DECKERS OUTDOOR CORP

Previous wording

The footwear, apparel, and accessories industry is subject to rapid changes in consumer preferences and fashion tastes, which make it difficult to anticipate demand for our products and forecast our financial results. Our success is driven to some extent by brand loyalty, and there can be no assurance that consumers will continue to prefer our brands. Consumer demand for our products depends in part on the continued strength of our brands, which in turn depends on our ability to anticipate, understand, and promptly respond to the rapidly changing preferences and fashion tastes, as well as consumer spending patterns, with appealing merchandise. As our brands and product offerings evolve, it is necessary for our products to appeal to an even broader range of consumers whose preferences cannot be predicted with certainty. New footwear models that we introduce may not be successful with consumers or our brands may fall out of favor with consumers. If we are unable to anticipate, identify, or react appropriately to changes in consumer preferences, our revenues may decrease, our brands’ image may suffer, our operating performance may decline, and we may not be able to execute our growth plans. Even if we develop and manufacture new footwear products that consumers find appealing, their ultimate success may depend on our pricing, and we may set the prices of new styles too high for the market to bear.

Current wording

The footwear, apparel, and accessories industry is subject to rapid changes in consumer preferences and fashion tastes, which make it difficult to anticipate demand for our products and forecast our financial results. Our success is driven to some extent by brand loyalty, and there can be no assurance consumers will continue to prefer our brands. Consumer demand for our products depends in part on the continued strength of our brands, which in turn depends on our ability to anticipate, understand, and promptly respond to the rapidly changing preferences and fashion tastes, as well as consumer spending patterns, with appealing merchandise. As our brands and product offerings evolve, it is necessary for our products to appeal to an even broader range of consumers whose preferences cannot be predicted with certainty. New footwear models that we introduce may not be successful with consumers or our brands may fall out of favor with consumers. If we are unable to anticipate, identify, or react appropriately to changes in consumer preferences, our revenues may decrease, our brands’ image may suffer, our operating performance may decline, and we may not be able to execute our growth plans. Even if we develop and manufacture new footwear products and collaborations that consumers find appealing, their ultimate success may depend on our pricing, and we may set the prices of new styles too high for the market to bear.

Previous wording

Further, the value of our brands is based on evolving consumer perceptions, including as a result of shifting ethical, political or social standards, and concerns with respect product quality, design, technical performance, components or materials (including their sustainability), or customer service could result in negative perceptions and the loss of brand loyalty and value. These concerns may be exacerbated by negative publicity regarding us or our products, brands, marketing campaigns, partners, or endorsers, which could adversely affect our reputation and sales regardless of the accuracy of such claims. Social media and digital marketing campaigns, which accelerate the dissemination of information, can increase the challenges of containing negative claims. If consumers perceive our brands negatively, whether or not warranted, our brand image would become tarnished and our products would become less desirable, which could have a material adverse effect on our business.

Current wording

Further, the value of our brands is based on evolving consumer perceptions, including as a result of shifting ethical, political or social standards, and concerns with respect to product pricing, quality, design, technical performance, components or materials (including their sustainability), or customer service could result in negative perceptions and the loss of brand loyalty and value. These concerns may be exacerbated by negative publicity regarding us or our products, brands, marketing campaigns, partners, or endorsers, which could adversely affect our reputation and sales regardless of the accuracy of such claims. Social media and digital marketing campaigns, which accelerate the dissemination of information, can increase the challenges of containing negative claims. If consumers perceive our brands negatively, whether or not warranted, our brand image would become tarnished and our products would become less desirable, which could have a material adverse effect on our business.

Previous wording

Changes in economic conditions may adversely affect our financial condition and results of operations.

Current wording

Changes to economic conditions may adversely affect our financial condition and results of operations.

Previous wording

Volatile economic conditions and changes in the market have affected, and may continue to affect, consumer spending generally and the buying habits and preferences of consumers. A significant portion of the products we sell, especially those sold under the UGG and HOKA brands, are premium retail products. The purchase of these products is discretionary and is therefore highly dependent upon the level of consumer confidence and discretionary spending. Sales of these products may be adversely affected by variable economic factors, including worsening economic conditions, consumer confidence in future economic conditions, changes to fuel, energy, labor, and healthcare costs, declines in income or asset values, and increases in consumer debt levels, inflation and interest rates, and unemployment rates. Uncertainty in global economic conditions may result in unpredictable consumer discretionary spending trends. During an actual or perceived economic downturn, fewer consumers may shop for our products, and those who do may limit the amount of their purchases or seek less costly substitutes for our products. As a result, we could be required to reduce the price we can charge for our products or increase our marketing and promotional expenses to generate additional demand for our products. In either case, these changes could reduce our sales and profitability, which could have a material adverse effect on our financial condition and results of operations.

Current wording

Volatile economic conditions and changes in the market have affected, and may continue to affect, consumer spending generally and the buying habits and preferences of consumers. A significant portion of the products we sell, especially those sold under the UGG and HOKA brands, are premium retail products. The purchase of these products is discretionary and is therefore highly dependent upon the level of consumer confidence and discretionary spending. Sales of these products may be adversely affected by variable economic factors, including worsening economic conditions, consumer confidence in future economic conditions, including recessionary concerns, changes to fuel, energy, labor, and healthcare costs, declines in income or asset values, and increases in consumer debt levels, inflation and interest rates, tariffs, and unemployment rates. Uncertainty in global economic conditions may result in unpredictable consumer discretionary spending trends. During an actual or perceived economic downturn, fewer consumers may shop for our products, and those who do may limit the amount of their purchases or seek less costly substitutes for our products. As a result, we could be required to reduce the price we can charge for our products or increase our marketing and promotional expenses to generate additional demand for our products. In either case, these changes could reduce our sales and profitability, which could have a material adverse effect on our financial condition and results of operations.

