Deckers Outdoor Corporation Stock

Good afternoon, everyone, and thank you for standing by. Welcome to the Deckers Brands First Quarter Fiscal 2027 Earnings Conference Call. [Operator Instructions] And finally, I would like to remind everyone that this conference call is being recorded. I would now like to turn the call over to Ms. Erinn Kohler, Vice President, Investor Relations and Corporate Planning. Please go ahead, ma'am.

Hello, and thank you, everyone, for joining us today. On the call are Stefano Caroti, President and Chief Executive Officer; and Steve Fasching, Chief Financial Officer. Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995.

All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to drive long-term value, the dynamic macroeconomic environment and related impacts on our business and operating results, including changes to global trade policy, freight costs and fluctuations in foreign currency exchange rates, geopolitical conflicts, including the ongoing Middle East conflict and related supply chain, logistics and cost impacts, our current and long-term strategic objectives, the expected performance of our brands and demand for our products.

The anticipated impacts of our brand, product, marketing, marketplace, distribution and investment strategies, our product development plans and the timing and anticipated performance of product launches, changes in consumer behavior, our ability to acquire new consumers and gain market share, our ability to achieve our financial outlook and multiyear framework, including anticipated revenues, product mix, margins, expenses, inventory levels, promotional activity, anticipated rate of full price selling and earnings per share, the timing of wholesale and distributor shipments, our ability to maintain a premium full-price global marketplace, statements regarding tariff refunds and our ability to generate free cash flow and execute our capital allocation strategy, including potential share repurchases.

Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors such as foreign currency rate fluctuations and changes to trade policies that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements.

The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements. On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency as well as free cash flow.

For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open throughout the current and prior reporting periods. The company believes that these non-GAAP financial measures are useful supplemental indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results.

Additionally, free cash flow is defined as net cash provided by operating activities for a particular period, less capital expenditures made during that same period. The company believes free cash flow is a useful supplemental measure of liquidity as it reflects the cash generated from operations after investments required to support the strategic growth of the business. Please review our earnings release published today for additional information regarding our non-GAAP financial measures. With that, I'll now turn it over to Stefano.

Thanks, Erinn. Good afternoon, and thank you all for joining today's call. For the first time in Deckers history, we delivered over $1 billion of revenue in the first quarter as total company revenue increased 5.7% versus last year, and diluted earnings per share was $0.94, both above our expectations for the quarter. As anticipated, performance was led by total company DTC, which increased 13% versus last year. Both HOKA and UGG maintained solid momentum and continued to capture high level of full-price consumer demand, driving global DTC revenue growth of 17% and 6%, respectively.

Wholesale channel growth was in line with our expectation, which included planned international shipment timing differences moving later this year as compared to last. Underlying consumer demand for our brands remains strong across international markets and domestically. HOKA and UGG each delivered healthy first quarter growth in terms of wholesale revenue sell-in, and full price unit sell-through in the U.S. market. I'm especially pleased with our progress across innovation and product newness, which are resonating globally.

The engagement we're seeing is not limited to a single region, channel or product family. It reflects the broader impact of our consistent approach to creating distinctive consumer-led products that connect emotionally, perform exceptionally and amplify the relevance of our brands. Further, we have been disciplined in how we're managing supply, protecting brand heat and avoiding unnecessary promotional pressure reflected in both the quality of our inventories and high levels of full-price business.

This gives us greater flexibility and visibility as we plan forward because we are operating from a stronger inventory position with cleaner channels, better pricing integrity and continued consumer demand for the products we're bringing to market. These results reinforce our confidence in our fiscal '27 outlook and multi-year framework. Our teams are bringing new and innovative ideas to market at the right time. while staying focused on quality, authenticity and long-term brand health.

We remain committed to the fundamentals that have long differentiated Deckers, building powerful brands, preserving a pull model of demand and investing with purpose to enhance our competitive positioning and capitalize on the opportunities ahead. While the consumer backdrop remains pressured, we continue to see people showing up for the brands they love, and we believe the compelling product pipeline for both HOKA and UGG will support continued market share gains throughout this year and beyond.

Steve will provide further details on our first quarter results and fiscal year '27 outlook later in the call. But first, I will share an update on Q1 brand performance. Starting with HOKA, global revenue in the first quarter increased 8% versus last year to $704 million. HOKA performance was driven by global DTC revenue increasing 17%, with all international regions continuing to deliver robust growth and the U.S. maintaining positive momentum. DTC growth was broad-based across HOKA franchise families with continued strong demand for our most popular products alongside well-received updates to emerging models in the assortment.

As growth and consumer affinity for Clifton and Bondi continues to build, additional models driving full-price DTC demand included Speedgoat 7, benefiting from our global integrated Run Wilder marketing campaign that delivered meaningful consumer engagement across our key markets, Mach 7, featuring a lower profile geometry inspired by fastest shoe, the Cielo X1; Mafate Speed 2 leading the HOKA brand's acquisition of global lifestyle consumers, particularly with the recent XLIM collaboration that was a resounding success in building brand heat and attention to the model more broadly and Skyward attracting consumers to the X 2 for an ultra-premium daily ride and the Skyward Laceless as an easy pull-on recovery shoe.

We're very encouraged by the meaningful consumer engagement with these models, spanning across road running, trail and lifestyle, which collectively contributed over half of global HOKA DTC growth in the quarter. The breadth of DTC demand across HOKA is the result of our targeted investments in capabilities across technology, design, color, lifestyle and marketing, which have allowed HOKA to expand consumer appeal for a wider array of styles.

This provides HOKA with an even greater opportunity to expand closet share with existing consumers and attract new consumers through models that offer a distinct HOKA performance experience while extending into lifestyle wearing occasions. We expect the benefits of these investments to continue building season after season, with current product assortment representing early days of the strategic elevation and even more exciting things to come in spring '27 and beyond.

On that front, I'd like to highlight one of our most recent launches, the first-ever Clifton Pro, though it only has been in the market for about 2 weeks. We are very encouraged by the early response from consumers and wholesale partners with some accounts already placing reorders. The launch of Clifton Pro is an important milestone for HOKA as it represents the progress we're making to offer more impactful differentiation, both within our product assortment and relative to the competition.

Building on the strength of the Clifton franchise, Clifton Pro elevates the performance experience with HOKA PROGLIDE+ midsole technology, featuring a supercritical foam that offers greater resilience and efficiency with every stride. Clifton Pro introduces our updated technology branding for HOKA, creating a clear performance product architecture that makes our Fly and Glide collections more intuitive for consumers.

Our Glide collection is designed to feel smooth, soft and cushioned, which encapsulates franchises like Clifton and Bondi. On the other end of the performance spectrum, our Fly collection is designed to be responsive, fast and propulsive, including franchises like the Mach, Cielo X and Rocket X. The Clifton Pro launched with selective strategic wholesale segmentation, while the Clifton 11 update is positioned for broader wholesale distribution with both styles available through DTC.

As we build upon the Pro concept, the Mach Pro will be our first model within the Fly collection, which is receiving very encouraging bookings in advance of its strategically segmented spring '27 release. The introduction of HOKA brand technologies is helping create more structure and differentiation throughout our innovation pipeline across performance and lifestyle improving model clarity for consumers, supporting premium price points and expanding the HOKA brand's addressable market over time.

From a HOKA wholesale perspective, global revenue increased 3% versus last year, aligned with our expectation that outlined an international shipment timing difference this year versus last. Growth in the quarter was driven by the U.S. market, which delivered higher sell-in and strong increase in full price sell-through, reflecting a healthier marketplace and smooth transition for Clifton.

While reported international wholesale revenue reflected the comparison to unusually early shipments last year, underlying consumer demand remains strong across regions and channels. EMEA delivered robust wholesale sell-through and another quarterly record for reorders. And international DTC continued to generate exceptional revenue growth across Europe, China and Japan. This momentum is fueled by the HOKA brand's relentless focus on innovation and performance.

Last month, that spirit was on full display at the Western States Endurance Run, the oldest continuously run 100-mile trail race, where HOKA celebrates its origin in trail running as a title sponsor. This year's ultramarathon was particularly special because our very own Senior Manager of Product Engineering and HOKA athlete, Vincent Bouillard set a new course record, winning the race in a custom-made HOKA Tecton prototype that he helped design.

We are incredibly proud of Vincent's accomplishment, both as an athlete and as an employee. Bravo, Vincent. We're also proud to congratulate Sam Laidlow, one of the world's top triathletes on his recent world record-setting victory at Challenge Roth, the largest iron distance triathlon in the world. Competing in the HOKA Rocket X 3, Sam's performance highlights the potential of HOKA innovation at the highest levels of competition.

As we move into the second quarter, we're focused on advancing our global marketplace execution to elevate and differentiate our strategic partners, supported by the continued strength of our DTC business. In the coming quarters, we'll continue to bring HOKA innovation to market across road, trail and lifestyle to grow brand awareness and capture global share.

Shifting to UGG, global revenue in the first quarter increased 5% versus last year to $278 million. Performance was balanced across channels with DTC and wholesale growing 6% and 5%, respectively. UGG delivered growth in both the U.S. and international regions. Growth was led by international markets with particular strength in Asia as the mono-brand retail presence has been especially effective at driving consumer adoption of versatile UGG products across new categories.

UGG performance in the first quarter reflected continued progress with our 365 and men's growth initiatives. During our first fiscal quarter, we continue to allocate availability of key classic styles while directing greater marketing and product investments toward fashion casual footwear, sneakers and sandals. These efforts have driven increased consumer adoption across those categories, resulting in favorable product mix shifts that supported higher gross margins for the UGG brand.

Key franchise families that have contributed to these product mix shifts include the Lowmel family, which continues to drive demand through the original Lowmel franchise while expanding into low profile with the Minimal introduction and the Golden collection, which benefited from strong selling across new seasonal GoldenGaze silhouettes. This quarter, our 365 initiative is also reflected in the performance of our men's business, which accounted for the largest portion of incremental UGG revenue.

We continue to see a combination of increased engagement for male consumers for all gender franchises like Tasman and Lowmel as well as demand for newer products specifically designed to serve our men's consumers such as the Otzo Clog. We're also encouraged by the reception to our Spring UGG apparel offering. Our fleece collection performed especially well across U.S., Europe and Asia. reinforcing apparel as a natural extension of the UGG brand with an opportunity to deepen engagement across a broader range of occasions.

Our common thread across UGG product successes remains our ability to reinterpret iconic brand codes through silhouettes, categories and consumer occasions, expanding the brand's relevance while maintaining the distinctive product attributes that consumers expect from the UGG brand. Importantly, these encouraging results reflect the UGG brand's ability to both influence and anticipate evolving consumer preferences translating those insights into products and brand stories that help shape demand across categories and seasons.

Our marketing initiatives continue to elevate the brand's cultural relevance, expand consumer engagement and strengthen consumer connections across key markets. Men's momentum was supported by the continued halo from our spring product campaign as well as lifestyle storytelling that resonated with global consumers. At the same time, the brand benefited from a series of culturally relevant activations across Atlanta, Los Angeles, Paris, London, Chengdu and Seoul, leveraging social-first content and talent partnerships that expanded awareness, deepen engagement and reinforced UGG as a year-round lifestyle brand.

Overall, our integrated approach to product storytelling, community-driven experiences and digital engagement helped maintain strong consumer interest while building momentum behind iconic UGG franchise families and new footwear styles that enhance brand growth and credibility across categories and seasons. As we transition towards the fall season, our teams are focused on driving our progress forward with the introduction of a new mule and hidden wedge silhouettes in the Mel franchise family.

In addition to launching our Dusty Orchid pink collection, which spans across classics, sneakers and ballet-inspired models. We'll continue to cultivate this brand's energy with our Born to Feel fall campaign later in the second quarter. Our team's efforts to continue strengthening the UGG brand's relevance across seasons and consumer occasions are reflected in our performance and the growing consumer demand for UGG, which gives us the confidence in the market share opportunities ahead for the special brand.

With that, I'll hand it over to Steve, who will provide further details on our first quarter financial results and our fiscal year '27 outlook.

Thanks, Stefano, and good afternoon, everyone. Our first quarter reflects continued consumer demand across both HOKA and UGG, supported by compelling product innovation, strong consumer engagement and continued strength in our DTC channel. While our wholesale results included planned shipment timing dynamics, the underlying brand adoption for HOKA and UGG across regions and channels remained encouraging.

Against that backdrop, we delivered first quarter revenue and earnings modestly above our expectations while continuing to invest in the long-term growth opportunities ahead. Now let's dive into the details of our first quarter fiscal year 2027 results. Total company revenue was $1.02 billion, up 5.7% versus the prior year. Growth was primarily driven by HOKA increasing 8% versus last year to deliver quarterly revenue of $704 million, driven by DTC channel growth across Europe, China, Japan and the U.S. UGG increased 5% versus last year to deliver $278 million of revenue as year-round styles continue to resonate with consumers.

Gross margin for the quarter was 56.4%, which is up 60 basis points from last year's 55.8%. As compared to last year, first quarter gross margin primarily benefited from favorable channel mix with DTC growing faster than wholesale, favorable product mix and full price selling, favorable foreign currency exchange rates and unique items in the quarter primarily related to better management of product closeouts with partial offsets from the net headwind of tariffs. SG&A dollar spend in the first quarter was $420 million, which is up 13% from last year's $373 million.

As anticipated, SG&A dollar growth reflects annualization of new hires in the prior year, primarily to support key brand initiatives, marketing investments to support our growth strategies, higher rent costs primarily related to adding global HOKA stores, increased technology expenses to enhance our operating platform and improve data analytics and an increase related to foreign currency remeasurement. Our tax rate was 23.1%, which compared to 24% for the prior year.

During the first quarter, we repurchased approximately $338 million worth of shares at an average price per share of $103.79. As of June 30, 2026, the company had approximately $4.7 billion remaining under its stock repurchase authorization. These results, including a lower share count from our share repurchase activity, drove diluted earnings per share of $0.94 for the quarter, which compared to $0.93 in the prior year period.

In terms of our first quarter performance relative to the expectations we shared in May, favorable gross margin was the primary driver of our $0.07 EPS beat relative to the high end of our guidance, which is our outlook. Turning to our balance sheet at June 30, 2026. We ended June with $1.6 billion of cash and equivalents. Inventory was $808 million, down 5% versus the same point in time last year, and we had no outstanding borrowings. Now moving into our updated outlook for fiscal year 2027.

We still expect total company revenue in the range of $5.86 billion to $5.91 billion, reflecting high single-digit growth versus the prior year. HOKA is still expected to increase to low double digits and UGG is still expected to increase mid-single digits. We have increased our gross margin expectations to now be slightly better than 56.5%, reflecting the first quarter's outperformance while also updating our go-forward tariff rate assumption to 12.5% from the prior 10%.

On the tariffs previously paid, we continue to pursue tariff refunds related to the IEEPA ruling but have not included any assumptions regarding refunds as a part of our guidance at this time. SG&A is still expected to be approximately 35% of revenue as we remain committed to investing in our key growth initiatives. As a reminder, consistent with our long-term framework, our investments in this fiscal year are focused on fortifying the foundation of our business and supporting the continued growth of our brands, positioning us to begin delivering operating expense leverage in fiscal year 2028 and beyond.

With these updates, operating margin is now expected to be slightly better than 21.5%, reflecting an increase from our prior outlook as we flow through a higher expected gross margin. Our effective tax rate is still projected to be approximately 23%. And we now expect diluted earnings per share in the range of $7.35 to $7.50, which represents a $0.05 increase due to our increased gross margin expectations on the year. This earnings per share guidance still assumes share repurchases with a value equal to approximately 80% of our projected fiscal year 2027 free cash flow.

Our teams remain focused on delivering the full fiscal year 2027 guidance that I just walked through. Within this full year's outlook, we continue to expect growth rates to accelerate in the second half. Similar to our first quarter, our second quarter expectations also reflect the planned timing differences in our wholesale and distributor businesses with shipments moving later in the year as well as an impact from lapping last year's wind down of the Koolaburra brand in Q2.

With that in mind, we'd like to provide additional context on the current quarter. In the second quarter compared to last year, we continue to expect HOKA contributing high single-digit percentage growth with acceleration in the second half of this year, UGG maintaining its mid-single-digit growth rate and other brands are expected to be down approximately 50% versus last year, primarily from streamlining our brand portfolio, with this all driving consolidated revenue up approximately 5% in Q2 versus last year.

Our second quarter gross margin is expected to be down due to tariffs and rising freight costs, while SG&A will continue to reflect first half weighted investments, leading to an expected diluted earnings per share in the range of $1.73 to $1.78. Given the unique operational timing dynamics embedded in the first half of fiscal year 2027, the planned acceleration of revenue growth in the second half is being driven primarily by the HOKA brand and our international wholesale and distributor business.

As we have said in the past, quarterly growth is not always linear, particularly for a brand like HOKA that continues to prioritize maintaining a pull model of demand to deliver long-term sustainable growth. Overall, the performance of our brands in the first quarter was solid as underlying global demand signals for our brands continue to be strong, reinforcing our confidence in the ability to achieve our increased full fiscal year guidance.

Our top-tier levels of profitability, robust free cash flow generation and debt-free balance sheet provide us the flexibility to continue fueling our long-term growth opportunities while remaining agile in the current environment. Thanks, everyone. I'll now hand the call back to Stefano for his final remarks.

Thank you, Steve. As we have discussed today, our first quarter was defined by broad-based consumer demand across both HOKA and UGG, supported by compelling product innovation, disciplined marketplace execution and strong engagement across channels and geographies. While the external environment remains dynamic, the underlying health of our brands and the quality of demand we continue to see reinforce our confidence in the opportunities ahead.

