Deckers(DECK) - 2026 Q1 - Quarterly Report

PART I - Financial Information Financial Statements The company's Q1 FY2026 financial statements show total assets at $3.84 billion, net sales up 16.9% to $964.5 million, and net income of $139.2 million, with operating cash flow impacted by inventory build-up Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased to $3.84 billion, driven by a significant rise in inventories, while stockholders' equity slightly decreased to $2.47 billion due to repurchases Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $1,720,416 | $1,889,188 | | Inventories | $849,351 | $495,226 | | Total current assets | $3,074,828 | $2,860,475 | | Total assets | $3,839,271 | $3,570,252 | | Liabilities & Equity | | | | Trade accounts payable | $732,881 | $417,955 | | Total current liabilities | $1,046,996 | $769,941 | | Total stockholders' equity | $2,467,479 | $2,513,013 | Condensed Consolidated Statements of Comprehensive Income For Q1 FY2026, net sales increased 16.9% to $964.5 million, driving net income up to $139.2 million and diluted EPS to $0.93, despite a slight decrease in gross margin Income Statement Highlights (in thousands, except per share data) | Metric | Q1 FY2026 (ended June 30, 2025) | Q1 FY2025 (ended June 30, 2024) | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $964,538 | $825,347 | +16.9% | | Gross profit | $537,906 | $470,000 | +14.4% | | Income from operations | $165,287 | $132,807 | +24.5% | | Net income | $139,203 | $115,625 | +20.4% | | Diluted EPS | $0.93 | $0.75 | +24.0% | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $2.47 billion as of June 30, 2025, primarily due to $183.0 million in common stock repurchases offsetting net income - For the three months ended June 30, 2025, the company repurchased 1,666 thousand shares of common stock for a total cost of $183.0 million[21] Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly decreased to $36.1 million due to a $354.1 million increase in inventories, while cash and cash equivalents ended at $1.72 billion Cash Flow Summary (in thousands) | Activity | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $36,146 | $112,650 | | Net cash used in investing activities | ($23,929) | ($22,521) | | Net cash used in financing activities | ($183,228) | ($151,861) | | Net change in cash and cash equivalents | ($168,772) | ($63,654) | - The significant decrease in operating cash flow was primarily driven by a $354.1 million use of cash for inventories, compared to a $279.0 million use in the prior year period[24] Notes to Condensed Consolidated Financial Statements Key notes detail reportable segments, revenue disaggregation, tax rate changes, and the stock repurchase program, highlighting the phasing out of the Koolaburra brand and strong wholesale channel growth - The company's three reportable operating segments are the HOKA brand, UGG brand, and Other brands (Teva, AHNU, Koolaburra)[32] - The company is phasing out standalone operations for the Koolaburra brand, with plans to wind down its wholesale presence by the end of calendar year 2025[33] Net Sales by Channel (in thousands) | Channel | Q1 FY2026 | Q1 FY2025 | YoY Change | | :--- | :--- | :--- | :--- | | Wholesale | $652,364 | $514,782 | +26.7% | | Direct-to-Consumer | $312,174 | $310,565 | +0.5% | Net Sales by Geography (in thousands) | Geography | Q1 FY2026 | Q1 FY2025 | YoY Change | | :--- | :--- | :--- | :--- | | Domestic | $501,258 | $515,856 | -2.8% | | International | $463,280 | $309,491 | +49.7% | Segment Performance (in thousands) | Segment | Net Sales (Q1 FY2026) | Segment Income from Operations (Q1 FY2026) | | :--- | :--- | :--- | | HOKA | $653,119 | $253,528 | | UGG | $265,092 | $53,983 | | Other Brands | $46,327 | $7,753 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported strong Q1 FY2026 net sales growth of 16.9% to $964.5 million, driven by HOKA and UGG brands, with operating income up 24.5% despite gross margin pressure and a planned inventory build-up impacting cash flow Financial Highlights Q1 FY2026 highlights include 16.9% net sales growth to $964.5 million, driven by HOKA and UGG brands, with operating margin improving to 17.1% and diluted EPS rising 24.0% Q1 FY2026 Financial Highlights vs. Prior Year | Metric | Performance | | :--- | :--- | | Net Sales Growth | +16.9% | | HOKA Brand Sales Growth | +19.8% | | UGG Brand Sales Growth | +18.9% | | Wholesale Channel Sales Growth | +26.7% | | International Sales Growth | +49.7% | | Operating Margin | 17.1% (+110 bps) | | Diluted