Previous wording

The footwear, apparel, and accessories industry is highly competitive and subject to changing consumer preferences and tastes. Our inability to compete effectively could cause our market share to decline, which could harm our reputation and have a material adverse effect on our financial condition and results of operations. Our competitors include both established companies and newer entrants into the market. In particular, we believe that, as a result of the growth of the UGG and HOKA brands, certain competitors have entered the marketplace specifically in response to the success of our brands, and other competitors may do so in the future, particularly as access to offshore manufacturing and changes in technology make it easier and more cost effective to compete. A number of our larger competitors have significantly greater financial, technological, engineering, manufacturing, marketing, and distribution resources than we do, as well as greater brand awareness in the footwear, apparel, and accessories markets among consumers. As a result, we have faced, and expect to continue to face, intense pressure with respect to competition for key customer accounts and distribution channels. These competitors may have relationships with our key retail customers that are more important to those customers because of the significantly larger volume and product mix that our competitors sell to them. Our competitors’ greater resources may enable them to more effectively compete on the basis of price and production, develop new products more quickly or with superior technical capabilities, adapt to changes in technology, including the successful utilization of data analytics, artificial intelligence, and machine learning, market their products and brands more successfully, identify or influence consumer preferences, increase their market share, withstand the effects of seasonality, and manage periodic downturns in the footwear, apparel, and accessories industry or in economic conditions. As a result of these pressures, we have faced, and expect to continue to face, intense pricing pressure. Efforts by our competitors to dispose of excess inventories may significantly reduce prices of competitive products, which may pressure us to reduce the pricing of our products to compete, or cause consumers to shift their purchasing decisions away from our products entirely. Further, we believe that our key customers face intense competition from their competitors, which could negatively affect the financial stability of their businesses and their ability to conduct business with us.

Current wording

The footwear, apparel, and accessories industry is highly competitive and subject to changing consumer preferences and tastes. Our inability to compete effectively could cause our market share to decline, which could harm our reputation and have a material adverse effect on our financial condition and results of operations. Our competitors include both established companies and newer entrants into the market. In particular, we believe that, as a result of the growth of the UGG and HOKA brands, competitors have entered the marketplace specifically in response to the success of our brands, and other competitors may do so in the future, particularly as access to offshore manufacturing and changes in technology make it easier and more cost effective to compete. A number of our larger competitors have significantly greater financial, technological, engineering, manufacturing, marketing, and distribution resources than we do, as well as greater brand awareness in the footwear, apparel, and accessories markets among consumers. As a result, we have faced, and expect to continue to face, intense pressure with respect to competition for key customer accounts and distribution channels. These competitors may have relationships with our key retail customers that are more important to those customers because of the significantly larger volume and product mix that our competitors sell to them. Our competitors’ greater resources may enable them to more effectively compete on the basis of price and production, develop new products more quickly or with superior technical capabilities, adapt to changes in technology, including the successful utilization of data analytics, artificial intelligence, and machine learning, market their products and brands more successfully, identify or influence consumer preferences, increase their market share, withstand the effects of seasonality, and manage periodic downturns in the footwear, apparel, and accessories industry or in economic conditions. As a result of these pressures, we have faced, and expect to continue to face, intense pricing pressure. Efforts by our competitors to dispose of excess inventories may significantly reduce prices of competitive products, which may pressure us to reduce the pricing of our products to compete, or cause consumers to shift their purchasing decisions away from our products entirely. Further, we believe that our key customers face intense competition from their competitors, which could negatively affect the financial stability of their businesses and their ability to conduct business with us.

Previous wording

Like other companies in our industry, we have an extended design and manufacturing process, which involves product design, material purchases, inventory accumulation and the subsequent sale of the inventories, and accounts receivable collection. This cycle requires us to incur significant expense relating to the design, manufacturing, and marketing of our products in advance of the realization of revenue from sales, and results in significant liquidity requirements and working capital fluctuations throughout our fiscal year. Because this cycle involves long lead times, which require us to make manufacturing decisions months in advance of an anticipated purchasing decision by the consumer, it is challenging to manage our inventory and working capital requirements. Further, supply chain disruptions may drive higher inventory procurement positions that could negatively affect our gross margins as a result of selling excess quantities though close out channels. Further, once manufacturing decisions are made, it is difficult to predict and timely adjust expenses, accurately forecast our financial results, and meet the expectations of analysts and investors, including as a result of:

Current wording

Like other companies in our industry, we have an extended design and manufacturing process, which involves product design, material purchases, inventory accumulation and the subsequent sale of the inventories, and accounts receivable collection. This cycle requires us to incur significant expenses relating to the design, manufacturing, and marketing of our products in advance of the realization of revenue from sales, and results in significant liquidity requirements and working capital fluctuations throughout our fiscal year. Because this cycle involves long lead times, which require us to make manufacturing decisions months in advance of an anticipated purchasing decision by the consumer, it is challenging to manage our inventory and working capital requirements. Further, supply chain disruptions may drive higher inventory procurement positions that could negatively affect our gross profit as a percentage of net sales (gross margin) as a result of selling excess quantities though close out channels. Further, once manufacturing decisions are made, it is difficult to predict and timely adjust expenses, accurately forecast our financial results, and meet the expectations of analysts and investors, including as a result of:

Previous wording

We rely upon a broad network of warehouse and distribution facilities to store, sort, package and distribute our products. In the US, we distribute products primarily through self-managed US DCs in Moreno Valley, California, and in Mooresville, Indiana (including the recent expansion to a second location that became operational in October 2023), which feature a complex warehouse management system that enables us to efficiently pack products for direct shipment to our customers and consumers. We expect our recent domestic DC expansion to create long-term capacity for the domestic growth of the UGG and HOKA brands. We could face a significant disruption in our domestic DC operations if our warehouse management system does not perform as anticipated or ceases to function for an extended period of time, which could occur due to damage to the facility, failure of software or equipment, cyber-security incidents, power outages or similar problems. In addition, if our domestic DC operations and scaling efforts are impeded or delayed for any reason, it could result in shipment delays or the inability to deliver product at all, which would result in lost sales, strain our relationships with customers and consumers, and cause harm to our reputation, any of which could have a material adverse effect on our business.

Current wording

We rely upon a broad network of warehouses and distribution facilities to store, sort, package and distribute our products. In the US, we distribute products primarily through self-managed warehouses and DCs in Moreno Valley, California, and in Mooresville, Indiana, which feature a complex warehouse management system that enables us to efficiently pack products for direct shipment to our customers and consumers. We expect our recent domestic warehouse and DC expansion to create long-term capacity for the domestic growth of the UGG and HOKA brands. We could face a significant disruption in our domestic warehouse and DC operations if our warehouse management system does not perform as anticipated or ceases to function for an extended period of time, which could occur due to damage to the facility, failure of software or equipment, cyber-security incidents, power outages or similar problems. In addition, if our domestic warehouse and DC operations and scaling efforts are impeded or delayed for any reason, it could result in shipment delays or the inability to deliver product at all, which would result in lost sales, strain our relationships with customers and consumers, and cause harm to our reputation, any of which could have a material adverse effect on our business.