At HOKA, we're expanding consumer participation through a more differentiated product portfolio growing international reach and building an innovation pipeline that continues to elevate the brand. With UGG, we're broadening relevance across seasons, categories and consumer segments, creating new avenues for long-term growth. At both brands, our teams are executing the strategies that we believe will strengthen our market position and support sustainable share gains over time.

Looking ahead, we remain disciplined in our approach to delivering exceptional products that resonate with our target audience, investing behind our brands and maintaining a premium full-price global marketplace. I want to thank our global teams for their passion and commitment, our retail partners for their collaboration and our shareholders for their continued support. We're encouraged by the start to fiscal '27 and remain confident in our ability to deliver long-term value. Thank you for joining us today.

Operator, we're now ready to begin Q&A.

[Operator Instructions] We'll go first this afternoon to Jay Sole with UBS.

Stefano, a question for you. Actually, 2 questions and also one for Steve. First, you talked a lot about the new products. You talked about Clifton Pro, which is great. You talked about a lot of the new products that are coming out there for HOKA. Can you -- I think last quarter, you talked about how you had multiple franchises, which are already almost at least $100 million in revenue.

Can you just talk about how the different franchises that you're launching contribute to HOKA's ability to grow double digits beyond this year into next year? And like what you've seen from things like Torrent, which you didn't mention or Arahi or some of the ones that are -- seem like they're strong, but you didn't mention on the call. And then maybe just talk about Bondi 10, what you're expecting from that as you get into the first part of calendar '27.

And then maybe on the gross margin, you also talked about the importance of full price sell-through. And I know that's one of your top KPIs. You talked about the flexibility that gives you as a brand to continue to grow. But can you just give us an example of why it's so important to stay at a high gross margin and keep the marketplace clean? And then Steve, can you talk about in the quarter how much upside to gross margin came from better-than-expected full price sell-through? Those are my questions.

Consumers are responding to newness and innovation. And I'm really happy with how the new product drops, new product launches are performing across the marketplace. Speedgoat 7 has been a resounding success. Most recently, Clifton 11 and Clifton Pro are off to a great start. We're already seeing reorders and some customers already topping up their spring/summer '27 orders. So consumers are responding to newness, and that's what gives me confidence that things will continue for the second half of the year.

Keep in mind that for the second half of the year, Jay, we have a broader assortment. The broader assortment allows us to segment and differentiate the market even further and gives us the ability to expand with key strategic partners, key strategic partners to champion the brand. We'll have more differentiation than ever before. We have Cielo 70 for lifestyle destinations and department stores. We have the Clifton CL (sic) [ Clifton L ] for athletic lifestyle, athletic specialty destination.

We have a new Mach Pro for athletic specialty and a new shoe for sporting goods called the Fly Pace. So consumers are responding to newness and innovation. That's what gives me the confidence that things will continue. Our full price sell-through continues to be strong. Inventories are tight. Inventories were down 5% for the quarter. So clearly, we continue to drive a pull model, and that's very, very important to us. And we enforce scarcity in the marketplace. So consumers can buy our product at full price.

Yes. And Jay, just to then carry on. I think this quarter, again, demonstrates execution on our part to maintain that high gross margin. As we said, we value it quite a bit, and that is what we will strive to achieve. You can see how it helps us maintain brand credibility in the marketplace. It also works well with our partners in terms of, as we've talked about in the past, profit generation for them down channel as well.

So those are all important elements for our brand to be successful for ourselves as well as for our partners. When we look at Q1, to your question in terms of where we saw the overperformance, largely, it was maintaining that full price selling. As I mentioned, a component of that was better product closeout this year compared to last year. And so just to give you a bit of a bridge in terms of how we saw that. So with the better management of closeout in the quarter, we saw that as worth about 60 basis points.

The full price selling, combined with some of the channel and brand mix, in the quarter contributed about 110 basis points. And then FX, we benefited a little bit with about 40 basis points. And then that was offset by increased tariffs in Q1 this year that we didn't have last year, which was about a negative impact of about 150 basis points. And again, that's year-over-year on Q1.

We'll go next now to Adrienne Yih with Barclays.

It's nice to see the start to the quarter and UGG looks really good. So I just wanted to throw that out there. Stefano, I am going to talk about HOKA. I was wondering if you can talk about sort of the changing competitive landscape. There's some -- it's clearly not promotional anymore. But there's some new entrants in this space. There are some recovering older players that are kind of coming back in the space. Can you talk about kind of where HOKA is positioned, what you're going after kind of with your traditional performance-based product?

And then when we think about the tariffs, you've taken some price increases last year across both businesses. There are some refunds coming back. Can you talk about if you were to get those refunds, how will you -- some of it was kind of from the vendor. So will you pass any of it back? Will you kind of hold on to current pricing and not raise prices further? Can you just kind of talk about some of the puts and takes on what you might do with the tariff refunds?

Yes. Thanks, Adrienne. On the competitive side and how HOKA is performing across the global marketplace, we continue to maintain or gain share in performance run and trail. I just saw the latest Circana data for the past 3 months, and we've gained share above $120, which is fantastic. Our products continue to perform. And as I said to Jay's question before, the newness that is coming is resonating with the end consumer.

Clifton Pro and Clifton 11 appear to be coexisting well. We have a new Mach Pro hitting the market. So we'll continue to invest across performance run, trail, hike, training fitness and lifestyle inspired by performance. Those are the areas we'll be competing in across footwear, apparel and accessories.

And then, Adrienne, just on tariffs, the way we're looking at it. So clearly, we have not recorded anything related to a refund of the tariffs paid over the last year. We're continuing to work on that. Timing on that is not specific yet, but we look to see some recovery potentially down the road. And we'll be able to provide more details when we get clarity on that. We don't see it necessarily as a lump sum. It's going to most likely come in over a period of time.

And so then to your point of kind of how we're looking at uses of that. So clearly, we will work with our partners who shared in some of that and return some of those funds to our partners. There will likely and will be tax related to anything that we recover. So there will be a portion on that. And then the other areas that we're going to continue to look at is what helps us drive the business forward.

So we don't have a specific list yet to articulate today, but we'll look at ways that help us either drive growth in the business and/or how we also return value to our shareholders. So those are all factors that are on the table, but we see when that happens, if that happens, is definitely beneficial to the business in terms of driving it forward. And then just one more point kind of going forward because I know there's -- especially today, more questions around where tariffs are going. I did want to just highlight that we have increased our assumption on the go-forward rate.

So embedded in our raised outlook on the year, we are actually including a higher rate assumption of a tariff go-forward rate. So where we were previously at 10%, we're now assuming that goes to 12.5%. So we know we're in a volatile tariff environment. We're planning our business accordingly. And we're looking for ways that we're going to continue to drive the business forward, continue to grow awareness, continue to grow share while returning value back to our shareholders.

We go next now to Laurent Vasilescu at BNP Paribas.

I think in the prepared remarks, it was noted that supported by continued strength of our DTC business, Stefano, Steve, can you maybe unpack that a little bit more? And then as we think about HOKA overall high single digits for the second quarter, should we think about similar channel growth dynamics until we go to the second half of the year as we think about the launches and the timing shift of distribution -- distributors?

Yes, Laurent, I'll take that last part first. Yes, I think the important thing here, and we articulated it on the last call and just kind of want to further reemphasize this again on this call. The growth that you're seeing this year is really a change in logistics. It's not any change in assumption in demand, right? And so recall last year where we had a new warehouse that we were bringing online in Europe a year ago, that was shifting more of our wholesale and distributor orders earlier in the year, so really more first half.

Whereas this year, as we're ramping that up to speed, we're seeing more of a normal shift back to a more normal cadence. So that's where you're seeing really the acceleration of growth. To your question, how we're seeing growth outside of that change in logistics, yes, it's fairly comparable through first half and second half. And really, what this is, is just us aligning to a different logistics. The demand continues to be very strong. Overall, the demand is strong for the year. We're just seeing a shift in fulfilling that demand slightly differently across quarters this year versus last.

Yes. But maybe can you just unpack that comment about DTC continued strength? Like how do we think about DTC for HOKA globally for the second quarter? I appreciate you giving us color, giving us quarterly comment, but just to help for the audience, like how do we think about DTC embedded in that 2Q commentary about the top line?

Yes. Basically, just a quick answer there is not a significant change. We still continue to drive significant growth in our DTC channel this year.

Okay. Okay. Maybe one more question. Because there's some concerns about warm weather, I'm just curious to know if you've had any conversations with your key partners around this maybe -- are you seeing any cancellations in the order book for the second half? Or is that continuing to be really sturdy on that front?

No, no cancellations to the order book, Laurent. The great thing about the UGG brand and what the team has done is that the brand is more versatile, diversified and balanced than ever before across categories, geographies, segments, our sneakers, as I mentioned on previous calls, continue to perform well. Now we have -- we're building this Lowmel family across mules. We have the wedge that we just launched that is -- that we're chasing because it's doing super well. The Minimal has done well.

Our Tasman family has now become a year-round business with sheepskin but also deconstructed. We just launched the Flex, which do well. Our Golden collection has done super well. The Toe Post -- the GoldenGaze Toe Post was one of the key sandals success stories, the season. So the brand is more diversified than ever before. So even -- and we're less depending on a cold winter than ever before. So even if we had a warmer winter, we believe we will continue to perform, and we're seeing no cancellations to the order books.

We'll go next now to Paul Lejuez at Citi.

I'm curious if you could talk about the Europe market a little bit more, what you're seeing in terms of promotional levels, also at point of sale and where you're seeing market share gains and what's driving it? And then, Steve, I just wanted one clarification on the tariff pressure in the first quarter. Were you still running through the majority of IEEPA tariffs? Is that what ran through the P&L causing that pressure? I just wanted to understand that a little bit more.

Yes, Paul, on the Europe market, we continue to see high levels of demand for both brands. As I said in the opening remarks, we saw record levels of reorders for the HOKA brand in Q1. We've seen some timing differences, as Steve outlined before in Q1, but the demand continues to be robust really across all markets.

Yes, the consumer in Europe is probably a bit more pressured than it is in the U.S. as a result of energy prices going up. But we're holding our own. And even in times of challenge, what I've experienced is consumers gravitate to premium brands and brands that make them feel good. So we anticipate having a great year in Europe.

And then on the tariffs, Paul, you're right. Basically, recall last year, the inventory that we were selling through in Q1 did not have tariffs associated with that. The inventory that we're selling through in Q1 of this year did have tariffs on it. So that year-over-year headwind that we -- that I just called out is the tariffs that have impacted this year. Now as we move into the year, we'll start to have a more comparable basis on that tariff paid last year versus tariff paid this year. But Q1 was the biggest headwind in terms of the 4 quarters that we will experience this year.

We'll go next now to Sam Poser with Williams Trading.

I have a few. On HOKA, with the mix of the business, how much of the -- both the margins and the revenue in the first quarter were driven by the decision to promote on your website versus last year, you were keeping things clean. I would assume that was both sales and margin accretive to you. How much did -- am I thinking about that properly? And if so, how much did that help?

Yes, Sam, I'm not going to give you kind of specifics because it's included in that margin overperformance. So there is definitely a component to how we handled closeouts this year and its contribution to the gross margin in Q1. So we definitely benefited this year kind of with that better management closeout product.

It wasn't just isolated to HOKA, but in the Clifton franchise, that was a player and component within the quarter. But yes, what you're seeing in Q1 is how we've managed close-outs better using some of that product and selling it through our direct channels, which have contributed to higher gross margins and contributed to the overperformance in Q1.

Okay. Great. And then with UGG, I've heard that you're -- in the U.S., you're rethinking some of your distribution, some smaller accounts are being cut off, and some other accounts are being fed. Can you talk a little bit about, I guess, making certain accounts more important and others not?

And how much of that may have been the result of last year where it looks like, let's say, in early mid-November, you lost some -- you may have gotten some cancellations, which then were taken up by others and rewarding those retailers that supported you and not the ones that were trying to cancel orders last year, probably regretted it come end of December.

Our goal is to continue to build a premium marketplace, and we've been doing it for some time, and we want to work with retailers who completely champion the brand year-round. And that's why you've seen some changes. But the strategy doesn't change. The strategy we've applied over the past 5, 6 years. So things are continuing to develop according to how we set up to elevate these brands across the marketplace. So no major changes.

Okay. And I just -- I asked this question before, but 2 years ago, you had a very early response to product. The business got cooking in August. But last year, it happened significantly later more in the holiday. How do you look at sort of the flow of the business really from a consumer demand perspective?

Like are you expecting back-to-school to be up and then see another lull, a big lull again in September, October and then have it kick in back at Thanksgiving and have another year at the end that would look similar to last year, around different volumes, but from the way the chart would look on that.

I think we're seeing a bit more event-driven buying this year versus last year. That may be the difference we are experiencing. But I wouldn't say patterns are changing dramatically. Yes, there is a buy now, wear now component, but I think we're well prepared, and we're flowing product according to key commercial moments to maximize sell-through for us and our partners. So I don't anticipate major, major changes versus last year.

Yes. I think on that, Sam, and I know we've talked about it in kind of prior quarters and even higher peaks and lower valleys. And that goes a little bit to what Stefano says is we're seeing consumers respond to more event-driven buying, the demand for our brands, we're not seeing a change. Now we may be seeing some concentration of buying patterns.

But what we see, and the data reflects is kind of strong consumer response to our brands. I think our gross margins are another indication of the healthy -- or health of the position of our brands in the marketplace. And yes, we may see some more points of concentrated buying in periods of time, but demand remains strong.

We'll go next now to Blake Anderson of Jefferies.

I wanted to ask, first of all, for the second half for HOKA. Steve, is there any color you can give us in terms of DTC versus wholesale? I know you talked about the delay kind of wholesale into the second half. Does that mean that wholesale could be above DTC? Just wondering if there's any more color you could give us on how to think about the magnitude of those 2 channels in the second half and any other puts and takes, especially given the level of newness as well?

Yes, sure. I think -- and this really relates again to just the logistics timing change this year versus last. Where you're going to see the change is an increase in the rate of growth on HOKA in the back half due to our logistical fulfillment of the orders that are out there.

So what you've seen in the first half, that growth rate being lower than the full year number will begin to increase as you get into the back half on the wholesale and distributor orders that are international related because that's really the change that you're seeing and the acceleration in the back half. Other than that, we're not expecting a significant shift in our business.

Got it. And then I wanted to ask on Lifestyle in particular. You mentioned some of the newer products and then the Clifton Pro and Mach Pro on more of the performance side. Stefano, are there any other hints you can give us on what's in the pipeline for HOKA product or retailer segmentation for Lifestyle in particular? And when do you think we could start to see a larger impact from Lifestyle to HOKA's growth over time?

Yes, you'd like to see a bit more of an impact in the second half of the year. We just launched Speedgoat 2 now. We did the collaboration with Foot Locker with a rapper called Smino on the Speedgoat 2. There's more product hitting in the spring. I mentioned Cielo 70, a low profile running inspired shoe that you should see in lifestyle destinations.

We're building these product families, the Bondi franchise, the Bondi CL (sic) [ Bondi L ], you should be able to see in key athletic specialty destinations. So you'll see in addition to colorways and materials of existing performance products that appeal to a lifestyle consumer. So you should see a more differentiated marketplace going into the second half of the year.

We go next now to Rick Patel of Raymond James.

On the last call, you talked about HOKA expanding distribution to new wholesale partners. Can you just provide an update there? Like how many points of distribution could be added? And to what extent could that be a material part of the building blocks for the back half acceleration?

Yes. You'll definitely see some new partners, again, partners to help elevate and champion the brand, especially in sporting goods in the back half of the year. And expansion given the broader assortment that we have with existing partners, both sporting goods and athletic specialty. I don't think we want to provide specific numbers, but you'll see an expanded distribution with elevated retailers, elevated quality retailers across really all regions in the second half.

Great. And then for UGG, I believe in the commentary, you touched on gross margin tailwinds from the outperformance of certain lines. Can you just expand on that? And is this something that you expected? Or is this something that drove upside? And then as a follow-up on UGG, like maybe some context on the UGG men's business, which sounds like it's terrific and going well, just how big that is and where it can go?

Yes. The men's business is still 15% of revenues, but the goal is to get to 20% higher. It was one of our key growth drivers this spring. We have healthier assortments, healthier sell-throughs than we've had in the past and healthier margins. So the product -- the diversified product, this 365 offering that I mentioned earlier has been performing well across the marketplace and gives us confidence that things continue going into the back half of the year.

And it looks like we have time for one more question this afternoon. We'll take that now from Peter McGoldrick of Stifel.

I wanted to follow up on Jay's question about the full price dynamics. You pointed to 60 bps of benefit in the first quarter from lower closeouts. Can you help us think about what's embedded in the outlook for the remainder of the year and remind us of what the base year closeouts and full price foundation is?

Yes, sure, Peter. I think the -- in terms of the overperformance in Q1, because of the volume of the closeouts that was planned in Q1, a bit of that tailwind that we received is unique to that quarter, and that's why we're calling it out as really a unique performance in the quarter. We think that as we go through the rest of the year, it is more equivalent to what we've seen in years past. So we haven't assumed any significant change in the promotional cadence in the rest of the year.

And again, we won't necessarily have the volumes that you do or some of the franchise changeovers in the models in the franchises that we have in Q1. And so that's why it is a bit of a unique benefit to Q1. And then, again, just the expectation is we will see some pressure on the gross margin in comparison to year ago quarters. But overall, that overperformance has helped us lift our thinking on the year.

So again, the lift is primarily driven by the Q1 performance. And it's also, again, helped us reconsider the increase in the tariffs to the 12.5% go rate. So again, that's embedded as well. So with all of those factored in, that's what's led us to a slight improvement in our thinking around the gross margin for the year.

