well as slightly lower SG&A expenses as a percentage of net sales in total.

Current wording

•The increase in income from operations of the DTC channel was due to higher global net sales for the HOKA and UGG brands at higher gross margins, partially offset by higher SG&A expenses as a percentage of net sales.

Previous wording

The net increase in our effective income tax rate, compared to the prior period, was due to higher operating income, including changes in jurisdictional mix of worldwide income before income taxes, partially offset by net discrete tax benefits for stock-based compensation.

Current wording

The net increase in our effective income tax rate, compared to the prior period, was primarily due to the effects of discrete items, including a change in valuation allowance on tax attributes and a change in return-to-provision differences, partially offset by net discrete tax benefits for stock-based compensation.

Previous wording

Total Other Comprehensive Loss, Net of Tax. The decrease in total other comprehensive loss, net of tax, compared to the prior period, was primarily due to lower foreign currency translation losses relating to changes in the net asset position against Asian foreign currency exchange rates.

Current wording

Total Other Comprehensive Income (Loss), Net of Tax. The increase in total other comprehensive income, net of tax, compared to the prior period, was primarily due to higher foreign currency translation gains relating to changes in the net asset position against Asian and European foreign currency exchange rates, partially offset by higher unrealized losses on cash flow hedges.

Previous wording

•Wholesale net sales of the HOKA brand increased due to higher global sales across the brand’s product assortment, driven by market share gains, refilling channel inventory, and benefits from select new points of distribution with key partners.

Current wording

•Wholesale net sales of the HOKA brand increased primarily due to higher global sales across the brand’s product assortment, driven by market share gains, refilling channel inventory, and benefits from select new points of distribution with key partners, as well as the timing of certain distributor shipments.

Previous wording

•DTC net sales increased primarily due to higher global sales for the HOKA and UGG brands, driven primarily by consumer acquisition and retention online as we continued to experience increased demand for both brands, as well as benefiting from a higher level of full-price selling, primarily for the UGG brand. Comparable DTC channel net sales for the 13 weeks ended June 30, 2024, increased by 21.9%, compared to the prior period.

Current wording

•DTC net sales increased primarily due to higher global sales for the HOKA and UGG brands, driven primarily by consumer acquisition and retention online as we continued to experience increased demand for both brands, as well as a slight benefit from higher levels of full-price selling. Comparable DTC channel net sales for the 26 weeks ended September 29, 2024, increased by 19.3%, compared to the prior period.

Previous wording

•Wholesale net sales of the UGG brand increased primarily due to higher domestic sales, resulting from strong brand heat driving earlier demand and refilling of inventory levels for our partners, including adoption of year-round key product franchises.

Current wording

•Wholesale net sales of the UGG brand increased primarily due to higher global sales as a result of increased demand for year-round key product franchises, also benefiting from timing of sell-in for fall and winter franchises.

Previous wording

Gross Profit. Gross margin increased to 56.9% from 51.3%, compared to the prior period, primarily due to favorable brand mix for the HOKA brand along with higher margin product driving a higher proportion of growth for both the HOKA and UGG brands, higher full-price selling, particularly for the UGG brand that was more promotional in the prior period, and favorable changes in freight costs.

Current wording

Gross Profit. Gross margin increased to 56.3% from 52.6%, compared to the prior period, primarily due to favorable brand and product mix for the HOKA brand along with higher margin product driving a higher proportion of growth for both the HOKA and UGG brands and higher full-price selling, including reduced closeouts to the wholesale channel.

Previous wording

The increase in total income from operations, compared to the prior period, was primarily due to higher net sales at higher gross margins, combined with relatively flat SG&A expenses as a percentage of net sales.

Current wording

•The increase in income from operations of HOKA brand wholesale was due to higher global net sales at higher gross margins, combined with relatively flat SG&A expenses as a percentage of net sales.

Previous wording

•The increase in income from operations of UGG brand wholesale was primarily due to higher domestic net sales at higher gross margins, as well as lower SG&A expenses as a percentage of net sales.