EPS | $0.93 (+24.0%) | Results of Operations Net sales increased 16.9% driven by HOKA and UGG, while gross margin declined to 55.8% due to channel mix, yet income from operations rose 24.5% to $165.3 million - HOKA brand net sales increased by $107.9 million (19.8%), primarily due to higher global wholesale sales from market share gains and earlier shipments related to a European 3PL transition[87][89] - UGG brand net sales grew by $42.1 million (18.9%), driven by increased demand for year-round products and timing of sell-in for fall franchises in the wholesale channel[87][89] - Gross margin decreased by 110 basis points, primarily due to unfavorable channel mix (higher wholesale growth), increased promotional activity, and higher freight costs[90] - SG&A expenses increased by approximately $35.4 million, driven by higher marketing expenses for HOKA and UGG ($13.3 million), increased payroll for talent investment ($8.9 million), and higher rent from retail expansion ($5.1 million)[91][94] Liquidity and Capital Resources The company maintains strong liquidity with $1.72 billion in cash, despite operating cash flow decreasing to $36.1 million due to inventory build-up, and has $2.44 billion remaining for stock repurchases - The company's cash and cash equivalents balance was $1.72 billion at the end of the quarter[100] - The decrease in net cash from operating activities was mainly due to higher inventory purchases to support demand and the transition of the European 3PL, along with higher trade accounts receivable[109] - As of June 30, 2025, the aggregate remaining approved amount under the stock repurchase program is $2.44 billion[106] - Net cash used in financing activities increased to $183.2 million from $151.9 million in the prior year, primarily due to a higher dollar value of stock repurchases[111] Quantitative and Qualitative Disclosures About Market Risk No material changes occurred in the company's market risk exposures, including commodity pricing, foreign currency, and interest rates, compared to the 2025 Annual Report[114] - There were no material changes in the quantitative and qualitative disclosures about market risk from the company's 2025 Annual Report[114] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[116] - No material changes to the company's internal control over financial reporting occurred during the quarter[117] PART II - Other Information Legal Proceedings The company is engaged in routine legal proceedings to protect its intellectual property rights, with management expecting no material adverse effect on financial condition or operations - The company is engaged in routine legal actions as part of its global program to protect its intellectual property rights, including claims of trademark counterfeiting and infringement[120] - Management believes that the final outcome of current ordinary course legal matters will not have a material adverse effect on the company's financial condition or results of operations[121] Risk Factors No material changes occurred to the risk factors previously disclosed in the company's 2025 Annual Report on Form 10-K[123] - During the three months ended June 30, 2025, there were no material changes to the risk factors previously disclosed in the 2025 Annual Report[123] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 1,665,902 shares for $183.0 million during the quarter, with $2.44 billion remaining under the authorized stock repurchase program Issuer Purchases of Equity Securities (Q1 FY2026) | Period | Total Shares Repurchased | Weighted Average Price per Share | Dollar Value of Shares Repurchased | | :--- | :--- | :--- | :--- | | April 2025 | 588,656 | $107.02 | $62,998 | | May 2025 | 532,150 | $118.38 | $62,998 | | June 2025 | 545,096 | $104.56 | $56,994 | | Total | 1,665,902 | $109.84 | $182,991 | - The Board approved a new $2.25 billion stock repurchase authorization on May 21, 2025[127] Other Information This section discloses director and officer trading plans, noting Anne Spangenberg's Rule 10b5-1 plan covering 16,686 shares during the quarter - During the quarter, Anne Spangenberg (President, Fashion Lifestyle Group) had a Rule 10b5-1 trading arrangement covering 16,686 shares[132] Exhibits This section indexes exhibits filed with the Form 10-Q, including officer certifications and Interactive Data Files (XBRL) - The report includes certifications from the Principal Executive Officer and Principal Financial and Accounting Officer as required by the Sarbanes-Oxley Act[134]