Excellent. And then the follow-up for me on gross margin, just a housekeeping item on the gross margin bridge. Can you help size the underlying assumption move from 12.5% -- to 12.5% from the prior 10% tariff assumption? Can you size that in basis points or EPS, however, you want to represent that?

Yes. We haven't called it out, but I'll just tell you kind of how we're thinking about it from this perspective. So much of our inventory is in place for what we're currently selling. So as we look at the increase, there is some impact to it in Q3 and more impact on a full Q4 basis. So we haven't called out the specific amount on that. You can calculate some of it in your model. But the assumption there is on the inventory that we'll be receiving that will sell through kind of later Q3 and Q4 will be subject to that. What is still being negotiated, I think, in terms of an increased tariff rate.

Thank you. And ladies and gentlemen, that will bring us to the conclusion of today's conference call. We'd like to thank you all so much for joining the Deckers Brands First Quarter Fiscal 2027 Earnings Conference Call. Please disconnect your lines at this time and have a wonderful day.

Good afternoon, everyone. Welcome to the Deckers Brands Fourth Quarter Fiscal 2026 Earnings Call. [Operator Instructions]And I would like to remind everyone that this conference call is being recorded.

I would now like to turn the call over to Ms. Erinn Kohler, Vice President, Investor Relations and Corporate Planning. Please go ahead, ma'am.

Hello, and thank you, everyone, for joining us today. On the call is Stefano Caroti, President and Chief Executive Officer; and Steve Fasching, Chief Financial Officer.

Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to drive long-term value, respond to the dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy, tariffs, pricing actions and mitigation strategies and fluctuations in foreign currency exchange rates, geopolitical conflicts, including the ongoing Middle East conflict and related supply chain logistics and cost impacts, our current and long-term strategic objectives, the performance of our brands and demand for our products; anticipated impacts from our brand, product, marketing, marketplace and distribution strategies, product development plans and the timing of product launches; changes in consumer behavior, including in response to price increases; our ability to acquire new consumers and gain share; our ability to achieve our financial outlook and multiyear framework, including anticipated revenues, product mix, margins, expenses, inventory levels, promotional activity, anticipated rate of full price selling and earnings per share and our capital allocation strategy, including potential share repurchases.

Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors such as foreign exchange rate fluctuation and changes to trade policies that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements.

On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States including constant currency as well as free cash flow. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open throughout the current and prior reporting periods. The company believes that these non-GAAP financial measures are useful supplemental indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. Additionally, free cash flow is defined as net cash provided by operating activities for a particular period less capital expenditures made during that same period. The company believes free cash flow is a useful supplemental measure of liquidity as it reflects the cash generated from its operations after investments required to support the strategic growth of the business. Please review our earnings release published today for additional information regarding our non-GAAP financial measures.

With that, I'll now turn it over to Stefano.

Thank you, Erinn. Good afternoon, and thank you all for joining today's call. We're closing fiscal '26 with exceptional results, strong momentum and deep conviction in the durability of our model and the demand for our consumer-love products. Over the past year, our teams executed with discipline by innovating our product pipelines, building brand heat and evolving the marketplace. Collectively, these actions once again translated into outstanding financial results in a dynamic environment. We have influential globally relevant brands led by UGG and HOKA, each with distinctive product propositions, deep consumer collections and meaningful runways for growth and expansion across head-to-toe categories, channels and regions,

Built on disruptive category-defining innovation, HOKA has a unique opportunity to attract an even broader global consumer base through cutting-edge performance technologies while extending into a growing lifestyle audience, creating a compelling pathway for continued growth. UGG has inspired generations of consumers through the evolution of iconic designs that transcend silhouettes and seasons, positioning the brand for meaningful long-term growth. Our growth strategy remains clear and consistent, build and sustain category leadership for UGG and HOKA, excite consumers and captivate a growing global audience, prioritize high-quality, full price sell-through and scale market share over the long term.

In addition, we have proven our ability to create shareholder value, driven by authentic, innovative product that fuels the continued growth of our brands and is further supported by industry-leading profitability that enables us to keep investing in the opportunities ahead.

With that, I'll start with highlights from the quarter and full fiscal year, recap brand performance and provide further perspective around our longer-term growth vision. In the fourth quarter, HOKA delivered its largest quarter ever, driven by new products in road and trail and robust global DTC growth, including continued healthy gains in the U.S., complemented by ongoing wholesale momentum worldwide. The ad brand's strong performance was fueled by seasonal extensions across both iconic and emerging franchises, primarily driven by strength in global DTC. Both brands contributed to expanded gross margins despite tariff headwinds as high levels of full price sell-through underscored our continued focus on quality sales.

The outstanding fourth quarter performance contributed to another record year for Deckers, across both revenue and earnings. For the full fiscal year, total Deckers' revenue increased 10% versus last year to nearly $5.5 billion. HOKA and UGG together added more than $0.5 billion of revenue over the prior year record highs, increasing 16% and 8%, respectively. We maintain high gross margins and investment discipline delivering best-in-class operating margins above 23%, and we drove record earnings per share to $7.02, reflecting an 11% increase versus last year. These results further demonstrate the momentum of our brands and the continued effectiveness of our marketplace execution. Fiscal '26, strengthened our organization and fortified our foundation for future growth.

Now let's dive into brand highlights. Starting with HOKA, our fastest-growing brand. Global revenue in the full fiscal year '26 increased 16% over last year to nearly $2.6 billion. HOKA growth was fueled by greater consumer adoption of its leading performance products with more people choosing the brand for various wearing occasions. HOKA continues to attract a wider audience through advancing product offerings that enhance the on-foot experience, offering unparalleled combination of performance and comfort, building awareness across the globe by investing in high-impact by marketing, fostering consumer loyalty by developing direct-to-consumer membership programs and exclusive experiences that build the HOKA community and expanding in-store visibility through collaboration with strategic wholesale partners.

In addition, the HOKA brand's fiscal '26 product upgrade significantly boosted our global reach and appeal. For the year, growth primarily came from consumer love upgrades to our most popular road running franchises, Bondi and Clifton, newly developed a H-frame technology and updated design aesthetic in our key stability models, Iraq and Gaviota; advancements in foam, midsole geometry and meta rocker technology in our fastest shoes, Cielo, ROCCAT and Mark; and expanded dimensions in the Masate franchise across performance and lifestyle.

Our franchises function as scalable platforms representing families of products, rather than single styles, allowing us to extend across performance and lifestyle tiers to deepen consumer engagement. There is significant equity in our most popular franchises, which is why we've placed greater emphasis on developing product families that can include multiple styles tiered across categories. The Mafate and Bondi franchises are two great examples of this successful strategy.

The Mafate franchise saw a great response to the launch of its peak performance version, Mafate X, which drove a halo of demand to both the Trail workhorse Mafate 5 in their more lifestyle-focused Mafate Speed 2. The Bondi franchise also demonstrated notable success, with the Bondi 9 excelling in performance channels, while Bondi 7, we introduced the and positioning key prominent lifestyle destinations has achieved robust sell-through following its release. The ongoing development of franchise families supports the HOKA brand's premium positioning and creates additional opportunities for segmentation and differentiation throughout the global marketplace.

By the end of fiscal '26, six HOKA franchise families had generated over $100 million of annual revenue, and 3 more are close to reaching that milestone. Since January of '25, all 9 of these top franchises have now been updated. And we also have launched new complementary products. In the seasons ahead, we intend to build on this momentum,; enhancing and elevating how we communicate HOKA product innovation to consumers through refined design principles, standardized technology branding and sharper franchise positioning that leverages brand equity across category and experiences.

With this polished approach to product creation, we believe HOKA is well positioned to accelerate the pace of performance to establish new standards, capture the imagination and loyalty of the next generation of athletes and maintain deep, meaningful connections with our consumers, ensuring their needs and aspirations remain at the heart of everything we create across footwear, apparel and accessories. You will see this evolution begins to take shape this fall when we augment the Clifton franchise through the introductions of Clifton 11, which introduces a premium engineered match upper with streamlined aesthetic crafted to extend the reach of our most beloved franchise. And the all-new Clifton Pro, our pinnacle offering in the franchise with enhanced technology, adding resilience and efficiency to the signature Clifton Ride.

This represents the first of several HOKA launches in the product pipeline, each designed to segment our most beloved franchises by capitalizing on existing franchise equity. HOKA performs best with consumers who understand its differentiated value proposition, which is why we continue to invest in brand marketing. These efforts are making an impact as HOKA brand recognition experienced notable growth over the past year.

According to our proprietary brand awareness survey, in the United States, HOKA awareness is now approximately 60%, reflecting an increase from 50% during the same period last year. In international markets, HOKA brand awareness now average approximately 40%, up from roughly 30% in the previous year. This increased awareness represents important progress in growing the HOKA brands audience, which we expect to continue acquiring through our focus to build a great product and expand the brand's in-store presence. The HOKA brand channel performance in fiscal '26 reflected our strategic evolution of the global marketplace, with wholesale increasing 18%, driven by strong full price sell-through and healthy reorders and DTC growing 12%, reflecting second half acceleration.

International regions delivered robust DTC growth across the fiscal year, while improved second half performance of the U.S. DTC business was driven by increased consumer awareness and adoption of key franchise updates, momentum for our enhanced HOKA membership program, including new benefits such as early exclusive product access, driving strong sign-ups since the August '25 update, strong product storytelling around GavioraSpike and Mark highlighting full price newness and lower marketplace inventory related to better management of outgoing models.

Some regional highlights from the year include maintaining top brand share in U.S. performance road and trail footwear above $140 and becoming a top 3 performance running brand in France, Italy and the U.K. both according to Secarna. Furthermore, we also grew our premium brand presence in China with strong full price performance across existing and new retail and partner locations contributing to market share gains. These highlights reflect the power of our brand and the strong partnerships HOKA has established throughout the global marketplace. We remain committed to the strategic positioning of the HOKA brand with our trusted wholesale and distribution partners, regardless of whether we're expanding or maintaining doors with individual retailers, sustaining HOKA performance and fostering mutually beneficial partnerships are essential to our ongoing collective success.

Based on the growing global demand we're seeing for HOKA, we plan to continue selectively expanding wholesale distribution in both the U.S. and international regions in fiscal '27, including a few thoughtfully chosen tests with new partners this fall. Door increases for HOKA will be primarily focused on high-quality sporting goods and athletic specialty retailers as the brand's presence remains relatively underpenetrated in these segments.

As always, our planned or growth will be controlled with a focus on maintaining a pull model of demand to build market share through healthy full price softer. As part of our effort to achieve a balanced channel mix over time, we'll also continue selectively expanding the HOKA brand's retail store presence with a focus on key cities that traditionally amplify the brand's DTC performance online as well.

I want to congratulate the entire HOKA team on delivering another great year. Together, we're well poised to further elevate the HOKA brand and shape its bright future as a leading performance brand.

Moving to UGG now, which once again drove growth above expectations, delivering another record-breaking year. Global UGG revenue in fiscal year '26 increased 8% versus last year to $2.7 billion. UGG's performance was primarily driven by more diversified product mix and broader consumer engagement with continued global market share gains as our iconic franchise families anchored the brand's leadership in quality and craftsmanship, our 365 strategy continued to gain traction with year-round products, consumers increasingly engage in new models that resonate with authentic brand codes and the brand continues to attract new consumer cohorts, including higher engagement from the male audience.

Cementing brands expanded relevance and versatility starts with the right product. Our iconic UGG franchise families continue to deliver foundational growth for the brand through incremental diversification and our product teams have done a fantastic job continuing to evolve the brand's category appeal through new collections deeply rooted in the brand codes. The Tasman remains our most popular franchise, boosted by complementary styles like the Taze and seasonal newness such as the Love TAC. Our iconic classic boot franchise was refreshed through the addition of the new plastic micro. And heritage slippers remain bestsellers as that remains the go-to brand in this category.

We're experiencing deeper consumer engagement with core franchise families like these, including with our top-selling apparel item, the as well as with our newer for styles, proving the demand of UGG as a multi-category and multi-seasonal brand. This is increasingly evident with our sneakers and sandals offering. Successful sneakers and sandals has come primarily through the development of the Loma franchise and the Golden collection, which accounted for more than half of the brand's growth in fiscal year '26. We continue to augment these collections through seasonal newness, most recently with the minimal and Golden Gate styles. These fresh souettes added new dimensions to each franchise and both have resonated well across the global marketplace since launching during the fourth quarter.

In addition to modernized styles within multiyear collections, UGG has driven demand with all new silhouettes delevers the brand's distinctive product DNA. Earlier this year, we highlighted the success of Vale Inspired newness with Zora and Quill. Most recently, the Otocog showcased our momentum in both innovation and in strengthening the UGG brands appeal to men, supported by focused product storytelling and locally relevant influencer seating, the also is leak all gender clog crafted with premium materials debited in February and delivered strong sell-throughs across global regions, particularly among new male consumers.

The UGG brand is gaining meaningful traction with male consumers. Men's styles accounted for more than 20% of the brand's global growth in fiscal '26 with progress across all regions as North America's exclusive collaboration with menswear brand Hidden sold out very rapidly extracting a predominantly new and younger consumer base of the brand with over half of the buyers new to the brand between the ages of 18 and 34.

EMEA delivered the highest incremental revenue growth in ongo markets, reflecting exciting momentum and significant opportunity given its relatively lower penetration. In China showed broad adoption across various categories through full-price sales of new products like weather Hybris, Viosca clog and the minimal sneaker.

From a channel perspective, UGG revenue growth versus the prior year was primarily driven by wholesale, which increased 13% for the fourth fiscal year. The brand benefited from strong early demand in the year that led to higher wholesale channel replenishments, increased allocations of the styles and compelling new product driving higher holiday demand. For fiscal '26, DTC grew 4% over last year, with growth weighted towards the second half of the year. The channel experienced temporary pressure early on in the year from improved wholesale in-stock positions, reflecting our strategic increase of product allocations. Overall, channel growth was much more balanced in the second half. Looking ahead to fiscal '27, we expect UGG to maintain a balanced business across channels. enhance its presence across the global marketplace and continue making progress to develop the 365 in men's opportunities.

A big congratulations to the Global UGG team on another outstanding year, maintaining leadership in the premium lifestyle space and increasing relevance across various product categories.

As I reflect on the past couple of years, we have made significant progress to strengthen our teams, our brands and our platform for future growth. Our brands are generating increasing levels of consumer interest through distinct and innovative products and operating in growing segments of the global marketplace with expanding category and distribution opportunities. Looking ahead, our long-term strategy provides clear visibility to sustain growth over the coming years.

While Steve will provide specific guidance for fiscal year '27 later in the call, I would like to provide further insight into Deckers' multiyear growth framework, highlighting our continued strategic focus and belief in our distinctive brands. Including our vision to further elevate the HOKA brand's positioning as the leading performance brand through disruptive innovation and enhanced lifestyle appeal and drive UGG momentum forward as we evolve iconic franchises to expand category adoption while cementing the brand's position as a leading premium lifestyle brand.

Given the significant opportunity ahead across categories, channels and geographies, all supported by our strong marketplace execution, we remain highly confident in our brand portfolio's ability to deliver high single-digit revenue growth on a consolidated company basis for our fiscal year 2030, with HOKA expected to increase low double digits annually and are anticipated to grow mid-single digits annually. Over this period of time, we anticipate the composition of our revenue growth to be consistent with what we've been communicating with DTC growing faster than the wholesale channel and international growing faster than the U.S. region.

To support our longer-term growth outlook. We will focus our investments on category-defining product innovation, brand marketing, including greater localization of regional content, DTC capabilities that drive lifetime value. in technology advancements, including the responsible use of AI designed to support gains in productivity, efficiency and consumer acquisition and connectivity. Taken all together, these investments are designed to further build brand heat, deepen consumer engagement and enhance our industry-leading operations, positioning Deckers to deliver operating expense leverage beyond this fiscal year.

As such, our fiscal '28 to '30 framework incorporates maintaining strong operating margins through industry-leading full price selling, disciplined marketplace execution and realizes the benefits of our multiyear investments. And with today's announcement of our Board's approval of an additional share repurchase authorization, this demonstrates the Board's confidence in our multiyear framework. Deckers' disciplined operational execution paired with this increased authorization for sustained shareholder capital returns through share repurchases, reinforced by a superior balance sheet and robust expected free cash flow generation is expected to drive low double-digit annual earnings per share growth for fiscal year 2028 to 2030.

Building on our proven track record, this framework embodies our durable multiyear multi-brand growth algorithm, positioning Deckers to deliver sustained long-term value for our shareholders.

With that, I'll hand it over to Steve to provide further details on our fourth quarter and full fiscal year '26 results as well as our outlook for fiscal year '27.

Thanks, Stefano, and good afternoon, everyone. Deckers' fiscal year 2026 performance was exceptional. HOKA and UGG delivered another year of sequential revenue growth, underscoring growing global demand across both of these amazing brands and their premium products. Our focused execution in the global marketplace yielded high levels of full price selling to deliver strong gross margins, which combined with our investment discipline and commitment to share repurchase resulted in best-in-class operating margins and another record earnings per share.

HOKA continues to build upon its strong foundation by growing global awareness and continuing to gain market share with performance runners while also expanding demand with consumers who are looking for a more technical and comfortable footwear for a variety of use cases.

UGG continues to build share across genders, generations and geographies through the expansion of iconic franchises, product newness infused with unique brand codes and our 365 strategy, which all combined to drive high levels of demand in consumer adoption across a variety of distinctive product franchises.