Previous wording

We depend on 3PLs to manage the operation of their DCs as necessary to meet our business needs in certain markets. Internationally, we distribute our products through DCs managed by 3PLs in certain international locations. If our 3PLs fail to manage these responsibilities, or if their operations are disrupted as a result of factors outside of their control, such as sanctions that could in the future be imposed on China by the US government, our distribution operations could face significant disruption. The loss of or disruption to the operations of any one or more of these facilities could materially adversely affect our sales, business performance, and results of operations. Although we believe we possess adequate insurance to cover the potential effect of a disruption to the operations of these facilities, such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

Current wording

Internationally, we distribute our products through warehouses and DCs managed by 3PLs in certain international locations. For example, we are currently in the process of transitioning one of our international 3PLs to a new partner with an upgraded warehouse management system beginning in October 2025. We depend on 3PLs to manage the operation of their warehouses and DCs to meet our business needs, performance standards, and expectations, including with respect to data security, compliance with data protection and privacy laws, and provision of quality services on a timely basis at the prices we expect. While we believe we conduct appropriate diligence before entering into service agreements with 3PLs, if our 3PLs fail to manage these responsibilities, or if their operations are disrupted as a result of factors outside of their control, such as sanctions that could in the future be imposed on other countries by the US government, our distribution operations could face significant disruption. The loss of or disruption to the operations of any one or more of these facilities could materially adversely affect our sales, business performance, and results of operations. Although we believe we possess adequate insurance to cover the potential effect of a disruption to the operations of these facilities, such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all.

Previous wording

We rely upon independent manufacturers and their respective material suppliers for most of our production needs, the majority of which are located in China and Vietnam, and we do not have direct control over these manufacturers or their suppliers. We expect these manufacturers to finance the production of goods ordered, maintain manufacturing capacity, comply with our policies, and store finished goods in a safe location pending shipment. Further, because most of our independent manufacturers are concentrated in Asia, we may be subject to an increased risk of supply chain disruption, particularly in the event of a natural disaster, epidemic, geopolitical tensions, or other event outside of our control affecting the region. If any of these were to occur, we may not be able to timely source raw and other materials, manufacture product, or fill customer orders, or product delivered may not meet our quality standards, which would result in lost sales and harm to our relationships with customers.

Current wording

We rely upon independent manufacturers and their respective material suppliers for most of our production needs, the majority of which are located in Southeast Asia, predominately in Vietnam, and we do not have direct control over these manufacturers or their suppliers. We expect our independent manufacturers to finance the production of goods ordered, maintain manufacturing capacity, comply with our policies, and store finished goods in a safe location pending shipment. Further, because most of our independent manufacturers are in Southeast Asia, we are subject to risks associated with natural disasters, epidemics, geopolitical tensions, or other events outside of our control affecting the region. If any of these were to occur, we may not be able to timely source raw and other materials, manufacture products, or fill customer orders, or products delivered may not meet our quality standards, which would result in lost sales and harm to our relationships with customers.

Previous wording

There can be no assurance of a long-term, uninterrupted supply of products from our independent manufacturers. While we have long-standing relationships with most of these manufacturers, any of them may unilaterally terminate their relationship with us at any time, seek to increase the prices they charge, or extract other concessions from us, and we may not be able to substitute alternative manufacturers that are capable of providing products of a comparable quality, in a sufficient quantity, at an acceptable price, or on a timely basis. If we are required to find alternative manufacturers, we could experience manufacturing delays, increased manufacturing costs, and substantial disruption to our business, any of which could negatively affect our results of operations.

Current wording

There can be no assurance of a long-term, uninterrupted supply of products from our independent manufacturers. While we have long-standing relationships with most of these manufacturers, they could terminate our engagement, seek to increase their prices, or extract other concessions from us, and we may not be able to timely engage a suitable alternative. If we are required to find alternative manufacturers, we could experience manufacturing delays, increased manufacturing costs, and substantial disruption to our business, any of which could negatively affect our results of operations.

Previous wording

Much of our financial success is related to the ability of our customers, which include our retailer and distributor partners, to successfully market and sell our brands to consumers. If a customer fails to satisfy contractual obligations or otherwise meet our expectations, or experiences operational issues, it may be difficult to locate an acceptable alternative. Any disruption to these relationships may result in increased costs or loss of customers. In addition, there is no guarantee that a new customer will generate results that are more favorable than the terminated party.

Current wording

Much of our financial success is related to the ability of our customers, which include our retailer and distributor partners, to successfully market and sell our brands to consumers. If a customer fails to satisfy contractual obligations or meet our expectations, or experiences operational issues, it may be difficult to locate an acceptable alternative. Any disruption to these relationships may result in increased costs or loss of customers. In addition, there is no guarantee a new customer will generate results that are more favorable than the terminated party.

Previous wording

We face a risk that key customers may not increase their business with us as we expect or may significantly decrease their business with us or terminate our relationship. Although no single customer accounted for 10.0% or more of our total net sales during fiscal year 2024, our top ten customers made up 24.2% of total net sales. The failure to increase sales with our key customers would have a negative effect on our growth prospects, and any decrease or loss of these customers’ business could result in a material decrease in our net sales and net income if we are unable to capture these sales through our DTC channel. Further, as of March 31, 2024, we have two customers that represent 31.2% of trade accounts receivable, net. Trade accounts receivable, net are typically unsecured and thus subject us to a risk that we will be unable to timely collect on amounts owed, which could affect our revenue and liquidity. Sales to our customers are on an order-by-order basis and may be cancelled or rescheduled by our customers. We rely on purchase order delivery dates as a key factor to forecast our sales and earnings, and if our customers postpone, reduce, or discontinue purchases from us, we could fail to meet our forecasted results. These risks have been exacerbated as our key customers are impacted by significant structural changes to the retail industry fueled by changing technology, consumer purchasing behavior, and economic conditions, as well as a shrinking retail footprint. These trends have been, and may in the future be, intensified by a pandemic or other public health emergency. We may lose key customers if they fail to manage the effect of this rapidly changing retail environment. Any loss of one of these key customers, or a significant reduction in purchases from one of these customers, could result in a significant decline in sales, write-downs of excess inventory, or pressure to discount our products, any of which could have a material adverse effect on our financial condition or results of operations. Further, a key customer may dispose of their excess inventories to consumers or unauthorized sellers at significantly reduced prices, which may put pressure on us to reduce our prices to compete, or cause consumers to shift their purchasing decisions away from our authorized sellers entirely.

