Deckers Brands Q2 FY2027 Earnings: Tariff Refunds Lift EPS as U.S. DTC Demand Softens

Deckers Brands reported fiscal second-quarter revenue of $1.48B, up 3.5%, while diluted EPS increased 27% to $2.31. The earnings gain was partly driven by a $0.28-per-share benefit from IEEPA tariff refunds and related interest, while underlying operating performance reflected stronger international demand and wholesale sales, offset by weaker U.S. direct-to-consumer activity and European fulfillment delays.

The central issue is not profitability in the quarter, which remained strong, but the slower growth outlook. Management reduced its full-year sales expectations as it prioritizes full-price selling and brand positioning over competing in an increasingly promotional U.S. athletic-footwear market.

Earnings Snapshot

The Bigger Story

Deckers protected margins despite a softer consumer environment, but it did so partly by accepting slower DTC growth rather than increasing discounting. The company’s U.S. e-commerce business was pressured as competitors increased promotions in athletic footwear, while consumers increasingly concentrated purchases around promotional events.

That discipline supported gross margin, but it also makes the near-term growth tradeoff clear. HOKA and UGG continue to grow, especially through wholesale and international markets, yet domestic sales declined slightly and DTC comparable sales fell 6.4%.

The second-quarter EPS result also requires adjustment for the tariff-refund benefit. IEEPA tariff net refunds of $46.0M, plus $3.0M of associated interest, added approximately $0.28 to diluted EPS and contributed roughly 310 basis points to gross and operating margin. Excluding that benefit, management said diluted EPS would have been $2.03, still up 11.5% from the prior year.

Revenue and Operating Performance

Revenue increased 3.5% to $1.48B, or 2.8% on a constant-currency basis. HOKA and UGG remained the growth drivers, with HOKA sales rising 6.8% to $677.2M and UGG sales increasing 3.5% to $786.4M.

Wholesale sales rose 5.5% to $1.09B, more than offsetting a 1.8% decline in DTC revenue to $387.5M. The channel divergence was especially apparent in the U.S., where management said HOKA’s e-commerce business faced a more promotional market while wholesale partners continued to see solid demand for full-price product.

International sales increased 9.0% to $644.7M and were a major source of incremental growth. Management identified APAC as the fastest-growing international region, while EMEA demand remained healthy despite service disruptions from a third-party logistics provider during a peak shipping period.

Those European delays reduced second-quarter revenue by roughly $22M. Management cautioned that not all of that volume is expected to shift into the second half, since some orders could be delayed further or canceled. The disruption therefore represents both a timing issue and a modest revenue-conversion risk.

Domestic sales declined 0.4% to $835.8M. The decline reflected weaker U.S. DTC trends and the phaseout of Koolaburra standalone operations, which also weighed on other-brand sales, down 54.3% to $17.0M.

HOKA: Wholesale Strength Offset by Softer U.S. Digital Demand

HOKA wholesale sales increased 9% to $444M, while DTC sales grew 4% to $234M. Management said international DTC growth remained strong, but U.S. digital demand was weaker as consumers responded to promotions from competing athletic-footwear brands.

Core HOKA franchises, led by Bondi, performed well. The company also cited Clifton Pro as a positive contributor. However, management acknowledged that some calendar 2026 franchise updates, including Transport, Kawana and Solimar, did not resonate as intended.

Deckers expects more substantial product updates in calendar 2027, including the January launch of Bondi 10, the April launch of Mach Pro, and a later update to the Mach franchise. Management said early bookings for Mach Pro were strong, but these launches remain an execution variable rather than an established growth driver.

UGG: Wholesale Selling Supports a Key Seasonal Period

UGG wholesale sales rose 7% to $641M, while DTC sales declined 8% to $146M. The second fiscal quarter is largely a wholesale selling period for UGG, and management said wholesale performance positioned the brand for its critical holiday season.

Management described consumer purchasing patterns as increasingly “buy now, wear now,” with shoppers delaying seasonal purchases until closer to need. That makes holiday sell-through and replenishment more important than usual. Deckers is not assuming the same level of reorder activity it received last year, when favorable weather and demand produced a particularly strong late-season reorder business.

UGG’s newer styles, including Lowmel, Goldenstar Evelina, Zora and Quill, were cited as positive demand indicators. Apparel, particularly fleece-led products, also contributed to engagement. The investment question is whether these newer categories can broaden the brand’s revenue base without weakening the premium positioning of its core footwear franchises.

Profitability and Margins

Gross margin expanded to 60.5% from 56.2%, a 430-basis-point improvement. However, approximately 310 basis points of that increase came from IEEPA tariff refunds, net of cost-sharing arrangements with independent manufacturers.

Excluding the tariff benefit, management said gross margin improved by roughly 120 basis points, split approximately evenly between higher full-price selling and favorable product mix. That underlying expansion is meaningful because it shows Deckers maintained pricing and product economics even as revenue growth slowed.

SG&A expense increased 6% to $505.7M, outpacing sales growth. Management said it reduced spending relative to prior expectations in response to slower revenue growth, while marketing and technology remained the primary areas of year-over-year investment.

Operating income rose 19.3% to $389.5M, and operating margin reached 26.3%. Excluding the tariff-refund benefit, management said operating margin was 23.2%, compared with 22.8% a year earlier. This indicates modest underlying margin improvement despite higher spending and a more difficult U.S. marketplace.