Now let's get into the details of our fourth quarter and full fiscal year 2026 results, and then I will provide our initial outlook on fiscal year 2027. For the fourth quarter, revenue came in at $1.12 billion, representing an increase of 10% versus the prior year. Growth in the quarter was driven by HOKA and UGG, which increased 15% and 9%, respectively. HOKA delivered revenue of $671 million, representing the largest quarter in the brand's history. DTC was the fastest-growing channel in the quarter, increasing 18% versus last year, with wholesale increasing 13%. Across both channels, revenue growth reflected continued strong momentum from international regions and positive contributions in the U.S.

UGG delivered revenue of $409 million, which was above our expectation as the brand benefited from extended selling of fall products primarily in the DTC channel. Gross margin in the fourth quarter was 57.6%, up 90 basis points versus the prior year period, primarily due to higher levels of full price selling across UGG and HOKA, favorable foreign currency exchange rates, reduced freight costs and a slight benefit from favorable product and channel with partial offsets from a net headwind of tariffs.

Gross margin was well above our implied fourth quarter expectations, primarily due to higher full price selling, greater freight savings and a slightly larger benefit from product mix favorability.

SG&A for the quarter was $488 million, representing 43.6% of revenue aligned with our expectation and taking advantage of our stronger FY '26 performance. This included shifting certain expenses earlier to provide a stronger setup as we begin fiscal year 2027. This earlier and higher spend primarily related to accelerating top of the funnel marketing to build brand awareness, advanced technology and also reflected unfavorable impacts from foreign currency exchange rate remeasurement. These results drove diluted earnings per share of $0.96 in which compares to $1 in the prior year period.

Our fourth quarter performance marked a strong close to the year. For the full fiscal year 2026, we delivered record revenue of $5.47 billion, which increased 10% versus last year. As compared to last year, revenue growth was driven by HOKA adding an incremental $354 million, totaling $2.59 billion in annual revenue with double-digit percentage gains across both DTC and wholesale. And UGG increasing $207 million, totaling $2.74 billion of annual revenue, led by the global strength of wholesale as well as an increase in DTC.

Gross margin for the year was 57.7%, down 20 basis points versus last year. The net headwind of tariffs in the fiscal year accounted for approximately 80 basis points of decline year-over-year, with underlying margin expansion offsetting approximately 60 basis points, largely related to favorable product mix and lower freight costs. Product mix favorability continues to be driven by successful scaling of our highest-margin products across UGG and HOKA.

SG&A dollar spend for the year was $1.89 billion, up 11% versus the prior year, $1.71 billion. SG&A represented 34.6% of revenue, which is slightly above last year's rate of 34.2%. Key areas of increased investment in fiscal year 2026 included higher marketing spend across HOKA and UGG to fuel brand initiatives, increased rent primarily from international HOKA store openings, hiring additional talent primarily to support future HOKA growth opportunities and strategic technology investments. We held our unallocated enterprise and shared brand expenses roughly flat versus the prior year, which created leverage to allow for strategic investments that support the long-term growth of our brands.

Our exceptional levels of profitability reflect Deckers' unique ability to play offense, invest behind our brands while remaining disciplined across other areas of the organization. Our full fiscal year 2026 operating margin was 23.1%, inclusive of our targeted investments to support long-term growth opportunities across our brands. This result came in above our expectation primarily due to gross margin favorability in the fourth quarter as our brands deliver high levels of full price selling. For the full year, our effective tax rate was 22.8%, which compares to last year's rate of 22.3%. During the fourth quarter, we repurchased approximately $262 million worth of shares at a weighted average price per share of $105.61. For the entire fiscal year 2026, we repurchased $1.075 billion worth of shares at a weighted average price per share of $102.43. Our record performance coupled with a lower share count that resulted from our highest ever annual share repurchase culminated in a record diluted earnings per share of $7.02, representing an 11% increase over last year's $6.33.

Turning to our balance sheet. At March 31, 2026, we ended the year with $1.9 billion of cash and equivalents inclusive of repurchasing nearly $1.1 billion worth of shares in the year, driven by 3 consecutive years of delivering a free cash flow above $900 million. Inventory, inclusive of tariffs paid on inventory received this year was $487 million, down 2% versus the same point in time last year. And during the period, we had no outstanding filings.

For the third consecutive year, our results returned invested capital above 35%. Now moving to our outlook. For the full fiscal year 2027, we expect revenue in the range of $5.86 billion to $5.91 billion, reflecting high single-digit growth versus the prior year with HOKA increasing low double digits versus the prior year, reflecting a higher DTC growth rate relative to wholesale and UGG increasing mid-single digits with balanced growth across channels.

Gross margin is expected to be approximately 56.5%, which is down versus last year, primarily due to higher freight costs from rising transportation costs and shipping disruption related to the ongoing Middle East conflict and increased input costs related to material upgrades and inflationary pressures.

Our guidance assumes the current tariff rate of 10% remaining in effect for the duration of the fiscal year with inventory expected to be sold in the first half at higher EPA tariff rates already paid. And while we are pursuing government refunds, our guidance does not include an assumed refund amount. SG&A is expected to be approximately 35% of revenue as we reinforce our foundation and support key growth initiatives. Increased investments are primarily focused on marketing to fuel the long-term success of our leading brands, people as we anniversary new hires supporting critical long-term growth opportunities technology to facilitate effective and efficient data utilization and DTC, including the strategic expansion of the HOKA brand's global retail presence. We believe these investments will position Deckers to begin delivering operating expense leverage in fiscal year 2028 and beyond as reflected in the framework Stefano provided earlier in the call. We expect an operating margin of approximately 21.5%, reflecting our commitment to deliver top-tier levels of profitability while continuing to invest in the long-term growth of our brands. We are projecting an effective tax rate of approximately 23%. This all results in an expected diluted earnings per share in the range of $7.30 to $7.45 and which includes an expectation to repurchase an amount equivalent to at least 80% of our free cash flow. Capital expenditures are expected to be in the range of $145 million to $155 million, which is above last year, primarily due to bolstering our technology infrastructure, adding select global focused stores and refreshing some of stores.

Our outlook reflects a deliberate strategy to prioritize long-term growth and brand strength. We have a high degree of confidence in our outlook, but we also recognize the challenges in the current macroeconomic environment. While difficult to determine what these impacts may be, we remain focused on executing our objectives, including the full year guidance I just walked through and the newly introduced multiyear framework that Stefano outlined earlier in the call.

And while we want to maintain focus on our long-term opportunities and given we are halfway through our first quarter, there are a few certain unique timing dynamics to consider for the current quarter. Our anticipated performance for the quarter ending June 30 includes consolidated revenue up approximately 5% to deliver our first ever $1 billion quarter ending June 30. With HOKA up high single digits, primarily from DTC growth. Wholesale timing dynamics to consider include last year's earlier shipments related to the EMEA warehouse transition delayed distributor shipments in APAC moving out of this quarter in preparation of the marketplace for the Clifton launch in July as we reduced shipments of the outgoing model leading up to the release.

UGG is expected to grow mid-single digits, aligned with our full year guide. Gross margin is expected to be down versus last year, primarily due to the wraparound net impact of higher tariffs on U.S. goods with slight positive offsets from favorable channel mix in currency. SG&A is expected to grow about double the rate of revenue in the quarter, reflecting marketing investments to support brand initiatives, lapping favorable timing elements in the prior year, including FX remeasurement and annualization of new hires in the prior year, with EPS expected to be in the range of $0.82 to $0.87.

With this first quarter context in mind, we want to reiterate that growth may not be linear across quarters, but our conviction in the broader outlook reflects our belief in our long-term strategy, powerful portfolio and operating model and proven ability to deliver results over many years.

Specific to the last 3 fiscal years, Deckers has grown revenue at a compound annual rate of 15% and earnings per share has more than doubled. With the framework Stefano shared, we anticipate earnings per share growing low double digits on a compounded annual basis for our fiscal year's 2027 to 2030, above the expected high single-digit revenue CAGR over the same time period. This multiyear growth framework is among the best in our industry, and it's on top of 9 consecutive fiscal years of revenue and earnings growth. Deckers has a very bright future ahead, and we look forward to executing on our plans to deliver outstanding results for years to come.

We will continue to prioritize the long-term health of our amazing brands, execute a pull model of demand and high full price sell-through, maintain investment discipline without sacrificing the long-term opportunities for our brands and preserve the strength and optionality of our pristine balance sheet.

With that, I'll hand the call back to Stefano for his closing remarks.

Thanks, everyone.

Thank you, Steve. Fiscal year '26 marked another record-setting performance for Deckers. Importantly, we achieved this primarily through full-price business and disciplined inventory management. Looking ahead to fiscal '27, our outlook remains strong. With steady and profitable revenue growth anticipated as we continue to invest in and strengthen our brands. In addition, we've outlined a multiyear framework through our fiscal year 2030, which includes annual total company revenue growth in the high single-digit range. With HOKA expected to achieve low double-digit growth and now targeting mid-single-digit increases. We'll continue to operate the global marketplace with full price execution and invest with discipline to maintain top-tier levels of operating margins.

And with continued capital returns through increased share repurchase authorization, earnings per share are expected to grow low double digits annually in fiscal '28 to fiscal '30. We have established a very solid foundation for continued growth.

Our long-term strategy is clear and well defined and a highly skilled team is already executing on our priorities. I want to express my gratitude to all Decker's employees for their dedication and hard work in building our company into what it is today. I look forward to collaborating with all of you as we shape the future together.

Thank you all for joining today's call, and thank you to all of our stakeholders for your continued support. I'll now turn the call over to the operator for your questions.

[Operator Instructions] We'll go first this afternoon to Laurent Vasilescu at BNP Paribas.

I wanted to ask a first a near-term question and then a longer-term question about the multiyear framework. But near term, Steve, Stefano, you usually don't comment about the quarter out. I appreciate you giving us some color around HOKA up high single digits. It sounds like there were earlier timing shipments moves around the launches. Maybe can you help us for the audience, the confidence around low double-digit growth for HOKA for the full year? How do we think about that 1H versus 2H in terms of that framework?

Yes. Sure, Laurent, I'll take the first one. So clearly, we are confident on the year with high single digits total company, low double-digits HOKA. And as I said kind of in our commentary on Q1, there are dynamics in Q1 this year that we have to look at what happened last year. And so that's not indicative of a normal trend of business. That's just some of the dynamics that happened last year. compared to what we're having this year with differences in timing of launches, differences in close-out of products. So it's not an indication of a change in business. We are as confident as ever in terms of the growth that we can achieve. And then recall last year, we did have a timing difference related to moving more inventory in Q1 with our 3PL conversion in Europe. So we were shipping more in Europe in that first quarter to accommodate a transition with our 3PL move.

So short answer to your question, extremely confident, good trends. We're seeing positive trends across the globe and confident in delivering the year.

Yes. Let me add something to that. Laurent, our wholesale ship and timing in Q1 also reflects setting up a clear marketplace for the launch of Clifton later in July.

Super helpful. And then nice to see the multiyear framework provided today. As we think about long-term HOKA growth of low double digits. Maybe can you help us frame it in terms of U.S. international? Should we assume mid-single digits for U.S. mid-teens international. And then maybe can you just provide a little bit more color around how you think about gross margins versus SG&A margins overall for the year -- for the full multiyear? And then sorry, Steve, I got to ask you this question. You tend to have a -- you tend to set conservative guidance. Does that apply to this multiyear framework?

Sure, Laurent, let me kind of go through some of those questions. So in terms of how you're thinking about the breakout between domestic and international in terms of growth, I think you're in line with how we're looking at it. As we've said, international will continue to grow at a faster pace in the U.S. The U.S. will continue to grow. Just international will continue to grow at a faster pace. .

The second question was -- gross margin. So we're seeing some -- yes, some of the pressure on the gross margin in the year really has to do with inflation and higher material costs. So other than that, we're not assuming a significant change in the movement of the gross margin on the year, just some pressures that we're seeing currently with input costs going higher as well as using upgraded material costs. And so that is contributing to a little bit of a hit on the gross margins.

And then the last bit on the multiyear. So yes, I think to your point, we have been viewed as conservative guides. As we're looking out over the next few years, we are leaning into it, right? This -- I would not call this a conservative guide as we look out to FY '30. But given the strength and the confidence that we've seen and the performance of our brands over the last 2 years, it's giving us confidence in our ability to do this. Our brands are in an incredible position. But to your point, we are leaning into it more than we have in the past.

We'll go next now to Paul Lejuez with Citi.

Just if you could talk about your HOKA order book and your visibility for the brand to grow significantly wholesale this year? And also specifically how you think about U.S. versus international within that HOKA wholesale business? And if you could you just touch on performance of lifestyle, that offering, what you've got planned in terms of the lifestyle initiatives this year? And how important is that to achieving now this year's plan, but with multiyear goals for that HOKA business to grow low double digits?

Yes. So on the on the framework, as Steve said, we anticipate mid-single-digit growth in the U.S. for HOKA and double-digit growth internationally. In terms of our order book, we have a strong healthy order book. Our innovation stories across road and trail have been very well received by retail partners. We now have a very clear design distinction between our Max silo glide and our speed silo slide. And this Pro concept that we're introducing with Clifton Pro is going to expand our reach in attracting audiences. And all this on the back of strong spring sell-throughs across new models, Gaviota, Mac, SpeedGoat 7 are all performing well in the marketplace. Regarding lifestyle, we're starting to see green shoots in our lifestyle business with Mafate Speed 2, Bondi 7 leading the charge. And this is very encouraging for us given the potential we've seen in this category.

And I think, Paul, just a little bit back on to the order book, strong performance always drives a strong order book. And coming off of a few years now where we've had success, our wholesale partners have had success -- it really does help form the order book, and we see strong earlier signals. So again, some of our signals around the confidence that we're seeing around the business with the success that we're having with our wholesale partners and the success that they're seeing with the sell-through of our product at full price selling. Those are all things that give us confidence and help us drive that order book.

Is any way to quantify the order book that you're seeing or maybe sell-throughs at retail that might be an indication of future orders?

Yes. We don't break that out in terms of numbers other than what we have with clearly, we just -- we aren't providing it in terms of numbers. What I can say is that clearly, with the gross margin that you've seen us deliver, it's an indication of the strong sell-through of our product. So our product is selling through very well. Our wholesale partners are having success with it.

And the other indicator of how strong that is its inventory levels. Even with the growth in the business, we're delivering lower inventory levels on our balance sheet as well as what our wholesale partners have in their stores. So those are really strong indicators of the health of our brand, the strong sell-through that we're seeing and, again, then another strong setup for our order book.

We'll go next now to Jay Sole with UBS.

Stefano, two questions for me. One on UGG, if we think about the multiyear framework you just gave. How much of the growth do you think will come from, say, the winter business, the classic business versus some of the newer stuff spring summer fall as you've made the brand more of a 12-month brand? How do you see the mix of business evolving in those 2 segments? That's the first part of the question.

Then the other part on the multiyear framework relative to HOKA, given that you're talking about franchise now with over $100 million in revenue in 3 that are close to $100 million. Lifestyle starting to see some green shoots, maybe some innovation coming next year. Do you see opportunity to open more HOKA stores? Is that part of the plan as you look out through 2030? What kind of growth driver would more HOKA stores be given the expanding assortment looking out over multi-year period?

Let me start with that one, and then I'll tackle on. Yes, we plan to expand our HOKA retail footprint in proportion with the growth of the brand. We're focusing on major cities. We've recently opened stores in Berlin, Milan, Xiamoni, the birthplace of the brand. We continue to build and open stores in Asia, especially in China. We anticipate 20, 25 store openings per annum, which is what we have been doing over the past couple of years.

Regarding UGG. Yes. UGG, to your point, has become a year-around premium lifestyle brand, and it's not competing across multiple categories, right, not just boots. So we expect the growth to continue to -- we intend to grow faster in spring/summer than in fall/winter. Our sneakers are performing super well. Our #3 product in the marketplace was the low melt sneaker this past year. Our sandals are performing super well clogs, slippers, our apparel and accessories also give us a reason to hope that we will continue to drive growth in textiles.

The team has really done an incredible job in keeping this brand relevant deseasonalize the business and really increasing warrants. So and newness has been working. The auto Clog, the minimal sneaker, the Zora Paleflat, the Quill Nikin all performing well across the global marketplace. So this gives us reason to hope that we'll be able to continue to grow our 360 approach and continue to grow spring/summer at a faster pace

We'll go next now to Blake Anderson with Jefferies.

I wanted to first ask about the medium-term financial framework. I appreciate all the color there. Steve, on the operating margin in the low 20s, it seemed like if we take the midpoint of that, it's kind of flat versus what you expect this year at 21.5%. And maybe I missed it earlier, but would be curious. Kind of any commentary on how you're thinking about gross margin there versus SG&A, especially given the commentary previously on how strong your levels of full price selling are that you've seen and then some of the freight impacts you're seeing this year. So kind of curious how you see the up versus down areas for gross margin versus SG&A over the next few years?

Thanks, Blake, for your question. In terms of how we're looking at the framework, it very similar to your point to how we're seeing the setup of this year. So continued driving along those lines. I didn't comment in the prepared remarks about an opportunity to achieve some level of operating expense leverage, and we have the ability to do that. At the same time, we'll continue to look at how we're investing in the brands. the operating margin will be a benefit of a function around our gross margin, but we expect to maintain strong gross margin. So the way we look at gross margins is kind of really how we price our product based on the value that we're delivering and we're delivering great product with high value. So we'll continue to maintain that going forward and then we'll continue to look at it. But I think in terms of how you're you've set up the question in the far -- that is how we're looking at the multiyear view.