Current wording

We face a risk that key customers may not increase their business with us as we expect or may significantly decrease their business with us or terminate our relationship. Although no single customer accounted for 10.0% or more of our total net sales during fiscal year 2025, our top ten customers made up 23.7% of total net sales. The failure to increase sales with our key customers would have a negative effect on our growth prospects, and any decrease or loss of these customers’ business could result in a material decrease in our net sales and net income if we are unable to capture these sales through our DTC channel. Further, as of March 31, 2025, we have one customer that represents 13.6% of trade accounts receivable, net. Trade accounts receivable, net are typically unsecured and thus subject us to a risk that we will be unable to timely collect on amounts owed, which could affect our revenue and liquidity. Sales to our customers are on an order-by-order basis and may be cancelled or rescheduled by our customers. We rely on purchase order delivery dates as a key factor in forecasting our sales and earnings, and if our customers postpone, reduce, or discontinue purchases from us, we could fail to meet our forecasted results. These risks have been exacerbated as our key customers are impacted by significant structural changes to the retail industry fueled by changing technology, consumer and wholesale partner purchasing behavior, and economic conditions, as well as a shrinking retail footprint. These trends have been, and may in the future be, intensified by a pandemic or other public health emergency. We may lose key customers if they fail to manage the effect of this rapidly changing retail environment. Any loss of one of these key customers, or a significant reduction in purchases from one of these customers, could result in a significant decline in sales, write-downs of excess inventory, or pressure to discount our products, any of which could have a material adverse effect on our financial condition or results of operations. Further, a key customer may dispose of their excess inventories to consumers or unauthorized sellers at significantly reduced prices, which may put pressure on us to reduce our prices to compete, or cause consumers to shift their purchasing decisions away from our authorized sellers entirely.

Previous wording

We depend on qualified personnel and, if we are unable to retain or hire executive officers, key employees, and skilled personnel, we may not be able to achieve our strategic objectives and our results of operations may suffer.

Current wording

We depend on qualified talent and, if we are unable to retain or hire executive officers, key employees, and skilled talent, we may not be able to achieve our strategic objectives, and our results of operations may be adversely impacted.

Previous wording

To execute our growth plan, we must continue to attract and retain highly qualified personnel, including executive officers and key employees. Further, to continue to develop new products and successfully operate and grow our key business processes, it is important for us to continue hiring and retaining personnel in highly skilled footwear, apparel and accessories design, marketing, merchandising, sourcing, technology, operations, including our DCs and retail stores, and support functions. Competition for executive officers, key employees, and skilled personnel is intense within our industry and there continues to be upward pressure on the compensation paid to these professionals. Changes to our office environment, adoption of new work models, and our expectations about when or how often employees work on-site or remotely may not meet our employees’ expectations. As certain jobs and employers operate remotely, traditional geographic competition for talent may change in ways that cannot be fully predicted. Many of the companies with which we compete for experienced personnel have greater name recognition and financial resources than we have. Further, the recent strength of our results of operations and growing market capitalization may result in other companies and competitors perceiving our employees as more desirable. If our employment proposition is not perceived as favorable compared to other companies’ policies, it could negatively affect our ability to attract, hire, and retain our employees. While we are committed to offering competitive compensation and benefits to employees across our business to positively affect attrition, which affects our selling, general, and administrative (SG&A) expenses, our domestic headquarters are located in Goleta, California, which is not generally recognized as a prominent commercial center, and it is difficult to attract qualified professionals due to our location. If we hire employees from competitors or other companies, their former employers may assert that we or these employees have breached legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the stock-based compensation when deciding whether to take a job. If our stock price experiences volatility, it may adversely affect our ability to recruit, retain, and motivate qualified personnel and we may be unable to execute our growth plan or achieve our long-term strategic objectives, our results of operations may suffer, and it may damage our reputation as a preferred employer, which would challenge our ability to effectively compete across the global labor market.

Current wording

To execute our growth plan, we must continue to attract and retain highly qualified talent, including executive officers and key employees. Further, to continue to develop new products and successfully operate and grow our key business processes, it is important for us to continue hiring and retaining talent in highly skilled footwear, apparel and accessories design, marketing, merchandising, sourcing, technology, operations, and support functions. Competition for executive officers, key employees, and skilled talent is intense within our industry and there continues to be upward pressure on the compensation paid to these professionals. Changes to our office environment or work models may not meet our employees’ expectations. Many of the companies with which we compete for experienced talent have greater name recognition and financial resources than we have. Further, continued strength of our results may result in other companies and competitors perceiving our employees as more desirable. If our employment proposition is not perceived as favorable compared to other companies’, it could negatively affect our ability to attract, hire, and retain our employees. We are committed to offering competitive compensation and benefits to employees across our business to positively affect attrition, which impacts our selling, general, and administrative (SG&A) expenses. Our domestic headquarters are located in Goleta, California, which is not generally recognized as a prominent commercial center, and it is difficult to attract qualified professionals due to our location. If we hire employees from competitors, their former employers may assert that we or these employees have breached legal obligations, resulting in a diversion of our time and resources. In addition, prospective and existing employees often consider the value of the stock-based compensation when deciding whether to take a job. If our stock price is volatile, it may adversely affect our ability to recruit and retain qualified talent and we may be unable to achieve our long-term strategic objectives, our results of operations may suffer, and it may damage our reputation as a preferred employer, which would challenge our ability to effectively compete across the global labor market.

Previous wording

We believe that our culture has been and will continue to be a key contributor to our success. If we do not maintain our culture and core values over time, we may be unable to foster the passion, creativity, teamwork, focus, and innovation that have contributed to the growth and success of our business. Any failure to preserve our culture could negatively affect our ability to recruit and retain personnel and to achieve our strategic objectives.

Current wording

We believe our culture has been and will continue to be a key contributor to our success. If we do not maintain our culture and core values, the growth and success of our business may be harmed. Any failure to preserve our culture could negatively affect our ability to recruit and retain talent and to achieve our strategic objectives.

Previous wording

The continued service of our executive officers and key employees is particularly important, and the hiring or departure of such personnel may disrupt our business or result in the depletion of significant institutional knowledge. Our executive officers and key employees are employed on an at-will basis, which means that they can terminate their employment with us at any time. The loss of one or more of our executive officers or other key employees or significant turnover in our senior management, and the often-extensive process of identifying and hiring other personnel to fill those key positions, could have a material adverse effect on our business.

Current wording

The continued service of our executive officers and key employees is particularly important, and the departure of such talent may disrupt our business or result in the depletion of significant institutional knowledge. Our executive officers and key employees are employed on an at-will basis, which means that they can terminate their employment with us at any time. The loss of one or more of our executive officers or other key employees or significant turnover in our senior management, and the often-extensive process of identifying and hiring other talent to fill those key positions, could have a material adverse effect on our business.