Current wording

•The increase in income from operations of UGG brand wholesale was primarily due to higher global net sales at higher gross margins, partially offset by higher SG&A expenses as a percentage of net sales.

Previous wording

•The increase in unallocated overhead costs was higher as a percentage of net sales, primarily due to higher payroll costs for key corporate roles to support growth of our brands, increased foreign currency-related losses, and higher other operating expenses.

Current wording

•Unallocated overhead costs were lower as a percentage of net sales, but increased primarily due to higher payroll costs for key corporate roles to support growth of our brands, and higher other operating expenses, partially offset by increased foreign currency-related gains.

Previous wording

Total Other Income, Net. The increase in total other income, net, compared to the prior period, was due to higher interest income from higher average invested cash balances and average interest rates.

Current wording

Total Other Income, Net. The increase in total other income, net, compared to the prior period, was due to higher interest income from higher invested cash balances and average interest rates.

Previous wording

Cash and Cash Equivalents. As of June 30, 2024, our cash and cash equivalents are $1,438,397, the majority of which is held in highly rated money market funds and interest-bearing bank deposit accounts with established national and global financial institutions. We believe our cash and cash equivalents balances, cash provided by operating activities, and available borrowing capacity under our revolving credit facilities, will provide sufficient liquidity to enable us to meet our working capital requirements and contractual obligations for at least the next 12 months and will be sufficient to meet the long-term requirements of our business strategies and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.

Current wording

Cash and Cash Equivalents. As of September 30, 2024, our cash and cash equivalents are $1,225,681, the majority of which is held in highly rated money market funds and interest-bearing bank deposit accounts with established national and global financial institutions. We believe our cash and cash equivalents balances, cash provided by operating activities, and available borrowing capacity under our revolving credit facilities, will provide sufficient liquidity to enable us to meet our working capital requirements and contractual obligations for at least the next 12 months and will be sufficient to meet the long-term requirements of our business strategies and plans. However, there can be no assurance that sufficient capital will continue to be available or that it will be available on terms acceptable to us.

Previous wording

Repatriation of Cash. Our cash repatriation strategy, and by extension, our liquidity, may be impacted by several additional considerations, which include future changes to or interpretations of global tax law and regulations, and our actual earnings in future periods. During the three months ended June 30, 2024, and 2023, no cash and cash equivalents were repatriated. As of June 30, 2024, and March 31, 2024, we have $343,082 and $263,820, respectively, of cash and cash equivalents held by foreign subsidiaries, a portion of which may be subject to additional foreign withholding taxes if it were to be repatriated. We continue to evaluate our cash repatriation strategy and currently anticipate repatriating current and future unremitted earnings of non-US subsidiaries to the extent they have been subject to US income tax if such cash is not required to fund ongoing foreign operations. Refer to Note 5, “Income Taxes,” of our consolidated financial statements in Part IV of our 2024 Annual Report for further information regarding our cash repatriation strategy.

Current wording

Repatriation of Cash. Our cash repatriation strategy, and by extension, our liquidity, may be impacted by several additional considerations, which include future changes to or interpretations of global tax laws and regulations, and our actual earnings in future periods. During the six months ended September 30, 2024, and 2023, no cash and cash equivalents were repatriated. As of September 30, 2024, and March 31, 2024, we have $273,887 and $263,820, respectively, of cash and cash equivalents held by foreign subsidiaries, a portion of which may be subject to additional foreign withholding taxes if it were to be repatriated. We continue to evaluate our cash repatriation strategy and currently anticipate repatriating current and future unremitted earnings of non-US subsidiaries to the extent they have been subject to US income tax if such cash is not required to fund ongoing foreign operations. Refer to Note 5, “Income Taxes,” of our consolidated financial statements in Part IV of our 2024 Annual Report for further information regarding our cash repatriation strategy.