Great. And then if I could ask one more. You mentioned freight shipping, I think, some input costs due to upgraded materials as well. There's a lot going on with higher oil prices and the supply chain. Would love any more color you can provide on how much impact you're seeing from oil prices versus freight? And then are you raising pricing along with some of those upgraded materials as well?

I would say still early in that sense. We have to see how things play out and where pricing begins to normalize. Clearly, we're seeing some pressure in terms of your point rate and fuel box and some of the input costs raising. Again, largely a lot of the products that we have is bought for FY '27. As we move into next calendar year and pricing for that, we'll be very careful about what we're seeing in terms of those input costs. And again, with strong brands, we have pricing power. So those are things that we can always take a look at.

We'll go next now to Sam Poser with Williams Trading.

Over the last 2 years, the UGG business has slowed from a, I guess, from a DTC or from a consumer demand perspective, it flowed two different ways. In 2024, it looks like it started really early. And then this year, it started -- this past year, it started much later. How are you looking at the flow of the business this year? And in the gross margin, have you -- you didn't mention it, but are you once again guiding to a more normalized promotional environment and then normalized doesn't seem to happen that often.

Yes. I'll start, maybe and then Stefano, if you want kind of jump in. In terms of the business, Sam, we've talked about this a little bit on the prior calls in terms of how we're seeing consumer respond in the market. So when you look at that dynamic, we are seeing trends where purchasing is more event-driven currently than it has been in years past. I think that's created some of the volatility. We've talked about peaks and valleys before in terms of seeing that. I think what we've seen in the last 2 years is that the consumer is still showing up for our brand. I think our Q3 and our Q4 performance is a further indication of that. And so while consumer purchasing patterns are changing and if they are shifting to event-driven purchasing, they're showing up and buying our brands. And that's really what our performance has been driven. .

In terms of the context of how you've answered the question, as Stefano said earlier, we're also driving a bigger spring summer business. So we are seeing increases in the spring/summer season because we're bringing more relevant products to the consumer who's looking for that product in that time frame. So we are seeing kind of multiple dynamics that are impacting sales patterns, but in both cases, we're capturing the consumer and increased purchases.

But there's something a buy now wear now mindset.

Yes. And then you had a question kind of on the gross margin. In terms of how we've laid out this year? We are assuming a more promotional environment, not in this turn back. So in terms of what the previous questions that I received in terms of how we're thinking about the gross margin pressure that we're seeing in FY '27. It really more is about inflation and higher input costs and material upgrades.

And then secondly, you mentioned the tariffs, how they're not in your numbers. How -- what was -- how much did you pay in tariffs under IEEPA? And how do you intend -- I assume you thought for the refunds, how do you intend to account for it once you get it?

Yes. So as we've said earlier, the gross amount that we paid was around $120 million. And we will look, once we receive the money back. Clearly, we have partners who were cost sharing in that. So we want to make sure that we're taking care of them in terms of any return amounts. That's still to be determined. And then for the accounting of it, we'll address that kind of when we see it come back into the bank account.

We'll go next now to Adrienne Yih with Barclays.

Congratulations. Great to see the early momentum. Stefano, I wanted to talk about HOKA and sort of the wholesale channel. I guess, wholesale and international. In the past, you've talked about kind of not really penetrating all of the places that you can be you're kind of in the top spaces in the premium doors. So can you talk about over this kind of the structural 3-year horizon, how you think about potentially penetrating doors that are kind of in maybe that second tier. If so, what would be the trigger for that? And when might we see that happen?

And then on the international side of things, can you talk a little bit more about international strategy, both in Europe and in Asia and when we might see that accelerate?

Starting with international as has been accelerating. And as we said before, we applied the U.S. playbook to our International business. International for HOKA is between 2 and 4 years behind based on awareness of we are at 40% awareness in Europe, 60% in the U.S., we are 30% in China. But our approach is still very, very consistent. We are monitoring signals in the marketplace, consumer demand turns, margins, door productivity and to determine when the right time to expand is.

And as our offer expands and our -- this gives us more differentiation and segmentation opportunities, and we're slowly and thoughtfully expanding where it makes sense. As I mentioned on the last call, sporting goods in the U.S. is still only 50% penetrated, affecting specialty only 25% penetrated. In EMEA, it's 40% for sporting goods and less than 20% for flood specialty. So plenty of upside for us within the framework that I shared to enter some of these destinations. We are doing some tests with some new upcoming retailers in the fall, both in the U.S. and Europe. And if those tests go well, we'll slowly and thoughtfully and systematically expand. So the approach that we've taken until now doesn't really change. Now we have a broader product offer that allows us to systematically differentiate the marketplace and offer consumers a differentiated proposition we have in the shop, and allowing us to see the marketplace more thoughtfully, including DTC.

Great. And then Steve, my follow-up is on the inventory. So the dollars are down, I guess, low single digits, which means the units are probably down more so than that. As we kind of go into the back half of the -- as we go into sort of the back half of the year, are you -- and you typically don't restock people right? So whatever is out there is out there. You're not really chasing inventory. So how do you think about the positioning of that inventory? And then what macro backdrop are you assuming for the rest of FY '27?

Yes, it's a good question. So clearly, having lower inventory helps. To your point, we have historically, when we run out of product, we're out of product, that helps drive full price selling and also helps drive increased orders for future seasons. And again, that's what you're seeing play out in the playbook, and that works very well for us. I think as we look at the environment, consumers even with everything going on, are still operating from a healthy position. I think what we've seen, especially in what played out in Q3 and Q4 was the consumers showed up for the brands that they want and they purchase the brands that they want. And that's our outlook for the rest of this year is that we see the demand for our brands. We see the growing awareness. We see the interest in the new products that we've been bringing to market. And so that's what's giving us confidence. So I think from a macroeconomic standpoint, I think I made the comment, we'll see how things evolve and develop, but we're confident with how our brands how the brands are resonating with consumers and the consumers' interest to purchase our product.

We'll go next now to Rick Patel with Raymond James.

I was hoping you can unpack your domestic performance in Q4. I believe it was flattish. What were the puts and takes by brand? And what are your expectations for the domestic market as you think about fiscal '27?

Yes. Sure, Rick. So I think you're still there. I don't know if we can. But just to answer your question, in terms of performance in the U.S., the performance in the U.S. was positive, as we made in the remarks, the -- what you're seeing from a top line perspective is being impacted from some of our discontinued brands. Those brands this year versus last year, that's muted. But when we look at both UGG and HOKA, both have grown in the U.S. and across the globe. So positive trends in that respect. We made the comment that we're seeing kind of positive trends. So I think still looking forward, we continue to see those positive trends continuing.

Got it. And then for HOKA, just zooming out to your plan to grow low double digits between fiscal '28 and '30, what needs to occur to drive that growth that you're not doing today? You touched on testing out some new wholesale accounts. Does it also embed entering new sports that HOKA doesn't participate in today or new categories like apparel. Just some color on the building blocks would be great.

No. Plenty of upside for us in the categories we're competing in, the categories, the channels and the geographies. The categories we're competing are $100 billion. And so plenty of upside for us across road trail fitness recovery lifestyle and apparel. So it doesn't -- we continue to explore new categories, but the framework doesn't incorporate any categories at this point.

Thank you. And ladies and gentlemen, that is all the time we have for questions on today's call. So this will conclude today's Deckers Brands Fourth Quarter Fiscal 2026 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day. Goodbye.

Good afternoon, and thank you for standing by. Welcome to the Deckers Brands Third Quarter Fiscal 2026 Earnings Conference Call.

[Operator Instructions]

I would now like to remind everyone that this conference call is being recorded. I will now turn the call over to Erinn Kohler, Vice President of Investor Relations and Corporate Planning. Please go ahead.

Hello, and thank you, everyone, for joining us today. On the call is Stefano Caroti, President and Chief Executive Officer; and Steve Fasching, Chief Financial Officer.

Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to respond to the dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy, tariffs, pricing actions and mitigation strategies and fluctuations in foreign currency exchange rates.

Our current and long-term strategic objectives, including continued international expansion, the performance of our brands and demand for our products; anticipated impacts from our brand, product, marketing, marketplace and distribution strategies, product development plans and the timing of product launches; changes in consumer behavior, including in response to price increases, our ability to acquire new consumers and gain share in a dynamic consumer environment; our ability to achieve our financial outlook, including anticipated revenues, product mix, margin, expenses, inventory levels, promotional activity, anticipated rate of full price selling and earnings per share; and our capital allocation strategy, including the potential repurchase of shares.

Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements.

On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through the current and prior reporting periods. The company believes that these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. Please review our earnings release published today for additional information regarding our non-GAAP financial measures.

With that, I'll now turn it over to Stefano.

Thanks, Erinn. Good afternoon, everyone, and thank you for joining today's call. Deckers delivered an outstanding third quarter performance, underscored by a strong composition of results that demonstrate robust global demand for our brands, fueling an increased outlook for fiscal year 2026. For the third quarter, we delivered $1.96 billion of revenue, representing a 7% increase versus the prior year. Global HOKA and UGG performance was exceptional, with revenue increasing by 18% and 5% versus last year, respectively, and each brand delivering balanced growth across DTC and wholesale. From a regional perspective, HOKA and UGG collectively drove third quarter revenue increases of 15% in international markets, reflecting continued momentum from the first half and 5% in the United States, demonstrating positive inflection relative to the first half based on our effective marketplace management initiatives.

This result exceeded our expectations for both brands. Importantly, it was achieved while maintaining high levels of full price selling and demonstrated resilient price elasticity. As a result, Deckers preserved strong gross margins, which contributed to an 11% increase in our third quarter diluted earnings per share, a record $3.33. As I reflect on our progress this year and our focus to build brands for long-term sustainable growth, I'm extremely pleased with our performance over the first 9 months of this fiscal year, which contributed to total company revenue increasing 10%, HOKA revenue growing 16%, UGG revenue growing 8% and diluted earnings per share increasing 13%.

Decker's year-to-date fiscal results and raised outlook demonstrate our commitment to generate shareholder value through sustained growth in revenue and earnings per share, bolstered by our share repurchase program and fortified balance sheet. Now in the final quarter of this fiscal year and looking into the next, I'm confident that we'll continue to execute on our strategic plan and deliver compelling results through the sustained strong momentum of our global brands.

Steve will provide specific details on our updated guidance and third quarter performance later in the call. But first, I'll share some brand-specific highlights from the third quarter. Starting with UGG. Global UGG revenue in the third quarter increased 5% versus last year to a record $1.3 billion. UGG continues to be top of mind for consumers, growing its leadership position as a premium lifestyle brand through a combination of purposeful consumer-informed product creation that celebrates recognizable brand codes, broadening the dimensions of category acceptance and an elevated global marketplace aligned to our target consumer segments, where the brand is able to build connections and community through a tailored yet consistent brand identity. As discussed on our last call, in response to the ongoing rise in consumer demand for the UGG brand, we strategically allocated additional products to the wholesale channel prior to peak season. The results indicate that this approach has proven effective.

Our strategic execution enabled improved in-stock positions for our wholesale partners, boosting fall sales and as planned, we effectively address late season demand through our direct-to-consumer channels. In terms of the UGG brand's third quarter performance across channels, DTC revenue increased 5% versus last year and wholesale revenue grew 4% compared to last year. From a direct-to-consumer perspective, our marketplace teams around the globe work closely across different departments to fill consumer demand, both in retail locations and online. Through these efforts, we drove meaningful growth in UGG Rewards membership, e-mail subscribers and retain consumers, providing ample opportunity to further strengthen consumer connections and drive repeat purchases in the future.

During the quarter, we also used our DTC channel to test products with speed to market, strategically pulling forward targeted new silhouettes to generate early reads at a time where UGG historically has the greatest attention from consumers. Our new Quill franchise was a standout success through this initiative. By sharing performance insights with our wholesale partners for products like the Quill, we are able to accelerate the global expansion and adoption of new offerings. UGG has firmly positioned itself as the top premium lifestyle brand in the global market. Our ongoing goal is to further enhance UGG's presence at every consumer touch point through consistent product presentation that highlights our distinctive brand identity.

While we focus on improving the consumer experience in our direct-to-consumer channels, we're also collaborating very closely with our retail partners to elevate the brand through intentional product offerings that support year-round wearability in our men's initiative. By planning strategically for shared growth, we sustain strong partnerships and nurture future opportunities, all while ensuring marketplace scarcity for UGG remains healthy. We're especially proud of how our retail partners supported the UGG brand during the holiday season, strengthening consumer connections and raising awareness and adoption across categories. Overall, this was an exceptionally well-executed third quarter and holiday season for the UGG brand.

Our marketing teams did a brilliant job leveraging product collaborations, brand activations and ambassadors to drive UGG brand heat, including a feel house experience in New York City, celebrating the UGG SACAI product collaboration, pop-ups in Chicago and Berlin that featured the UGG Palace product collaboration and new male brand ambassadors across sport and pop culture in China, contributing to our strongest men's regional performance. Globally, the men's category performed very well as we continue to see healthy adoption of popular all-gender products like the Tasman, Ultra Mini and Lowmel. As well as men'-specific styles like the Weather Hybrid collection that spans across multiple silhouettes.

Overall product performance was positively influenced by robust consumer response to newness, which underscores the growing demand for UGG and its diversified product range across various categories. Iconic UGG franchises continue to benefit from the addition of complementary styles such as the new Tazelle and Classic Micro, helping fuel growth for the brand with the latter even placing among the 10 best-selling styles this quarter. We also made notable progress with products aimed at supporting the UGG brand's 365 initiative. The Lowmel franchise continued to expand UGG's presence in the lifestyle sneaker segment, more than doubling its revenue this quarter and ranking among the brand's top 5 best sellers.

As we approach the fourth quarter, our priority is to finish another successful year by boosting interest in new product launches that align with our brand strategies, including the Minimel, an all-new low-profile spring sneaker with/the Lowmel collection, the Otzo, an all-new Clog with a sleeker aesthetic that features elevated materials and new fashion sandal silhouettes within the Golden collection. Congratulations to Anne and the entire UGG team on a fantastic fall season and holiday quarter. We are excited for what's to come as we continue to expand consumer reach and category acceptance of our compelling product assortment and grow this amazing brand around the world.

Speaking of amazing brands, let's shift to HOKA. Global HOKA revenue in the third quarter increased 18% versus last year to $629 million. This growth included strength in both DTC and wholesale with gains in the U.S. as well as international markets. The strong performance was driven by broader consumer adoption of the HOKA brand's innovative and versatile products, especially as we've refined our approach to managing the global marketplace. This helped achieve balanced growth across channels as DTC revenue increased 19% versus last year and wholesale revenue grew 18% compared to last year. As we continue to build this brand and introduce new products to the market, we are proactively maintaining a healthy pull model of demand across all channels.

This approach aligns with our long-term objectives of achieving growth in every channel and region. While some fluctuations in channel growth may occur as we make strategic adjustments to distribution, we remain committed to creating a more balanced business over time as demonstrated by HOKA's performance this quarter. We continue to incorporate insights from consumers and learnings from the marketplace to refine how we go to market.

A notable initiative this quarter has been our HOKA membership program, which enhanced consumer loyalty by delivering a distinct and differentiated customer experience. Our revamped membership program now includes exclusive and early product access, select opportunities for special discounts and rewards for higher purchase frequency. Though we are still early in the development of the HOKA membership program with additional consumer engagement drivers and differentiation in the pipeline for next year, we're already seeing a benefit in revenue per consumer, units per transaction and multi-category purchasing from HOKA members relative to the average consumer. These members' key performance indicators are directly contributing to our positive results, helping drive an acceleration of the HOKA brand's DTC growth in the third quarter compared to the first half of the fiscal year.

In the U.S., DTC returned to healthy growth in the quarter with a meaningful improvement of new consumer acquisition online compared to what HOKA experienced earlier this year. In addition, as we look ahead to future product transitions, we see an opportunity to more effectively utilize our higher-margin DTC channel to strategically manage end-of-season inventory in a controlled manner as we tightly manage wholesale marketplace inventories to ensure a clean environment for future launches. The HOKA brand's improved DTC performance demonstrates the effectiveness of our loyalty marketing tactics, which have enabled us to enhance the consumer's journey increase brand affinity, build lasting relationships and increase customer lifetime value for a growing base of consumers.

At the same time, we remain focused on driving strong performance with HOKA in the wholesale channel. We believe it's very important for HOKA to compete in a multi-brand environment, particularly in the performance category where innovation is critical to success. Our partners remain an important destination for consumers to experience the HOKA brand's unique blend of technology, geometry and premium materials directly on their feet. HOKA has continued to perform very well in the wholesale channel globally, driving healthy levels of full price sell-through and gaining additional market share.

In the U.S., according to Circana, HOKA's market share increased significantly in the road running category above $140 for the 3 months ending in December. This growth further establishes HOKA as a top brand in the segment and demonstrates the strength of our full price sell-through. In Europe, the pace of sell-out continues to drive record levels of reorders with our top strategic customers averaging 90% sell-through, which is fueling future season demand. We attribute the HOKA brand's market share expansion to 3 main factors: compelling innovative products that resonate with consumers, enhanced global brand awareness and recognition and increased brand access in more locations. These developments have opened the door for a wider range of consumers to connect with the brand, not just for performance-related reasons.

With more people choosing to wear HOKA as part of their active lifestyle wardrobe, the brand is well positioned to take advantage of this growing trend. HOKA is proactively advancing its lifestyle strategy, identifying this segment as a significant opportunity in terms of product development and expansion through wholesale distribution, account segmentation and differentiation. As the lifestyle category evolves, HOKA is positioned to leverage the company's global expertise in this area. As HOKA continues to tap into significant lifestyle opportunities, it's important to acknowledge the valuable growth potential within our established categories.