Previous wording

We use sheepskin to manufacture a significant portion of our products, and if we are unable to obtain a sufficient quantity of sheepskin at acceptable prices that meets our quality expectations, or if there are legal or social impediments to our ability to use sheepskin, it could have a material adverse effect on our business.

Current wording

We use sheepskin to manufacture a significant portion of our products, and if we are unable to obtain sufficient sheepskin at acceptable prices that meets our quality expectations, or if there are legal or social impediments to our ability to use sheepskin, it could have a material adverse effect on our business.

Previous wording

We purchase certain raw materials that are affected by commodity prices, the most significant of which is sheepskin. The supply of sheepskin, which is used to manufacture a significant portion of our UGG brand products, is in high demand and there are limited suppliers that are able to provide the quantity and quality of sheepskin that we require. In addition, our unique product design and animal welfare standards require sheepskin that may be found only in certain geographies. We presently rely on only two tanneries in China to provide the majority of our sheepskin, which they source primarily from Australia. If the sheepskin provided by these tanneries and the resulting products we produce do not conform to our quality or sustainability specifications or fail to meet consumer expectations, we could experience reduced demand for our products, a higher rate of customer returns, and negative effects on the image of our brands, any of which could have a material adverse effect on our business. Similarly, if these tanneries are not able to deliver sheepskin in the quantities required, or were to cease operations, we may not be able to timely obtain suitable substitute materials, which would limit our ability to meet demand for our products, lead to inventory shortages, result in a loss of sales, strain our customer relationships, and harm our reputation. In addition, any factors that negatively affect the business of these tanneries, or the businesses of the suppliers that warehouse their inventories, such as loss of customers, financial instability, loss or destruction of property, work stoppages, political instability, or acts of terrorism or catastrophic events, could result in shortages in our supply of sheepskin.

Current wording

We purchase certain raw materials that are affected by commodity prices, the most significant of which is sheepskin. The supply of sheepskin, which is used to manufacture a significant portion of our UGG brand products, is in high demand and there are limited suppliers that are able to provide the quantity and quality of sheepskin that we require. In addition, our unique product design and animal welfare standards require sheepskin that may be found only in certain geographies. Sheepskin used in our UGG brand products is sourced primarily from designated suppliers in Australia and processed by two tanneries in China. If this sheepskin and the resulting products we produce do not conform to our quality or sustainability specifications or fail to meet consumer expectations, we could experience reduced demand for our products, a higher rate of customer returns, and negative effects on the image of our brands, any of which could have a material adverse effect on our business. Similarly, if these tanneries are not able to deliver sheepskin in the quantities required, or were to cease operations, we may not be able to timely obtain suitable substitute materials, which would limit our ability to meet demand for our products, lead to inventory shortages, result in a loss of sales, strain our customer relationships, and harm our reputation. In addition, any factors that negatively affect the business of these tanneries, or the businesses of the suppliers that warehouse their inventories, such as loss of customers, financial instability, loss or destruction of property, work stoppages, political instability, or acts of terrorism or catastrophic events, could result in shortages in our supply of sheepskin.

Previous wording

While we have experienced stable pricing in recent years, fluctuations in the price of sheepskin could occur as a result of any factors that increase the demand for, or decrease the supply of, sheepskin, including weather patterns, supply conditions, energy prices, work stoppages, increased logistics costs, government regulation, sanctions and policy, economic climates, market speculation, compliance with our standards, harvesting decisions, incidence of disease, the price of other commodities, such as wool and leather, the demand for our products and the products of our competitors, and global economic conditions, any of which would increase our manufacturing costs and reduce our gross margin. The impacts of any of these factors may be exacerbated by global climate change. While we use purchasing contracts and other pricing arrangements to reduce the effect of sheepskin price fluctuations on our results of operations, we may be unable to offset the negative effect of a prolonged increase in such prices on our results of operations. In that event, it is unlikely we would be able to adjust our product prices sufficiently to eliminate the effect on our gross margin and our financial results may suffer.

Current wording

While we have experienced stable pricing in recent years, fluctuations in the price of sheepskin could occur as a result of any factors that increase the demand for, or decrease the supply of, sheepskin, including weather patterns, supply conditions, energy prices, work stoppages, increased logistics costs, government regulation, sanctions and policy, market speculation, compliance with our standards, harvesting decisions, incidence of disease, the price of other commodities, such as wool and leather, the demand for our products and the products of our competitors, and global economic conditions, any of which would increase our manufacturing costs and reduce our gross margin. The impacts of any of these factors may be exacerbated by global climate change. While we use purchasing contracts and other pricing arrangements to reduce the effect of sheepskin price fluctuations on our results of operations, we may be unable to offset the negative effect of a prolonged increase in such prices on our results of operations. In that event, it is unlikely we will be able to adjust our product prices sufficiently to eliminate the effect on our gross margin and our financial results may suffer.

Previous wording

We rely on technical innovation, as well as increased use of preferred materials, to compete in the market for our products.

Current wording

We rely on technical innovation to compete in the market for our products.

Previous wording

EVA, as opposed to petroleum-derived EVA, within certain UGG brand products. We also increasingly use preferred synthetics, such as recycled polyester, recycled nylon, recycled polyethylene, and bio-based ethylene, preferred regenerated or synthetic cellulosic fibers, such as TENCEL™ Lyocell and TENCEL™ Modal, and preferred plant fibers, such as cotton sourced through responsible cotton schemes, hemp, linen, ramie, and jute, and the responsible-down certified standard. Although we continue to invest in research and development to refine our materials and develop new properties for specific applications, if we fail to introduce technical innovation in our products or experience issues with the quality of our products or materials, consumer demand for our products could decline and we may experience reputational damage. Further, as our brands transition to suppliers with preferred materials, we may be subject to increased costs or supply constraints, which could reduce our sales and profitability and have a material adverse effect on our financial condition and results of operations.

Current wording

Our success relies in part on our continued innovation in both the materials we use and the design of our footwear. In particular, our HOKA brand maintains its competitiveness through continuous product innovation and timely introduction of new features and technologies that align with current and emerging consumer expectations. Also, we continue to invest in research and development to increasingly incorporate preferred materials in our products as part of our sustainability efforts. We also increasingly use preferred synthetics, preferred regenerated or synthetic cellulosic fibers, and preferred plant fibers. Although we continue to refine our materials and develop new properties for specific applications, if we fail to introduce technical innovation in our products or experience issues with the quality of our products or materials, consumer demand for our products could decline and we may experience reputational damage. Further, as our brands transition to suppliers with recycled, renewable, regenerated, and certified/natural materials (preferred materials), we may be subject to increased costs or supply constraints, which could reduce our sales and profitability and have a material adverse effect on our financial condition and results of operations.

