Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Deckers Outdoor Corp (DECK, Financial) reported a 20% increase in revenue for the second quarter, reaching $1.3 billion.
- The HOKA brand achieved a significant milestone by surpassing $2 billion in revenue over the trailing 12-month period.
- Gross margins improved to 55.9%, up 250 basis points from the previous year.
- Diluted earnings per share increased by 39% to $1.59, compared to $1.14 last year.
- The company raised its full-year revenue growth expectations to approximately 12%, reflecting strong demand for its brands.
Negative Points
- The company anticipates a more promotional environment in the second half of the fiscal year, which could impact margins.
- There are concerns about macroeconomic pressures, including potential recessionary impacts and inflationary pressures.
- Inventory levels increased by 7% compared to the same period last year, which could pose a risk if demand slows.
- The company faces potential headwinds from increased freight costs, which have already impacted gross margins.
- There is uncertainty regarding tariffs and geopolitical tensions, which could affect future financial performance.
Q & A Highlights
Q: Can you discuss the impact of higher-priced HOKA styles like Skyward X and Cielo X1 on top-line growth and brand expansion?
A: Stefano Caroti, President and CEO, noted that Pinnacle products like Cielo X1 and Skyward X have exceeded expectations, breaking the $200 price point. Steve Fasching, CFO, added that these styles are crucial for market penetration and distribution expansion, improving both top-line growth and margin profiles.
Q: With HOKA's guidance raised to 24% growth, how should we view second-half performance and channel/geography expectations?
A: Steve Fasching explained that the majority of growth was planned for the first half due to new styles and wholesale expansion. The second half will see moderated growth as inventory levels stabilize, but international markets, particularly Europe, continue to show strong performance.
Q: What is the strategy for HOKA's international growth, and how does it compare to the U.S. market?
A: Stefano Caroti stated that international markets are 2-3 years behind the U.S. but are following the same successful playbook. The goal is to achieve a 50/50 revenue split between U.S. and international markets, with significant growth potential in Europe and Asia.
Q: How are you managing gross margin pressures in the second half, and are there signs of a pullback in full-price selling?
A: Steve Fasching indicated that gross margin pressures are anticipated due to increased inventory and potential promotions. However, current full-price selling remains strong, and the company is cautious about macroeconomic conditions affecting the holiday season.
Q: Can you elaborate on the performance and strategy for HOKA and UGG in Asia, particularly China?
A: Stefano Caroti highlighted that both brands are performing well in China despite economic challenges. HOKA is gaining traction in major races, and UGG is expanding through local collaborations. The company is small in China but sees significant growth potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