Our main global marketplace priorities for HOKA include enhancing the brand's premium position through product innovation, engaging authentically with consumers through strategic product segmentation and expanding the brand's reach while maintaining performance integrity. As we look at wholesale distribution in the U.S. market, run specialty remains our priority segment to introduce and engage consumers with HOKA brand's innovative performance products. Our aim here is to uphold HOKA's performance credibility by continuing to lead in this segment. In sporting goods, HOKA is present in roughly half of the targeted stores we consider potential distribution points. We also see more opportunities to expand shelf space and market share in existing doors as we continue to diversify our product offering.

The biggest opportunity for HOKA's expansion in the U.S. lies within the athletic specialty segment, where we are currently represented in only about 1/4 of the stores we believe will be relevant for the brand moving forward. Internationally, we're much earlier in the process of expanding HOKA's distribution. In Europe, we're making steady progress in building awareness and marketplace presence. We still have room for door and market share expansion in the European run specialty segment, where we continue to climb in brand ranking throughout various countries in the region, having captured around 80% of the opportunity we see for this segment. Furthermore, HOKA has reached approximately 40% of the European sporting goods destinations considered relevant for the brand and is available in less than 20% of suitable athletic specialty stores in the region.

This illustrates the significant opportunity that remains for attractive distribution expansion. In Asia, our primary area of focus remains China, where we operate mainly through a mix of company-owned and partner-run mono-brand retail stores. Typically, we keep a 2:1 ratio of wholesale partner locations to company-owned retail stores. Currently, we occupy a little less than 1/3 of the potential we see over the next several years.

All of this to say, we continue to see meaningful untapped global opportunities for HOKA. We're building this brand for the long term, and we'll continue to take a methodical approach to global expansion, maintaining a full model of demand while gradually improving the balance between DTC and wholesale channels. Our ongoing progress in international markets, along with positive developments in our U.S. operations makes us very optimistic about HOKA's promising future. From a product perspective, top franchises continue to perform very well, and we are now operating in a much cleaner global marketplace relative to a year ago. The brand's launch of Gaviota 6 is off to a great start, further bolstering our positioning in the stability category alongside the positive reception of the Arahi 8.

HOKA has a number of exciting product updates to come in the fourth quarter across our key strategic priorities of winning in road, dominating trail and igniting lifestyle. The category has 2 key product stories launching in Q4. Our Pinnacle racing shoe, the Cielo X1 3.0, which is the fastest and lightest racing shoe HOKA has ever created and our completely redesigned Mach 7, crafted for responsive daily runs with tempo. Beyond the Road segment, we eagerly anticipate the launch of Speedgoat 7, which is designed to build HOKA's legacy in the trail category by offering an exceptional underfoot experience across diverse terrains. In lifestyle, we are excited to announce the launch of our first fully integrated marketing campaign for this category, featuring new ambassador partnerships, global brand experiences and products that connect with well-known HOKA franchises.

Congratulations to the whole HOKA team on a well-executed quarter. We look forward to closing out the year with these exciting product launches to come. I am really proud of the success our entire team has delivered this year, and I'm even more excited for what lies ahead as I look at the opportunities for the next year and beyond. We intend to continue driving healthy profitable growth for both UGG and HOKA. We expect HOKA to remain our fast-growing brand with significant potential for international expansion and consistent progress in the U.S., supported by effective marketplace management.

At the same time, we also expect the UGG brand to continue driving growth across DTC and wholesale through its men's and 365 product initiatives, similarly led by international regions alongside continued growth in the U.S. Given these growth opportunities, our disciplined management of the global marketplace to sustain strong full price sales and our strategic investments leveraging portfolio synergies, I'm confident that Deckers will continue to be a leader in our space.

Thanks, everyone. Over to Steve for more details on our third quarter financial results and an update to our fiscal year '26 guidance.

Thanks, Stefano, and good afternoon, everyone. Our third quarter performance exceeded expectations and demonstrated robust momentum of the UGG and HOKA brands. For the third quarter, UGG drove solid growth to deliver its largest quarter in history with balanced increases across channels and regions. HOKA delivered another quarter of strong global growth with this quarter being balanced across DTC and wholesale. HOKA growth was led by international and included meaningful contributions from the U.S. market, highlighted by the positive inflection of the U.S. DTC business. These results are a testament to the exceptional strength of our premium brands within the U.S. and internationally as our disciplined approach to marketplace management, combined with innovative product and an elevated consumer experience led to high levels of full price selling and exceptional performance during the holiday season.

Now let's get into the details of the third quarter results. Third quarter fiscal 2026 revenue was $1.96 billion, representing a 7% increase as compared to the prior year. Revenue growth in the quarter was primarily driven by HOKA, which increased 18% versus last year to deliver $629 million, adding $98 million of incremental revenue over the prior year. As anticipated, HOKA performance benefited from another sequential improvement in the U.S. DTC business, which delivered healthy growth in the quarter, contributing to a more balanced result across DTC and wholesale.

UGG increased 5% versus last year to deliver record quarterly revenue of $1.3 billion, adding $61 million of incremental revenue over the prior year. UGG growth also benefited from improved global DTC performance, which inflected to positive growth following a more pressured first half. Gross margin for the third quarter was 59.8%, which was better than we had expected for the quarter, primarily due to a lower-than-expected impact from increased tariffs, reflecting the timing of inventory flows and the mix of inventory sold through during the quarter, benefiting from lower tariff inventory in the pipeline.

Larger benefits from our pricing actions, primarily attributable to the UGG brand and though above last year, we had slightly lower promotions than planned for the quarter. In achieving this result, both UGG and HOKA maintained a very healthy level of full price selling with each achieving an average selling price slightly above the prior year and HOKA delivering gross margin expansion in the quarter, contributing to our better-than-expected result. SG&A dollar spend in the third quarter was $557 million, up 4% versus last year's $535 million as we continue investing in key areas of the business. As a percentage of revenue, SG&A was 28.5%, which is 80 basis points below last year's rate of 29.3% with leverage primarily driven by favorable impacts from foreign currency exchange rate remeasurement. Our tax rate for the quarter was 23.3%, which compares to 21.8% for the prior year.

These results culminated in a record diluted earnings per share of $3.33 for the quarter, which is $0.33 above last year's $3 diluted earnings per share, representing EPS growth of 11%. Turning to our balance sheet. At December 31, 2025, we ended December with $2.1 billion of cash and equivalents. Inventory was $633 million, up 10% versus the same point in time last year and includes tariffs paid on inventory received this year. And during the period, we had no outstanding borrowings. In the third quarter, we repurchased approximately $349 million worth of shares at an average price of $92.36.

Through the first 9 months of fiscal year 2026, we have repurchased approximately 8 million shares, representing more than 5% of shares outstanding at the beginning of this fiscal year. As of December 31, 2025, the company had approximately $1.8 billion remaining authorized for share repurchases. And given our strong cash flow and cash balance and in consideration of the current market valuation, we remain committed to continue returning value to shareholders through our share repurchase program. In fiscal year 2026, we are on track to repurchase more than $1 billion in total by the end of the year, which is expected to contribute more than $0.20 of diluted earnings per share improvement.

Now moving into our updated guidance for fiscal year 2026. Based on the strength of our brand's performance in the third quarter, we are increasing our full year revenue expectations to a range of $5.4 billion to $5.425 billion. For HOKA specifically, we've raised our expectation now reflecting mid-teens revenue growth versus last year. And for UGG, we now expect revenue to increase mid-single digits versus last year, which is at the high end of our prior guidance. Gross margin is now expected to be approximately 57%, which is 100 basis points above our prior guidance, primarily due to lower than previously anticipated net impact from tariffs.

We still expect SG&A to be approximately 34.5% of revenue as we continue to make investments that support the long-term growth and opportunities ahead for UGG and HOKA. Our operating margin is now expected to be approximately 22.5%, which is 100 basis points above our prior guidance and remains best-in-class. We still expect an effective tax rate of approximately 23%. These updates and the continued benefits from both year-to-date and projected fourth quarter share repurchase result in a raise to our expected diluted earnings per share, which is now in the range of $6.80 to $6.85, representing a 7% to 8% increase over last year's record EPS.

Regarding tariffs, based on the robust pricing power of our brands, which has not materially impacted demand to date, combined with a lower-than-expected blended tariff rate in Q3, we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $110 million. As a result of our better-than-expected price action benefits and the favorable timing of inventory sold, we now estimate a net tariff impact of approximately $25 million. Please note, this does not represent a full year impact if tariffs remain in place moving forward. Our increased full year 2026 guidance includes the following assumptions for the fourth quarter. HOKA is expected to deliver 13% to 14% growth, representing the brand's largest ever quarterly revenue based on the momentum from international regions and continued U.S. growth with both contributing to global market share gains.

UGG revenue is assumed to be roughly flat to last year as some orders previously planned for Q4 shipped earlier in Q3 with the total of both quarters contributing to the brand's increased outlook for the year. Our implied gross margin assumes an approximate 200 basis point headwind, the entirety of which is expected to come from the net pressure from tariffs. Note that this is projected to be our largest quarterly net impact from tariffs in fiscal year 2026 on a rate basis as we anticipate the full 20% burden in Q4 and slightly more deleverage in our SG&A spend in the quarter as we continue to make investments while taking advantage of our overall improved outlook. We believe these targeted variable investments will help us continue to carry momentum into FY '27.

As Stefano touched on, we have a high degree of confidence in our brands to continue delivering exceptional results into next fiscal year. Specifically, we believe Deckers has the ability to continue delivering meaningful revenue growth paired with a top-tier operating margin beyond this year, through operating a pull model of demand, maintaining a well-managed global marketplace that drives high levels of full price selling, utilizing shared service synergies across brands as we invest to add capabilities and remaining disciplined in our approach to portfolio management, focusing on investments in areas that we see the highest long-term returns. In closing, we are proud of the outstanding results achieved in the third quarter as our in-demand brands drove record quarterly revenue and earnings per share.

UGG and HOKA are operating at a high level across the global marketplace. And I, along with the rest of our leadership team, remain confident in our ability to deliver on our increased guidance for fiscal year 2026 and continue driving healthy growth over the long term.

With that, I'll hand the call back to Stefano for his final remarks.

Thank you, Steve. Deckers performed very well in the quarter, achieving record results that highlight the strength of our brands in the global marketplace. During the holiday season, UGG and HOKA drove consistent growth across channels, demonstrating success in both international markets and in the U.S. through compelling and innovative products that are meeting the demands of our consumers. Deckers has once again demonstrated resilience, gaining share and improving growth momentum in the current environment. We have visibility to continued growth, both domestically and internationally, and this gives us the confidence to raise our full year outlook.

We are very proud of our company's ability to guide for another year of robust and profitable growth through our powerful differentiated brands that are operating in growing segments of the global marketplace. UGG and HOKA are both actively scaling their respective addressable audiences through category expansion, giving each brand ample opportunity to gain market share, grow in underpenetrated markets and capture new consumers globally. They remain highly complementary, allowing us to benefit from shared synergies and knowledge expertise across the organization as we maintain our best-in-class profitability profile.

Before we close, I want to once again express my sincere gratitude for the tremendous work of our dedicated global teams and all we've accomplished thus far in this fiscal year 2026. In December, the Wall Street Journal recognized Deckers as one of the best managed companies of 2025, an honor made possible by the collective efforts of our employees who are the driving force behind what makes our company so special. Thank you all for joining today's call, and thank you to our shareholders for your continued support.

With that, I'll turn the call over to the operator for Q&A.

[Operator Instructions]

Your first question comes from the line of Jay Sole of UBS Financial.

Stefano, it sounds like HOKA really had a terrific quarter. It sounds like that you've seen an acceleration in the business from last quarter to this quarter. Can you maybe just dive into what has changed? What has driven the improvement? You talked a lot about product. I think you mentioned the Gaviota, the Arahi. There's a lot of newness out there. You mentioned the Cielo, the Mach, Stinson, some of these other things that have popped up. Is it product? Is it marketing? Is it just maintaining a very strong full price sell-through mentality? Maybe just explain to us what has gotten better? And do you see it as sustainable going forward?

Yes. First of all, I do see it sustainable going forward. I think we had a few learnings last year. We decided to space out key franchise launches with tightened inventories of outgoing styles, and we better leverage our DTC channel to move closeouts in a controlled manner. We see opportunity across every region every channel in every category of our business this year. So I feel confident that this trajectory will continue.

Yes. I think, Jay, just to add on to that, too. I think what's also encouraging in some of where we're seeing acceleration is with some of the new product that we introduced last year, performing very well with consumers. So recall that we had some of our big franchise updates last year, early last year, and we've continued to see consumers engage with those updates quite a bit.

Yes. And as you mentioned, Jay, Gaviota 5 is off to a great start on the back of a successful Arahi introduction. Now we're a meaningful player in the stability category. Transport 2, again, launched last week, but off to a good start. Cielo X1 3.0, our fastest and lightest shoe to date, launched today, and it's already our best-selling style online. So I feel very good about the product pipeline coming.

Got it. Maybe if I can just follow up on that. You talked about lifestyle in your prepared remarks. I think you mentioned you're going to do a new ad campaign. Can you talk a little bit more about where lifestyle is today, what your projection is for how that business will develop? And with all the new stuff that you're talking about, Machs, Speedgoats, Cielo, Gaviota, Arahi, Stinson and Transport, I mean, how much is the diversification of the product line really changed the mix of the business from just Bondi and Clifton? Can you give us a sense of that as well? Those are really the 2 questions.

That is really one of our aims. We have boosted capabilities, as you know, across innovation, design, color and lifestyle. And this is helping us more effectively segment the marketplace and also differentiate DTC. Performance, however, remains at the core of what the brand is. And as you know, the lifestyle consumer has adopted many performance styles. At the same time, we do view this category as a huge opportunity for the brand. And I'm really encouraged by what is coming. Early reads on some of the products we launched in Q4 is very positive. [ Stinson ] 7, Bondi Mary Jane, Speed loafer are performing very well. And as I look ahead, the team has done a great job in clarifying the line architecture, simplifying designs and also hit more commercial price points. So I do believe that we have a good runway also in lifestyle going forward.

Your next question comes from the line of Peter McGoldrick of Stifel.

I was interested in the channel strategy for the UGG brand. It's encouraging to see both channels grow in tandem in the key sell-through quarter. Given the shift in strategy to prioritize retail partner in-stocks for fiscal '26, I'm curious how we should think of your plans to manage the UGG brand in fiscal '27 on a wholesale versus DTC basis.

Potential for the UGG brand across all channels. all regions and all categories. So you should continue to see a balanced growth in the UGG portfolio. We're very happy with what the brand has delivered in terms of newness. Our 365 offering has been very well received. Our -- we're now playing legitimately in the sneaker category with the Lowmel. And our classic products continue to perform very well. So you should expect continued segmentation of the marketplace, continued differentiation and growth across all channels, markets and categories.

Yes. And I think, Peter, also, as you looked at this year in terms of channel strategy, I think the important thing to recall is a couple of things. that impacted timing, especially around the wholesale channel distribution. So recall, in Europe, we had a distribution center move. So we were shipping earlier product to avoid disruption on some of that business logistics change in Europe. And then I think with the strong demand that we saw coming out of last year, we saw strong wholesale orders and then reorders. And so much of those customers wanted product earlier this year. That's why you were seeing a shift of the wholesale growth more to the first half of the year.

And that was really more of an indication of the strength of the demand of the UGG brand coming up to our biggest season. And so what that allowed us to do was shift more focus to DTC. So very encouraging to see how that channel played out during the course of the year because, again, we're not managing just every quarter. We're managing the business for the long run and for the season. So what's very encouraging is how well the season did. And I think some of the dynamics that you saw play out between quarters was just a way of managing the increasing demand that we're seeing for the brand.

I appreciate that. And Steve, a follow-up for you on DTC performance. Nice to see the consolidated inflection. I'm curious how we should consider this moving forward? It seems like you've got some nice structural contributors from HOKA membership, and then we're looking at easier comparisons. Can you help us think about assumptions for traffic, conversion, ticket and basket embedded in the outlook?

Yes. So we continue to see improvements. So I think encouraged with what we saw, consistent with what we've been saying for the past few quarters in terms of an expectation that we would see momentum and improvements in the DTC performance. You're seeing that continue in the current quarter that we just reported, and we're continuing to look for improvements going forward. So I think encouraged with everything that we've said. I think the other highlight was some of the things that we talked about in prepared remarks, which improved DTC and I think importantly, drove gross margin improvement on the HOKA brand, right? So it shows that the work that we're doing to improve the business, draw more full-priced consumers in and bring them through the DTC channel is working, and we'll continue to build on that.

Your next question comes from the line of Laurent Vasilescu of BNP Paribas.

I wanted to follow up on Peter's Steve. The HOKA guide of 13% to 14%, this is despite a very, very easy compare. Any considerations there on that front? Is it just conservatism? I think you mentioned in your prepared remarks, maybe with Stefano, going forward, there's fluctuations in channel growth that may make strategic decisions. Can you maybe unpack a little bit more for the audience?

Yes, sure. I'll start on that. I think the point there, right, is how we're managing both our brands for long-term sustainable growth, right? And so we're not going to get hung up on kind of quarterly compares if we believe it's kind of detrimental to the brand. So if we look at what happened this year, right, as I talked about with Peter's question in terms of how we were flowing inventory into the channel, we're making sure that we have the appropriate amount of inventory with the demand that we're seeing, but also setting up an opportunity to continue to grow our DTC, right, with a long-term target of improving the proportion of our DTC business overall, which will take several years. It's an important marketplace management setup of how you get there.