Previous wording

We may not succeed in implementing our growth strategies, including through identifying new retail store locations that meet our requirements, in which case we may not be able to take advantage of certain market opportunities and may become less competitive.

Current wording

We may not succeed in implementing our growth strategies, in which case we may not be able to take advantage of certain market opportunities and may become less competitive.

Previous wording

As part of our overall growth strategy, we are continually seeking out opportunities to enhance the positioning of our brands, diversify our product offerings, extend our brands into complementary product categories and markets, expand geographically, optimize our retail presence both in stores and online, and improve our financial performance and operational efficiency. Our future growth depends in part on our expansion efforts outside of North America (international growth strategy). For example, we have opened HOKA brand retail locations in international markets through Company-owned stores and through third-party partners, and we have expanded our international flagship store presence for the UGG and HOKA brands. Flagship stores play a crucial role in brand market positioning, and are operated to have neutral operating profitability, are typically greater in size, and involve more extensive leasehold improvements and furniture and fixtures compared to our other concept retail stores. If we are unable to identify new retail locations with consumer traffic sufficient to support a profitable sales level or elevate our brand market positioning, our retail growth may be limited. Global store openings involve substantial investments, including leasehold improvements, furniture and fixtures, equipment, information systems, inventory, and personnel. Successful operation of a retail store depends, in part, on the overall ability of the retail location to attract a consumer base sufficient to generate profitable store sales volumes, and if we have insufficient sales at a new store location, we may be unable to avoid losses or negative cash flows. Furthermore, our future growth also depends in part on our ability to effectively manage the profitability of our existing retail locations. For example, our failure to successfully identify and close underperforming stores in a timely manner could have a number of material adverse effects, such as impairments and a negative impact on our financial condition and results of operations.

Current wording

As part of our overall growth strategy, we are continually seeking out opportunities to enhance the positioning of our brands, diversify our product offerings, extend our brands into complementary product categories and markets, expand geographically, optimize our retail presence both in stores and online, and improve our financial performance and operational efficiency. Our future growth depends in part on our expansion efforts outside of North America (international growth strategy). For example, we have opened UGG and HOKA brand retail locations in international markets through Company-owned stores and through third-party retailers. Flagship stores play a crucial role in brand market positioning, are operated to have neutral operating profitability, are typically greater in size, and involve more extensive leasehold improvements and furniture and fixtures compared to our other concept retail stores. If we are unable to identify new retail locations with consumer traffic sufficient to support a profitable sales level or elevate our brand market positioning, our retail growth may be limited, and we may be unable to avoid losses or negative cash flows. Furthermore, our future growth depends in part on our ability to effectively manage the profitability of our existing retail locations. For example, our failure to successfully identify and close underperforming stores in a timely manner could have a number of material adverse effects, such as impairments and a negative impact on our financial condition and results of operations.

Previous wording

We also license the right to operate our brand retail stores to third parties through our partner retail program. Most of the partner retail stores are operated in international markets. We provide training to support these stores and set and monitor operational standards. However, the quality of these store operations may decline due to the failure of these third parties to operate the stores in a manner consistent with our standards or our failure to adequately monitor these third parties, which could result in reduced sales and cause our brand image to suffer.

Current wording

We also license the right to operate our brand retail stores to third parties through our partner retail program. All of the partner retail stores are operated in international markets. We provide training to support these stores and set and monitor operational standards. However, the quality of these store operations may decline due to the failure of these third parties to operate the stores in a manner consistent with our standards or our failure to adequately monitor these third parties, which could result in reduced sales and cause our brand image to suffer.

Previous wording

Investor advocacy groups, certain institutional investors, investment funds, stockholders, customers, consumers, non-governmental organizations, and regulators, such as the SEC, are increasingly focused on corporate responsibility, specifically on the ESG practices of companies and the implications of the social and environmental costs of their investments. From time to time, we communicate certain ESG initiatives and goals to market participants and our customers and business partners, including through our annual Creating Change Report. Any ESG disclosure we make may include our policies, practices, initiatives, and goals on a variety of human rights, corporate governance, environmental compliance, sustainability, employee health and safety practices, human capital management, product quality, supply chain management, and workforce inclusion and diversity. Although we have undertaken expansive efforts to improve and implement our ESG initiatives, it is possible that stakeholders may not be satisfied with such disclosures, our ESG practices or the speed of their adoption. The establishment of ESG criteria and key metrics, as well as the collection of relevant ESG data subject to developing internal controls and processes, can be costly, challenging, and time consuming, and is subject to evolving ESG reporting standards and regulations. If our ESG practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, or if we are perceived to have not appropriately responded to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, it may negatively affect our employee retention and recruitment, or we may suffer from reputational damage and our business and financial condition could be materially and adversely affected. We may also incur additional costs or require additional resources to monitor such stakeholder expectations and standards and to meet our targets and commitments. Further, we could fail, or be perceived to fail, to achieve our ESG initiatives or goals, or we could fail to report our progress fully and accurately on such initiatives and goals, which could negatively affect our reputation, employee retention and recruitment, and the willingness of our customers and suppliers to do business with us.

Current wording

Investor advocacy groups, certain institutional investors, investment funds, stockholders, customers, consumers, employees, non-governmental organizations, the media, including social media, and regulators, such as the SEC, are increasingly scrutinizing corporate responsibility, specifically related to ESG practices and disclosures of companies and the implications of the social and environmental costs of their investments. From time to time, we communicate certain ESG initiatives to market participants and our customers and business partners, including through our annual Creating Change Report. Any ESG disclosure we make may include our policies, practices, initiatives, and goals on a variety of human rights, corporate governance, environmental compliance, sustainability, employee health and safety practices, human capital management, product quality, supply chain management, and workforce inclusion and diversity. Although we have undertaken expansive efforts to improve and implement our ESG initiatives, it is possible stakeholders may not be satisfied with such disclosures, or our ESG practices or the speed of their adoption. In addition, negative perception of diversity, equity, and inclusion initiatives, whether due to perceived over or under pursuit of such initiatives, could result in reduced customer demand, stockholder activism, regulatory inquiries, and litigation or other adverse impacts. The establishment of ESG criteria and key metrics, as well as the collection of relevant data subject to evolving internal controls and processes, can be costly, complex, and time consuming, and is subject to evolving reporting standards and regulations. If our ESG practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, or if we are perceived to have not appropriately responded to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, it may negatively affect our employee retention and recruitment, or we may suffer from reputational damage and our business and financial condition could be materially and adversely affected. We may also incur additional costs or require additional resources to monitor such stakeholder expectations and standards and to meet our targets and commitments. Further, we could fail, or be perceived to fail, to achieve our ESG initiatives or goals, or we could fail to report our progress fully and accurately on such initiatives and goals, which could negatively affect our reputation, employee retention and recruitment, and the willingness of our customers and suppliers to do business with us.