Previous wording

•Primary Credit Facility. During the three months ended June 30, 2024, we made no borrowings or repayments and there were no material changes to the terms, to the outstanding letters of credit, or to the borrowing availability under our unsecured revolving credit facility disclosed in our 2024 Annual Report.

Current wording

•Primary Credit Facility. During the six months ended September 30, 2024, we made no borrowings or repayments and there were no material changes to the terms, to the outstanding letters of credit, or to the borrowing availability under our unsecured revolving credit facility disclosed in our 2024 Annual Report.

Previous wording

•China Credit Facility. During the three months ended June 30, 2024, we made no borrowings or repayments and there were no material changes to the terms or to the outstanding bank guarantees under our credit facility in China disclosed in our 2024 Annual Report.

Current wording

•China Credit Facility. During the six months ended September 30, 2024, we made no borrowings or repayments and there were no material changes to the terms or to the outstanding bank guarantees under our credit facility in China disclosed in our 2024 Annual Report.

Previous wording

Contractual Obligations. Refer to the subsection titled “Leases” under Note 5, “Commitments and Contingencies,” of our condensed consolidated financial statements in Part I, Item 1 within this Quarterly Report for further information regarding our material contractual obligations incurred during the three months ended June 30, 2024, and through July 11, 2024.

Current wording

Contractual Obligations. Refer to the section titled “Leases” under Note 5, “Commitments and Contingencies,” of our condensed consolidated financial statements in Part I, Item 1 within this Quarterly Report for further information regarding our material contractual obligations incurred during the six months ended September 30, 2024, and through October 11, 2024.

Previous wording

Stock Repurchase Program. As of June 30, 2024, the aggregate remaining approved amount under our stock repurchase program is $789,737. Our stock repurchase program does not obligate us to acquire any amount of common stock and suspend at any time at our discretion.

Current wording

Stock Repurchase Program. As of September 30, 2024, the aggregate remaining approved amount under our stock repurchase program is $685,413. Our stock repurchase program does not obligate us to acquire any amount of common stock and may be suspended at any time at our discretion.

Previous wording

The decrease in net cash provided by operating activities during the three months ended June 30, 2024, compared to the prior period, was due to $70,111 of unfavorable changes in operating assets and liabilities partially offset by $57,499 of favorable net income after non-cash adjustments. The unfavorable changes in operating assets and liabilities were primarily due to increased purchases of inventory to support higher demand for our brands, increased accrual primarily for performance-based compensation related to the prior fiscal year, increased trade accounts receivable on higher net sales, partially offset by favorable changes due to timing of derivative cash settlements, tax refunds and payments, as well as receipt of goods and services relative to payments on trade accounts payable.

Current wording

The decrease in net cash provided by operating activities during the six months ended September 30, 2024, compared to the prior period, was due to $233,409 of unfavorable changes in operating assets and liabilities partially offset by $133,981 of favorable net income after non-cash adjustments. Changes in operating assets and liabilities were primarily due to (1) higher purchases of inventory to support higher demand for our brands, (2) lower net trade accounts payable related to timing of receipts of goods and services and respective disbursements, (3) higher trade accounts receivable on higher net sales, (4) lower accrued expenses primarily for the payment of performance-based compensation; and (5) favorable changes due to timing of derivative cash settlements.

Previous wording

Investing Activities. The decrease in net cash used in investing activities during the three months ended June 30, 2024, compared to the prior period, was primarily due to lower capital expenditures for leasehold improvements for our warehouses and DCs.

Current wording

Investing Activities. The decrease in net cash used in investing activities during the six months ended September 30, 2024, compared to the prior period, was primarily due to lower capital expenditures for leasehold improvements for our warehouses and DCs, and by an increase from cash proceeds from the sale of certain assets.

Previous wording

Financing Activities. The increase in net cash used in financing activities during the three months ended June 30, 2024, compared to the prior period, was primarily due to a higher dollar value of stock repurchases.

Current wording

Financing Activities. The increase in net cash used in financing activities during the six months ended September 30, 2024, compared to the prior period, was primarily due to a higher dollar value of stock repurchases.