And I think that's what you're seeing play out this year is a focus on balancing some of that wholesale demand out, fulfilling it a little bit earlier, placing then a little bit more emphasis on DTC growth as we get into the selling or bigger selling seasons. And that works, right? And so as we look going forward, it's about maintaining that. One of the positive things, I think, that we see is when we have these strong quarters, it's a signal of the consumer demand that's out there, right? And the demand for our brands is very strong. What it also does is it encourages some wholesale accounts to order bigger and order earlier, and we'll take advantage of that. And that's where that will play out.

But again, we have a very keen focus on how we continue to develop our DTC business. You've seen some of the improvements that we've made and how that's driving more consumer engagement and more full-price consumer engagement for us.

Very, very helpful. And then as a follow-up second question here. I think on the last call, it was noted that you have strong spring/summer order for HOKA. I think today, I think you talked about meaningful growth. Curious to know what your order books look like. If you can maybe unpack that a little bit more in terms of dimension, like in terms of how do we think about the growth rates there because you mentioned meaningful growth. And did I hear this correctly, Steve, that you anticipate UGG to grow next year for fiscal '27? Was that in the prepared remarks?

Sure. I'll take a shot at the first one, and then Stefano, you can jump in. Yes, we're anticipating growth for UGG in FY '27. I think through the quarter that we just delivered is a demonstration of how well the UGG brand resonates with consumers across the globe, including the U.S. So even as we continue to get bigger, the demand continues to grow for this brand. And so yes, we see UGG continuing to grow in FY '27.

Yes. And to the order book, we're not going to provide today fiscal '27 guidance, but I'm pleased with how the order books are coming in for both brands, especially for HOKA, given the fact that HOKA books a bit early fall than UGG does. Typically, wholesalers wait for the holiday season to end given how big that season is for UGG to place orders in early spring. And -- but we have visibility through the first 3 quarters of next year, and we're very encouraged by how the order book is developing globally.

Your next question comes from the line of Paul Lejuez of Citi.

Curious within the HOKA wholesale business, if you can talk about sell-through by channel, specialty running, sporting goods, athletic specialty, what you saw this quarter? And I'm curious if you've seen any change quarter-to-date.

No major changes. Throughout the fall season, sell-through continued to outpace sell-in, which is a good indicator of brand health in the marketplace. All our major introductions for the season and the color updates on our 2 biggest franchise continue to perform well. In the athletic specialty space, our performance product has actually outperformed our lifestyle product. But in one of the 2 leading athletic specialty retailers for the month of December, we're the #2 brand in the doors we're in. So the brand is performing well really across channels.

Can you talk about the sell-through at the sporting goods channel as well?

Very similar -- my comment was for the -- for all channels. So generally speaking, yes, we continue to perform well across all channels, across every market.

Got it. And then just one follow-up. I think last quarter, you had some cautionary comments about the U.S. consumer. Just curious about your outlook for the consumer, just given that we've just got through the holiday season, how that might influence or inform how you're thinking about growth for each brand in the U.S. next year.

Yes, that's fair. We've been cautious about the economy and the consumer, but never about our brands. So the brands did show up, and this increases our optimism going into next year.

Yes. I think, Paul, just on that, I think as Stefano said, our comments in prior quarters more has been just watching especially the U.S. consumer as we've seen very strong growth internationally. We knew our brands are well positioned. And I think we even said that on the call last quarter, which was, hey, if the consumer shows up, we expect our brands to do well. And that's exactly what happened. So even in the current environment, I think we see consumers choosing and buying the brands that they want.

And again, with our performance, this is just an indication of the resonance that our brand has with consumers. And so that really gives us confidence going into next year.

Your next question comes from the line of Sam Poser of Williams Trading.

Aaron, I'm sorry, we can't go through our normal stuff. We already got all the info. Can you hear me?

Yes, we can hear you.

Okay. All right. A couple of questions. Can you give us some idea of how the domestic DTC business was for HOKA and for UGG?

Both UGG and HOKA performed well indeed.

And I think continuing -- yes, continuing to grow positively inflecting, right, which is kind of what we said on the call. So again, as we said at the beginning of last year, we expected sequential improvement. We've delivered sequential improvement, and we've positively inflected in the U.S.

So is that -- I mean, you're up 19% with your DTC. Does that mean U.S. was up like 8% and you were -- or I mean, can you give us a little warmer? And then was the UGG DTC business up in the U.S.?

Yes. So both were up.

Brands were up, yes.

Okay. And then you talked about lifestyle. And then, Stefano, but you mentioned like with athletic specialty, how they were doing better with performance products. How do you define lifestyle? I mean, because a lot of product over the years has -- so the product has run over the years has just always hit the it's a gray area, what's lifestyle and what's performance sometimes based on how consumers respond. So how do you define lifestyle?

We define lifestyle as product created by our category, right? But to your point, we're treating performance products also in a lifestyle manner that have been adopted by our Flex specialty distribution, and those have performed very well. So...

Yes. And I think, Sam, just on that a little bit, right? I think to your point on kind of the gray area nature is we build performance product. But clearly, we have people wearing it once they experience kind of the comfort of HOKA for lifestyle applications. So we have performance shoes that are being worn in lifestyle applications. When we talk about the further lifestyle ability, it's more around the improvement on certain styles or designs where we can further amplify our ability to get into a lifestyle category. Clearly, people are wearing -- individuals, consumers are wearing HOKA product for lifestyle. That is giving us more permission to move more aggressively into a lifestyle-defined category.

And one last thing. Back to the breakout, the regional breakout. Based on the information you gave us about DTC, that implies that 1 of the 2 brands, HOKA or UGG was down, the wholesale business was down in the quarter. Could we assume that, that was HOKA just because of the amount of Bondi that you shipped?

No. Yes. So just to clarify on that, no, both UGG and HOKA were up. If you'll see on the press release, part of what's driving the decline is the phaseout of the Koolaburra brand. And so that's where you're seeing decline. So if you refer back to the press release, you'll see where we've broken out kind of the 3 categories, the declines there are driven by the phaseout of Koolaburra. UGG and HOKA were all positive.

In both geographies?

Yes.

Your next question comes from the line of Rick Patel of Raymond James.

I also have a question on HOKA U.S. DTC. So you've touched on the numbers, but can you help us understand what drove the positive inflection in Q3 relative to the first half? Because you previously alluded to consumers preferring to shop in person for new products and this weighed on D2C in the first half. So just curious what's changed in the go-to-market strategy to drive the positive outcome in Q3 as we evaluate the durability of this DTC growth.

One of the main reasons, Rick, has been the HOKA membership program that has helped us improve revenue per customer, units per transaction, multi-category purchases and relative to the average customer. That was one of the main reasons for our success. and the fact that there was less noise in the marketplace of outgoing styles. If you recall last year with the Bondi transition, and there was a lot of product in the marketplace. This year, the marketplace is a lot cleaner, and we benefited from it.

Yes. And I think, Rick, to the point you made where we were saying people were finding the updates, right? People were more familiar with the updates. So as we moved into Q3, and this was part of our comment on the sequential improvements, as people became more familiar with the product having been in the market, they were responding, right, to the updates. That's to my earlier one of the questions where I talked about what's driven confidence for us is the consumer engagement with our updates. And so yes, it's Clifton, Bondis, Arahis, it's other styles, too. But that it speaks to consumers coming back to us directly through improvements through the membership program and engaging with us to buy that product. So there are a number of things there that are embedded. It's product improvement...

Exclusives, early drops, and that has definitely helped our DTC business.

Great. And then can you also help us think about the opportunity for HOKA pricing? I think the increase you took last year was a bit lower than what competitors have done. So do you see room to take pricing higher? And if so, is that a near-term event?

Selectively and strategically, as we've done, we have some price increases hitting the spring and some more in the fall. We typically, when we upgrade the product, we price it up. that has been our approach and has served us well so far.

Yes. And I think the quarter demonstrates that we have more pricing power, and that's something that we can always look at.

Your last question comes from the line of Dana Telsey of Telsey Advisory Group.

As you think about the DTC channel, any difference by brand of e-commerce and stores? And what are your plans for opening stores this year? And then just on the wholesale channel, any more color on any specific retailers that's been working? And did you have any exposure to SAC?

On the latter, no, we have little or no exposure to SAC. Both channels, retail and e-commerce performed well. And your third question was sort of related to DTC -- on wholesale. We're very happy with really the performance of the brand really across all retailers. Journeys had a good run with the brand. Foot Locker is performing well with the brand. ESG is performing well with the brand. Run specialty continues to perform well with the brand, and we are together with Brooks, #1, 2 in the run specialty channel. So generally, the brand has performed in a balanced way across the wholesale portfolio. In the U.S.

There are no further questions at this time. With that, ladies and gentlemen, concludes today's call. We thank you for participating. You may now disconnect your lines.

Good afternoon, and thank you for standing by. Welcome to the Deckers Brand Second Quarter Fiscal 2026 Earnings Conference Call.

[Operator Instructions]

I would like to remind everyone that this conference call is being recorded. I'll now turn the conference call over to Ms. Erinn Kohler, VP, Investor Relations and Corporate Planning. Please go ahead, ma'am.

And thank you, everyone, for joining us today. On the call is Stefano Caroti, President and Chief Executive Officer; and Steven Fasching, Chief Financial Officer. Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to respond to the dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy tariffs, pricing actions and mitigation strategies and fluctuations in foreign currency exchange rates. Our current and long-term strategic objectives, including continued international expansion, the performance of our brands and demand for our products; anticipated impacts from our brand, product, marketing, marketplace and distribution strategies, product development plans and the timing of product launches, changes in consumer behavior, including in response to price increases, our ability to acquire new consumers and gain share in a dynamic consumer environment; our ability to achieve our financial outlook, including anticipated revenues, product mix, margins, expenses, inventory levels, promotional activity, anticipated rate of full price selling and earnings per share and our capital allocation strategy, including the potential repurchase of shares.

Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including in the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements.

On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through the current and prior reporting periods. The company believes that these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. Please review our earnings release published today for additional information regarding our non-GAAP financial measures.

With that, I'll now turn it over to Stefano.

Thank you, Erinn. Good afternoon, everyone, and thank you for joining today's call. Deckers delivered outstanding second quarter results ahead of our expectations on both the top and the bottom line. Specifically in the second quarter as compared to last year, we drove revenue growth of 9% and and a 14% increase in diluted earnings per share. These results closed out a solid first half for Decker's fiscal year 2026 with highlights that include total company revenue growing by 12%, HOKA revenue increasing by 15%, UGG revenue rising 12% and diluted earnings per share growing by 17%. In the first half, our international regions remain the driving force behind UGG and HOKA revenue growth, increasing 38% versus last year. Year-over-year gains were led by the wholesale channel, in part from earlier shipment timing, while DTC also delivered strong growth for the first half. We continue to see progress from our brand-building marketing investments in these regions, helping grow HOKA awareness and expand UGG [indiscernible] share with consumers around the world.

I could not be more pleased with how our teams are executing our strategy and connect with consumers who are increasingly looking to HOKA and UGG for innovation and newness. In the U.S., consumer sentiment is still under pressure, but we're encouraged by the size of progress we have seen in our business and have maintained our focus to ensure HOKA and UGG remain positioned for long-term success. The U.S. marketplace remains dynamic with recent consumer trends indicating a heightened preference for multi-brand shopping experiences. We believe UGG and HOKA are prepared to acquire new consumers and gain share in this environment with consumers where they wish to interact with our brands as with strong brand partnerships with premium wholesalers, which help elevate our brands, UGG resonates with consumers with high-quality distinctive products that provide a unique [indiscernible] experience, HOKA sees the highest consumer adoption when people can try its unique blend of technologies, geometries and materials firsthand on their feet. We view this as a strategic opportunity to continue expanding our consumer base across both brands, while maintaining this relationship through our direct-to-consumer business. This approach supports our long-term objective of achieving a balance of 50% between direct-to-consumer and wholesale channels. As we enter our historically largest fiscal quarter, our brand and global marketplace teams are focused on delivering profitable growth in building UGG and HOKA for sustainable value creation.

I'm confident that our solid foundation, sound financial discipline and nimble operations will serve us well to continue executing against our long-term strategic objectives. Steve will provide additional details on our second quarter financial results and an update on our latest fiscal year 2026 projections later in the call. Prior to that, I will share further details on first half brand performance as well as the forward direction we see for HOKA and UGG.

Starting with HOKA. Global HOKA revenue in the first half increased by 15% versus last year. Performance was driven by consumer [indiscernible] updates to the brand's 3 largest road running franchises: the Clifton, Bondi and Arahi as well as exciting updates in the trail category with the expansion and evolution of the Masate franchise. Bondi, Clifton and Arahi have continued to deliver strong growth and impressive self-rate for the brand as consumers embrace the significant enhancements implemented by our product team. The success of these top franchises helped hold gain market share.

According to Sircana, HOKA gained 2 points of market share in the overall U.S. road running category for the past rolling 12 months ended September 25 and also outpaced the competition in Europe as one of the fastest-growing road running brands across Italy, France and Germany for the first half of 2025. Beyond the success of top franchises, the HOKA team is making great progress developing product families deeply rooted in the brand's organs. We're leveraging a multilayered approach to build recognizable icons that resonate across multiple categories and use cases, including dimensions of peak performance, everyday performance use and versatile active lifestyle. [indiscernible], HOKA's original shoe is the latest example of how we are aligning our products within these key dimensions. Mate X was created to deliver peak performance through maximum cushioning and carbon plate propulsion for agile long-haul efforts on the trail. Masate 5 was upgraded to adapt to all types of trail terrain with premium performance cushioning and traction.

As [indiscernible] 2 has been reintroduced from the archive with an updated aesthetic to achieve a contemporary, active lifestyle look. This product family has already contributed [indiscernible] growth during the first half of the year and now accounts for a larger share of total brand revenue, supported by targeted marketing initiatives that have strengthened consumer awareness, visibility and alignment with HOKA's brand heritage. We've previously discussed the importance of the UTMB world Series finals in Samui France, where HOKA is a title sponsor. The event includes 7 races attracting top trail runners from around the globe and nearly 100,000 spectators. HOKA reinforced its leadership in UTMB and it was the top brand in overall Shoe share as well as among top 5 finishers, including first place finishes for HOKA athletes, Jim Walmsley, Francisco Pupi and Martina [indiscernible].

Our marketing initiatives for the HOKA brand are designed to establish coherent product narratives to foster consumer engagement and encourage adoption across our portfolio. We're seeing traction with our approach to building product families that are supported by marketing investments. This approach will, over time, allow us to further segment and differentiate the marketplace. You will soon see this product strategy evolution comes to life through the [indiscernible] franchise, where we recently introduced the X3 Peak performer in the lineup and in Spring '26, we'll be launching the Mark 7 and Mark Remastered for everyday road running an active lifestyle, respectively.

From a regional standpoint, HOKA performance in the first half was driven by the strength of our international business, where the brand continues to grow awareness and gain market share. We tailor our strategy for each region, taking into account the unique stages of brand distribution and awareness while staying attuned to evolving consumer preferences. What remains consistent is our focus to maintain high levels of full-price selling as we continue to expand our presence within the premium and elevated marketplace. And we're very pleased with HOKA brand's results across the board. HOKA has seen constantly strong gains across all international regions throughout the first half with notable incremental revenue contributions from EMEA and China.

In the EMEA region, HOKA is driving impressive results across all countries and segments of distribution, including market share gains and robust reorders with our specialty partners as we continue to drive double-digit growth. Best-in-class sell-through with our key sporting good partners significant percentage gains with athletic and lifestyle specialty accounts, where we are just beginning to build our business and broad-based strength in our DTC channel across Germany, France, Italy and the U.K. with our first German store opening in Berlin and a pop-up retail experience in Shamali for UTMB. In China, the HOKA brand's premium positioning and product innovation continue to drive resilient consumer demand. Highlights include new store openings in key cities that are attracting strong consumer interest, substantial growth in loyalty membership with particularly strong gains with females and younger consumers, industry-leading full-price selling and sell-through rates for wholesale exceeding the goals set for monobrand partner locations as we navigate a dynamic U.S. marketplace, HOKA continues to gain market share in the athletic for category, and we remain dedicated to controlling distribution and driving a pull model of demand.

There are a number of positive signals for the HOKA brands U.S. business. They give us great confidence in the vast opportunities ahead for this brand with wholesale sell-through increasing double digits in the first half.

DTC delivering a sequential improvement from Q1 to Q2, maintaining a high-quality full-price business, a strong Spring/Summer '26 season order book and positive feedback from retailers on our Fall '26 product line. HOKA is a disruptive and transformational brand with the ability to further capture billions of incremental global market share dollars. Across both domestic and international markets, we'll continue to uphold our disciplined approach to marketplace management by building our DTC business and carefully exploring potential expansion into attractive wholesale channels and partnerships. We are committed to building sustainable growth for HOKA and are confident in the strategy we're executing to achieve this goal.

As we enter the second half of fiscal '26, our priorities are driving healthy sell-through and gaining market share, leveraging our enhanced DTC loyalty program to drive consumer engagement, preparing the marketplace for Spring '26 updates to Gaviota, Mark and Speedco franchises and investing in marketing to build global HOKA awareness.

Moving on to the UGG brand. Global UGG revenue in the first half increased by 12% versus last year. [indiscernible] brands first half performance still consistent, fueled by our key brand initiatives. Top performing styles remained in line with our 365 focus. Men's footwear achieved growth at twice the rate of the overall brand, international regions accounted for the lion's share of our growth. We are especially encouraged by the consumer response to newer products and expanded franchises aligned to our men's and 365 initiatives, including the Mel franchise, which across sneaker, Chuck and Chelsea [indiscernible] has more than doubled versus last year in the first half.