Previous wording

Increasing focus on ESG matters has resulted in, and is expected to continue to result in, the adoption of legal and regulatory requirements designed to mitigate the effects of climate change on the environment and requiring climate-related disclosures. If new laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet such obligations. Our processes and controls for reporting ESG matters and related data across our operations and supply chain are evolving along with multiple disparate standards for identifying, measuring, and reporting ESG metrics, including ESG-related disclosures required by the SEC, European, and other regulators, such as California, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.

Current wording

Increasing focus on ESG matters has resulted in, and is expected to continue to result in, the adoption of legal and regulatory requirements designed to mitigate the effects of climate change on the environment and requiring climate-related disclosures. If new laws or regulations are more stringent than current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet such obligations. Our processes and controls for reporting ESG matters and related data across our operations and supply chain are evolving along with multiple disparate standards for identifying, measuring, and reporting ESG metrics, including ESG-related disclosures required by the SEC, European, and other regulators, such as those in California, and such standards may change over time, which could result in significant revisions to our current goals, reported progress in achieving such goals, or ability to achieve such goals in the future.

Previous wording

Global climate change, including extreme weather conditions, natural disasters, public health issues, or other events beyond our control, as well as related regulations, have adversely affected, and could in the future adversely affect, our business.

Current wording

Climate change, natural disasters, public health issues, or other events beyond our control, as well as related regulations, have adversely affected, and could in the future adversely affect, our business.

Previous wording

Natural disasters or other catastrophic events, including the effects of global climate change and a pandemic, may damage or disrupt our operations, international markets, and the global economy. Our operations are subject to interruption from extreme weather events, power shortages, pandemics, terrorism, political instability, telecommunications failure, cyber-attacks, war, and other events beyond our control. Although we maintain disaster recovery plans, such events could disrupt our operations or those of our independent manufacturers, suppliers and customers, including through the inability of personnel to work, destruction of facilities, loss of life, and adverse effects on supply chains, power, infrastructure and the integrity of IT systems, all of which could materially increase our costs and expenses, delay or decrease sales, and disrupt our ability to maintain business continuity. We could incur significant capital expenditures and other costs to improve the climate-related resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate the effects of climate change, including compliance with evolving, and at times inconsistent, country specific laws and regulations. We could also experience increased costs for energy, production, transportation, raw and other materials, as well as higher insurance premiums and deductibles, which could adversely affect our operations. Our insurance may not be sufficient to cover losses that we may sustain. A significant natural disaster or other event that disrupts our operations or those of our partners or customers could have a material adverse effect on our business, results of operations and financial condition. Any assessment of the potential impact of future climate change legislation, regulations, or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate.

Current wording

Natural disasters or other catastrophic events, including the effects of climate change or a pandemic, may damage or disrupt our operations, international markets, and the global economy. Our operations are subject to interruption from extreme weather events, power shortages, pandemics, terrorism, political instability, telecommunications failures, cyber-attacks, war, and other events beyond our control. Although we maintain disaster recovery plans, such events could disrupt our operations, including through the inability of talent to work, loss of life, and adverse effects on supply chains, power, infrastructure and the integrity of IT systems, any of which could materially increase our costs and expenses, decrease sales, and disrupt our business continuity. We could incur significant capital expenditures and other costs to improve the climate-related resiliency of our infrastructure and otherwise prepare for, respond to, and mitigate the effects of climate change, including compliance with evolving, and at times inconsistent, laws and regulations. We could also experience increased costs for energy, production, transportation, raw and other materials, as well as higher insurance premiums and deductibles, which could adversely affect our operations. Our insurance may not be sufficient to cover losses that we may sustain. Any event that disrupts our operations or those of our partners or customers could have a material adverse effect on our business, results of operations and financial condition. Any assessment of the potential impact of future climate change legislation, regulations, or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate.

Previous wording

These events could also adversely affect the supply of raw materials, including sheepskin and leather, which are key resources in the production of our products, disrupt the operation of our supply chain and the productivity of our contract manufacturers, increase our production costs, impose capacity restraints, and affect the types of products that consumers purchase. If consumers increasingly adopt plant-based diets for personal reasons, this could reduce the supply of sheep for the meat industry, and in turn, hinder our ability to source sufficient sheepskin for our products. Further, public health issues and related regulatory responses, including a pandemic, may reduce demand for certain products, deteriorate our ability, or the ability of our customers, to operate in affected regions, and result in the failure of key business partners to provide services for our efficient operations, including the inability of our manufacturers or third-party distributors to timely fulfill their obligations to us, any of which would adversely affect our business, results of operations and financial condition.

Current wording

These events could also adversely affect the supply of raw materials, including sheepskin and leather, disrupt the operation of our supply chain and the productivity of our contract manufacturers, increase our production costs, impose capacity restraints, and affect the types of products consumers purchase. Further, public health issues and related regulatory responses may reduce demand for certain products, deteriorate our ability, or the ability of our customers, to operate in affected regions, and result in the failure of key business partners to provide services for our efficient operations, including the inability of our manufacturers or third-party distributors to timely fulfill their obligations to us, any of which would adversely affect our business, results of operations and financial condition.

Previous wording

We face risks associated with pursuing strategic acquisitions and divestitures, and our failure to successfully integrate any acquired business or product could have a material adverse effect on our results of operations and financial position.

Current wording

We face risks associated with strategic acquisitions and divestitures, and our failure to successfully integrate any acquired business could have a material adverse effect on our results of operations and financial condition.

Previous wording

Additionally, we may not be able to successfully integrate the assets or operations of any acquired businesses into our operations, or to achieve the expected benefits of any acquisitions. Following an acquisition, we may also face cannibalization of existing product sales by our newly acquired products, unless we adequately integrate new products with our existing products, aggressively target different consumers for our newly acquired products and increase our overall market share. The failure to successfully integrate any acquired business or products in the future could have a material adverse effect on our results of operations and financial position.