The tariff-related gains are non-recurring in nature. They materially lifted reported profitability in the quarter and will also affect the full-year comparison.

Demand, Customers and Pricing

Management’s response to the promotional market has been to preserve full-price selling rather than pursue incremental sales through discounts. That strategy supported second-quarter gross margin, but it also contributed to softer U.S. DTC performance as consumers found promotional alternatives through other brands and retail channels.

For HOKA, management said the brand continues to gain share in performance running above the $120 price point. Competition is greater below $120, where Deckers sees more compressed price points and more aggressive discounting.

Management expects the athletic-footwear market to look cleaner by the second half of calendar 2027 as inventories and product transitions normalize. Deckers specifically expects to enter the Bondi 10 launch with relatively clean inventory of Bondi 9, though the timing and extent of markdowns will depend on sell-through.

UGG’s demand profile is more seasonal. Management said early demand for several new and returning styles exceeded internal expectations, but the major test remains the late-November through December holiday period.

What is Deckers Brands’ guidance for FY2027?

Deckers now expects fiscal 2027 net sales of $5.700B to $5.725B. Management expects HOKA revenue to increase by a high-single-digit percentage and UGG revenue to increase by a low-single-digit percentage.

The company expects:

• ·Gross margin of approximately 58.5%
• ·SG&A expense of approximately 35.5% of revenue
• ·Operating margin of approximately 23%
• ·Effective tax rate of approximately 23%
• ·Diluted EPS of $7.80 to $7.95

The outlook includes IEEPA tariff net refunds received through October 8 totaling $87.9M, plus $4.7M of associated interest. Management said those refunds add approximately 150 basis points to gross and operating margin and roughly $0.52 to projected full-year diluted EPS. No additional unreceived tariff refunds are included in guidance.

Excluding the tariff-refund benefit, management expects fiscal-year gross margin of about 57% and operating margin slightly above 21.5%.

For the fiscal third quarter, Deckers expects total revenue growth in the low single digits, with UGG growing low single digits and HOKA growing low to mid-single digits. Diluted EPS is expected to be $3.52 to $3.60, including an estimated $0.24 benefit from tariff refunds.

Management’s full-year outlook implies a reacceleration in HOKA growth in the fourth quarter, supported by international demand and planned product launches.

Balance Sheet, Cash Flow and Capital

Deckers ended the quarter with $1.21B in cash and cash equivalents and no outstanding borrowings. Inventory was $860.8M, up 3% year over year, which management characterized as tightly managed.

The company repurchased $299.3M of stock during the quarter, buying approximately 3.2 million shares at an average price of $93.65. First-half repurchases totaled $637.5M, or roughly 6.5 million shares, at an average price of $98.77.

Deckers’ full-year EPS outlook assumes $1.0B of share repurchases. The company had approximately $4.4B remaining under its authorization at quarter-end.

What Investors Should Watch

1. U.S. DTC trends

DTC comparable sales declined 6.4% in the quarter. Improvement in U.S. e-commerce conversion without a major increase in promotional activity would support management’s claim that brand demand remains intact.

2. HOKA’s product-reset execution

Bondi 10, Mach Pro, Mach 8 and other calendar 2027 launches are intended to address uneven reception to certain recent franchise updates. Retailer bookings, full-price sell-through and product-transition inventory will show whether those launches can restore stronger HOKA momentum.

3. UGG holiday sell-through and reorder demand

UGG’s fiscal third quarter is its largest seasonal period. The key variable is whether consumers respond to new styles and holiday marketing strongly enough to produce replenishment demand, especially after management adopted a more conservative reorder assumption.

4. Margin durability without tariff refunds

Reported margins benefited substantially from tariff refunds. Investors should focus on full-price selling, product mix, freight costs and promotional intensity to determine whether Deckers can preserve its underlying margin structure after that benefit rolls off.

5. European fulfillment normalization

The $22M impact from EMEA logistics delays was partly a timing issue, but not all delayed orders are expected to convert into later revenue. The pace of operational recovery will affect international growth and the reliability of wholesale shipments.

AlgovestIQ Takeaway

Deckers delivered a profitable quarter, with HOKA and UGG still growing and international demand providing a meaningful offset to U.S. DTC weakness. The company’s decision not to chase promotions protected product economics, and underlying gross-margin and operating-margin performance remained better than the reported revenue growth might suggest.

Still, the 27% EPS increase overstates the underlying earnings trend because tariff refunds added $0.28 per share in the quarter. Excluding that benefit, EPS growth was 11.5%, which remains solid but better reflects the operating result.

The more important change is the growth outlook. Management is signaling that the U.S. consumer and athletic-footwear marketplace have become more difficult, and that Deckers is willing to accept slower near-term sales growth to defend pricing and brand equity. This approach can preserve long-term brand value, but it raises the burden of proof around HOKA’s ability to return to faster growth through product innovation, distribution expansion and improved digital execution.

The next several quarters should clarify whether the slower outlook is primarily a cyclical response to promotional competition or evidence of a more durable slowdown in U.S. demand. Strong holiday UGG sell-through, clean HOKA product transitions, renewed DTC momentum and stable margins excluding tariff benefits would strengthen the investment case. Continued domestic weakness, heavier markdowns or delayed conversion of European shipments would weaken it.