Current wording

Additionally, we may not be able to successfully integrate the assets or operations of any acquired businesses into our operations, or to achieve the expected benefits of any acquisitions. We may also face cannibalization of existing product sales by newly acquired products unless we aggressively target different consumers for products and increase our overall market share. The failure to successfully integrate any acquired business or products in the future could have a material adverse effect on our results of operations and financial position.

Previous wording

Further, we may be required to issue equity securities to finance an acquisition, which would be dilutive to our stockholders, and the equity securities may have rights or preferences senior to those of our existing stockholders. If we incur indebtedness to finance an acquisition, it will result in debt service costs, and we may be subject to covenants restricting our operations or liens encumbering our assets.

Current wording

Further, we may be required to issue equity securities to finance an acquisition, which would be dilutive to our stockholders, and equity securities may have rights or preferences senior to those of our existing stockholders. If we incur indebtedness to finance an acquisition, it will result in debt service costs, and we may be subject to covenants restricting our operations or liens encumbering our assets.

Previous wording

As part of our overall strategy to allocate resources that best align with our long-term objectives, we may seek to sell one or more brands. For example, during October 2023, we announced that we intend to divest the Sanuk brand. These transactions involve financial and operational risks, including diverting management and employee time and attention away from other aspects of our business, separating personnel and financial and other systems, impairments, and adversely affecting relationships with existing suppliers and customers. Further, during the fourth fiscal quarter for the year ended March 31, 2024, we recorded an impairment loss of $8,164 in SG&A expenses in the consolidated statements of comprehensive income for the Sanuk brand definite-lived trademark, driven by lower-than-expected results of operations for the wholesale channel. Refer to the subsection “Definite-Lived Intangible and Other Long-Lived Assets” in the “Critical Accounting Policies” section in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” within this Annual Report for further information.

Current wording

As part of our overall strategy to allocate resources that best align with our long-term objectives, we may seek to sell one or more brands. For example, during fiscal year 2025, we completed the sale of the Sanuk brand and began phasing out the standalone operations of the Koolaburra brand. These transactions involve financial and operational risks, including diverting management and employee time and attention away from other aspects of our business, separating personnel and financial and other systems, impairments, and adversely affecting relationships with existing suppliers and customers.

Previous wording

The process of completing any acquisitions or divestitures may be time-consuming, involve significant costs and expenses, and may not yield a benefit if the transactions are not completed successfully. In situations where acquisitions or divestitures are not successfully implemented or completed, or the expected benefits of such acquisitions or divestitures are not otherwise realized, our business or financial results could be negatively impacted.

Current wording

The process of completing any acquisitions or divestitures may be time-consuming, involve significant costs and expenses, and the expected benefits of such acquisitions or divestitures may not be realized, and our business or financial results could be negatively impacted.

Previous wording

Most of our independent manufacturers are located in Asia, and products manufactured overseas and imported into the US and other countries are subject to numerous risks and uncertainties. For example, while we require our independent manufacturers and suppliers to adhere to environmental, labor, ethical, health, safety, and other business practices and laws, and while we periodically visit and audit their operations, we do not control their business practices. If non-compliant manufacturers or suppliers cannot or will not become compliant, we will cease conducting business with them, which could increase our costs and interrupt our supply chain. Our manufacturers’ violations of laws and business standards could also result in negative publicity or product recall, which could damage our reputation, brand value, and cause us to incur additional costs. Further, if our manufacturers or suppliers violate US or foreign trade laws or regulations, we may be subject to extra duties, significant monetary penalties, the seizure, and forfeiture of products we are attempting to import, or the loss of our import privileges, which could have a negative effect on our results of operations.

Current wording

In addition to trade-related risks, our international operations and independent manufacturers are subject to a range of regulatory, operational, and reputational risks. While we require our independent manufacturers and suppliers to adhere to environmental, labor, ethical, health, safety, and other business standards and conduct periodic audits of their operations, we do not directly control their practices. Noncompliance with applicable laws or standards could lead to product recalls, regulatory penalties, the seizure or forfeiture of our products, or reputational harm. If any of our suppliers are unable or unwilling to comply with our standards, we may be forced to terminate those relationships, which could increase our costs and disrupt our supply chain. Further, if our independent manufacturers or suppliers violate US or foreign trade laws or regulations, we may be subject to extra duties, significant monetary penalties, the seizure, and forfeiture of products we are attempting to import, or the loss of our import privileges, which could have a negative effect on our results of operations.

Previous wording

•restrictions on the transfer of funds from foreign jurisdictions;

Current wording

•restrictions on the transfer of funds from foreign jurisdictions or volatile foreign exchange rates;

Previous wording

•practices involving corruption, extortion, bribery, pay-offs, theft, and other fraudulent activity;

Current wording

•social instability and corruption, extortion, bribery, pay-offs, theft, and other fraudulent activity;

Previous wording

•health-related concerns that could result in a reduced workforce or scarcity of raw and other materials; and

Current wording

•health-related disruptions, such as disease outbreaks or raw material shortages, which could impact our workforce or scarcity of raw and other materials; and

Previous wording

Elevated inventory levels, combined with the uneven flow of receipts and shipments, could cause further capacity pressures within our US DCs and 3PLs. For example, we are in the process of expanding our distribution network for HOKA brand wholesale operations to our DC in Mooresville, Indiana. If we are unsuccessful in achieving our transition timelines, we may be limiting our ability to efficiently fulfill orders for our wholesale partners and consumers. These pressures may be exacerbated by labor disputes that affect the operations of our partners, which creates significant risk for our business, particularly if these disputes result in work slowdowns, strikes, or similar disruptions. As we manage product availability from supply chain or other disruptions, the timing of sales to our wholesale partners and consumers may be affected, which may result in increased risk of order cancellations.

Current wording

Elevated inventory levels, combined with the uneven flow of receipts and shipments, could cause further capacity pressures within our US warehouses and DCs and international 3PLs. These pressures may be exacerbated by labor disputes that affect our partners, which create significant risk for our business, particularly if such disputes result in work slowdowns, strikes, or other disruptions. As we manage product availability from disruptions, the timing of sales to our wholesale partners and consumers may be affected, which may result in an increased risk of order cancellations.

Previous wording

While we have historically used more expensive air freight to ship our products to meet demand in the past, we continued to reduce our use of air freight into fiscal year 2024. However, if we experience such fluctuations in product demand and costs in future periods, we may be required to leverage air freight in future periods to maintain service levels.

Current wording

In addition, while we have historically used more expensive air freight to ship our products to meet demand, we continued to reduce our use of air freight into fiscal year 2025. However, if we experience fluctuations in consumer demand or product availability and costs in future periods, we may be required to leverage air freight to maintain service levels.