The classic Micro, our most versatile derivative to the original classic boot, debuting as a top 5 style across DTC and wholesale, and also the Zora [indiscernible] flat in a unmistakable UGG version of the time of silhouette that is significantly outperforming our expectations in its first month since launch. While these products have driven positive sell-throughs, I would note that wholesale sell-in was the driver for total UGG brand performance in the first half, which includes benefits from earlier shipments that were carefully curated in alignment with our marketplace management strategy. These shipments have provided greater opportunities for consumers to discover UGG as wholesale points of distribution which we believe in combination with the shift to consumer shopping habits has put pressure on our DTC business near term.

From a regional perspective, as anticipated, international markets are leading our growth, but we've seen a very strong order book conversion across all regions. The consumer response to our fall '25 collection has been very consistent globally with consumers gravitating towards fresh seasonal colors and transitional newness such as the classic micro stromal, Peak mod and Zora [indiscernible]. This quarter, these style saw gains as consumer preferred versatile buy now, wear now items.

As we prepare to ignite a season, our teams have created cohesive brand stories with our iconic style and iconic design global marketing campaigns, aiming to generate excitement and drive consumer engagement. In August, UGG's iconic from the first step campaign, featuring Stefan Diggs, Sara Jessica Parker and Founder, Brian Smith, to celebrate the brand's legacy. In September, UGG served as the official signing partner for highest [indiscernible] New York Fashion Week opening ceremony party aimed at building fashion credibility with influential [ mails ]. At the beginning of this month, to celebrate Paris Fashion Week, I took over the atrium of Gallery Lafayette to create a curated icons pop-up store. And tomorrow, UGG will launch an aspirational product collaboration with renowned Japanese fashion label, Takai. These brand activations help UGG brand generate momentum with consumers while at the same time, maintaining cultural relevance. And our team will continue to build upon the compelling content we've created to elevate the brand and amplify key seasonal product stories. I'm confident that the global marketplace is well positioned for UGG season. Thanks, everyone. I'll now pass it off to Steve to discuss our second quarter financial results and provide an update on fiscal year 2026.

Thanks, Stefano, and good afternoon, everyone. We are extremely proud of the results achieved in the second quarter and first half of our fiscal year 2026. For the second quarter, HOKA delivered more balanced growth across wholesale and DTC led by the strength of international and included sequential improvement in U.S. DTC compared to the prior quarter as we continue expanding the brand's presence to gain global awareness and market share. The UGG brand drove robust wholesale growth also led by the strength of international as we prepare the global marketplace for the brand's peak season. Our disciplined approach, flexible operating model and strong balance sheet continue to position us favorably in a dynamic marketplace as we head into the second half of our fiscal year 2026. We remain energized by the opportunities ahead for HOKA and UGG and look forward to further progress towards our long-term vision for these consumer-loved brands.

Now let's get into the details of our second quarter results. Second quarter fiscal year 2026 revenue came in at $1.43 billion, representing an increase of 9% versus the prior year. Performance in the quarter was driven by HOKA and UGG, which increased 11% and 10% versus last year, respectively, with small offset primarily from winding down stand-alone operations of smaller brands. For HOKA, wholesale remained the primary driver of growth, increasing 13% in the quarter as the brand continues to experience and healthy sell-through with innovative and compelling products that are resonating with consumers. HOKA DTC grew 8% versus last year, as international momentum carried through from the previous quarter, and we saw improvements in the U.S. business as anticipated.

For UGG, growth was driven by wholesale increasing 17% in the quarter, which was partially offset by a 10% decline in DTC. Wholesale strength was driven by strong demand from our retail partners, including earlier demand as well as European shipments that were pulled forward related to our upcoming third-party warehouse transition. UGG DTC was softer than anticipated as we have continued to experience pressures from better in-stock positions with our wholesale partners due to increased allocations delivered earlier in the year in an effort to match the demand that has continued to build in recent years, a more challenging macroeconomic environment for the U.S. consumers with shifts in consumer preference toward multi-brand in-store shopping experiences. Additionally, we believe these factors will continue to have an impact on growth in the second half.

Gross margin for the second quarter was 56.2%, up 30 basis points from last year's 55.9%. Second quarter gross margins compared to last year benefited from price increases, favorable product mix, favorable foreign currency exchange rates and factory cost sharing with partial offsets from incremental tariffs on U.S. goods and channel mix headwinds. As a result of our price increases being implemented at the beginning of July, in combination with actions to bring additional inventory in ahead of increased tariff rates being implemented, we saw a slight delay in the net headwind of tariffs and did not experience a meaningful negative impact in the second quarter compared to the prior year result. However, this is unique to the second quarter, and our expectation of net tariff headwinds in the back half of fiscal year remain largely unchanged.

SG&A dollar spend in the second quarter was in line with expectations at $477 million, up 11% versus last year's $428 million as we continue investing in key areas of the business. As a percentage of revenue, SG&A was 33.4% versus last year's 32.7%. Our tax rate was 21.7%, which compares to 24% for the prior year as a result of onetime benefits recorded in the quarter. These results culminated in diluted earnings per share of $1.82 for the quarter, which is $0.23 above last year's $1.59 diluted earnings per share representing EPS growth of 14%. In terms of our second quarter performance relative to the guidance we provided in July, gross margin was the primary driver of EPS favorability. Again, the better-than-expected gross margin result was largely driven by favorable timing of tariff-related variables unique to the second quarter with benefits of our pricing actions flowing through in advance of the full burden from increased tariffs.

Turning to our balance sheet at September 30, 2025. We ended September with $1.4 billion of cash and equivalents. Inventory was $836 million, up 7% versus the same point in time last year. And during the period, we had no outstanding borrowings. During the second quarter, we repurchased approximately $282 million worth of shares at an average price of $109.31. As of September 30, 2025, the company had approximately $2.2 billion remaining authorized for share repurchases.

Now moving into our forward-looking update. We are now providing an outlook for our full year fiscal 2026 and expect total company revenue of approximately $5.35 billion with HOKA increasing by a low teens percentage versus last year and UGG growing in the range of a low to mid-single-digit percentage. Gross margin of approximately 56% as we anticipate headwinds from the impact of tariffs as this becomes material in the back half of this fiscal year, with partial offsets from our mitigation strategies and normalized levels of promotion in a more pressured macroeconomic environment. SG&A to be approximately 34.5% of revenue, reflecting our commitment to investing in the long-term opportunities of our powerful brands. This results in an expected operating margin of approximately 21.5%, which remains at a top-tier level of profitability relative to our peers. We are projecting an effective tax rate of approximately 23%. Finally, we expect earnings per share in the range of $6.30 to $6.39. This guidance assumes a blended growth rate of approximately 9% from our 2 largest brands, as we have streamlined our brand portfolio to focus on our most profitable long-term opportunities and expect to yet again deliver record years for UGG and HOKA, each with annual revenues north of $2.5 billion and significantly contributing to our best-in-class profitability profile. Within this revenue guidance, we continue to expect international to outpace U.S. growth and global wholesale to outpace DTC for this fiscal year.

Over the longer term, our focus remains to create a balanced business across regions and channels as we continue building our consumer base, bolstering connections with consumers through direct relationships and capturing incremental market share for years to come. Regarding tariffs, with timing-related favorability seen in the second quarter result, and our expectation of tariff impact in the second fiscal half largely unchanged, we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $150 million. Further, we now estimate that our mitigation efforts for this fiscal year will offset approximately $75 million to $95 million of this pressure, including benefits from select strategic and staggered pricing increases as well as partial cost sharing with factory partners.

Please note, this guidance excludes any unforeseen charges that may be considered nonrecurring to our ongoing business or impact from any future share repurchases. Additionally, our guidance assumes no meaningful deterioration of current risks and uncertainties, which include, but are not limited to, further updates to imposed tariffs or other global trade policy changes in consumer confidence and recessionary pressures, inflationary pressures, fluctuation in foreign currency exchange rates, supply chain disruptions and geopolitical tensions.

Overall, our second quarter and first half fiscal year 2026 results illustrate the strong demand for our brands and strength of our disciplined model, giving us conviction to provide and achieve a compelling outlook for fiscal year 2026. We remain confident in the growth trajectory of our consumer love brands as our top-tier levels of profitability provide opportunities for targeted investments supported by our fortified balance sheet, all of which position us effectively to drive sustainable growth over the long term.

Thanks, everyone. I'll now hand the call back to Stefano for his final remarks.

Thank you, Steve. Before we take your questions, I would like to highlight that our brands have continued to perform very well through the first half of this fiscal year. More importantly, we remain committed to supporting and strategically managing our brands to ensure sustained long-term growth. We believe that both HOKA and UGG are well positioned across the global marketplace as we enter the holiday quarter and our teams are energized and hyper focused to deliver our full year guidance. HOKA has established itself as a prominent global performance brand, extending far beyond its disruptive origins. HOKA has just begin to realize its full potential and capability to innovate, and we are excited to continue building this transformational brand and UGG brand continues to inspire generations of consumers with its iconic products and its global appeal. This powerful brand has established a unique position in the marketplace with a strong loyal customer base and an ability to capture new audiences through compelling product evolution.

These 2 premium brands maintain a strong commitment to the original values, consistently creating purposeful products while adapting to the evolving demands of their respective global customer base. We're very excited about the opportunities ahead and we remain focused and disciplined on our approach to delivering long-term sustainable growth and value creation. I'd like to sincerely thank all of our valued employees across the Global Deckers team for their continued commitment to our collective success.

Thank you all for joining us today, and thank you to our shareholders for your continued support. With that, I'll turn the call over to the operator for Q&A.

[Operator Instructions]

Our first question comes from Laurent Vasilescu, BNP Paribas.

So Steve, very glad to hear that you are reinstating guidance here. And I wanted to ask about that. Originally, Steve, the framework, I think, on the fourth quarter call was calling for poke to grow mid-teens for this year to grow around mid-single digits. I think last quarter, I think there was a greater confidence in that framework with today's guide lower expectations on those 2 metrics. Can you maybe just unpack that a little bit more? Is there just a degree of conservatism. And I didn't hear anything about weather. With regards to UGG, of the low single to mid-single, but do you think that's a factor playing into your guidance?

Laurent, this is Stefano. We have 2 of the healthiest brands in the global marketplace with a very strong and loyal consumer base and a growing global demand. Our first half demonstrates the strength of these brands. For the back half, we are anticipating a more cautious consumer as the full impact of tariffs and price increases will be felt here in the U.S. Having said that, our brands are well positioned when the consumer shows up for the holidays. And as we said, we don't manage our business month-to-month and quarter-to-quarter. We build brands for long-term profitable sustainable growth.

Yes, Laurent, this is Steve. I think just to talk a little bit about the guidance and kind of reorient everyone in terms of what we said at the beginning of the year. And you're right, we didn't give full year guidance and the fact and appreciate your recognition of that, giving guidance now, I think, is a demonstration of our confidence of how well our brands are performing in the marketplace and the continued path that we see on that. Part of the framework that we gave at the beginning of the year really said, if tariffs did not have an impact on consumers, how we saw kind of certain growth. And we still believe that, right? But we do know and we are more currently seeing some impacts on the U.S. consumer.

So as U.S. consumers are beginning to see some price increases, it is impacting their purchase behavior within the consumer discretionary space. And so as we now look out at the next 6 months to give the full year guidance, our HOKA back half still is a low teen guide. So in many respects, we're not off of what we originally thought, maybe a little bit of a reduction. But we are now anticipating the impacts of tariffs. So I think that's a demonstration again, that the brand continues to do better than what we thought in a tariff imposed environment. So we feel good about that. to Stefano's point, we're going to manage these brands for the long run. We're not going to try to chase growth in the current period that could be detrimental to the brand. And again, that is what our guidance reflects is we are going to maintain these brands. We're going to manage them in the marketplace that allows us to grow these grow these meaningful over a sustainable longer period of time.

And I think that is a bit of what you're seeing in our guidance. And yes, we do know that the revenue is below where the consensus was. We're taking into account a consumer who's a little bit more cautious. I think is there opportunity that we could do better. Sure, and we'll see how the consumer shows up. And that's how we're looking at it.

From an inventory position, we have inventory that if the consumer shows up, we will be able to capture some upside to this. But we're confident, again, in how our brands are performing in the marketplace, internationally and domestically, we know domestically that the U.S. consumer is a little bit more pressured. So we're reflecting that in our outlook for the next 6 months. But again, our positioning of the brands remains with long-term sustainable growth in mind. And then just the other bit on the guidance. I think, again, we're showing a demonstration of how we can manage our business from an overall perspective. So even with a more conservative approach on some of the revenue guidance, we're still delivering profitability on the consensus bracketed for the full year. So again, I think we will continue to manage these brands in a healthy way and drive long-term sustainable growth.

Very helpful. And then, Steve, just to understand a little bit more on the back half guide for HOKA, low double digits. I know you don't guide anymore by quarter out, but any nuances we should consider just because there are some compares that we can look at between 3Q and 4Q. I thought it was also interesting that you mentioned there's positive reception regarding spring-summer order book. Maybe can you unpack that a little bit more?

Yes, sure. I think in terms of how we're looking at the back half, more pressure in Q3 with more growth in Q4. So -- and again, I think that's where we're going to see how the consumer shows up kind of Thanksgiving through the holiday season. That's 1 thing that we're going to keep a very close eye on. We believe our brands are positioned better than most, right? If the consumer shows up, our brands are positioned to capture that demand. And so really, this is more about how does the consumer show up. So we're being a little bit more cautious with our third quarter growth with a little bit more aggressive growth in the fourth quarter. And then to your point on the order book, and I'll let Stefano jump in here, very confident with how things are shaping up and the consumer response to our product.

Yes, Laurent. I'm very happy what the teams have done specifically in the U.S. market for HOKA. We are growing awareness, we're gaining share really across every country, but this is [indiscernible] to the U.S., the market place is clean, sell-throughs are stronger than sell-in. Our full-price business is very, very strong. our key franchises, Clifton, Bondi and Arahi are performing well in the marketplace. And our most recent product launches have also performed well and referring to Challenger the [indiscernible] X [indiscernible], Rocket X3, Rocket X [indiscernible]. Our order books are healthy. We're gaining share in performance on. We're back to #1 in our specialty. And we're well set up with the transition to these 2 models I just mentioned. So our marketing also has been resonating and we're seeing improvements also in our DTC business. So all is good in the home [indiscernible] side of the U.S.

The next question is from John Kernan PD Cowen.

Steve, can you talk to the split between DTC and wholesale in Q3 and Q4 a bit more -- the DTC compare gets a lot easier as you enter the fourth quarter you did provide some color to Laurent's question. Just curious, the channel split between wholesale and DTC and what you're doing specifically to reaccelerate DTC same-store sales or omnichannel comps particularly in in the U.S.

Yes. I think from a total company DTC perspective, we expect to continue to see improvements in Q3 and then further improvements in I think also important just to -- as you look at our growth and understand kind of what we said about this year is, again, Remember, as we're expanding wholesale this year, we said much of that was going to come in the first half of the year, right? And that's what we've delivered and more so. And I think that's a demonstration of the strong demand that's out there for both brands is that our wholesale partners to get their hands on product earlier, they wanted to be able to showcase product earlier. And so we were selling into that environment.

That has put some pressure on our first half DTC. So with expanded distribution, right? It's more a demonstration of the growth of our demand for our brands and really a timing effect. And so it's not an indication of things kind of slowing down for a brand and from a demand perspective, they are still increasing. And on a full year basis, it still has increased. But as we've shipped more of that in the first half of the year, you're just seeing kind of a timing flow of that. And so in respect to that, right, that's where we'll see a little bit or expect a little bit more DTC growth on a percentage basis in the back half, a little bit more in Q3, a little bit more in Q4. And then with selling more in the first half in wholesale, you're going to see kind of lower numbers as a result of having more product move in, into the wholesale channel earlier in the year.

That's helpful. You obviously called out the company's top-tier profitability. I think you have the highest operating margin structure of anybody in the athletic footwear and apparel space. I'm just curious as we look into next year, obviously, tariff pressure is going to be pretty significant in the first half of the year. How do we put guardrails on the long-term margin structure of the business? We're finishing this year around 21.5%. -- is north of 20% plus operating margins, how you look at the business long term?

Yes, it's a good question, John. And we appreciate it. Clearly, right, what you're seeing. So last year, we delivered exceptional levels. Again, this year, I think, in comparison to what others are saying, it's going to be another exceptional year with half of the year being impacted by tariffs. Next year, you're going to have kind of another half of year, so that will be a headwind to further margins. But again, and I think you can see as demonstrated by Q2, how we manage our business. So we are continuing to organically grow our business. The demand for our brands continues to increase.

And at the same time, we're doing, I think, a very good job of managing an uncertain volatile environment. And you can see how we've mitigated some of those tariff impacts in Q2, where we earlier thought that we would see some headwinds. We were able to take some actions and mitigate some of that and flow that improvement through, and that's what you're seeing on that gross margin. We will continue to operate in that disciplined approach. But yes, to your point, we're going to continue to see tariff headwinds as we look into FY '27. And we're not in finishing [indiscernible] to kind of give guidance on that. But yes, you will see further pressure.

And our strong financial profile will also allow us to invest in capabilities we're building, whether it's innovation or apparel or technology digital

Got it. And then the gross margin pressure you're guiding to in the back half of this year, it's safe to assume that at least that magnitude carries into the first half of next year, I'll assume.

Yes correct.

If the tariffs stay in effect, the way they currently are, yes, equivalent.

Next, we'll hear from Adrienne Yih from Barclays.

This is probably for both of you, but Stefano and Steve. Can you talk about kind of the price actions that you have taken at both brands earlier in July. It's earlier in back-to-school, it seemed like those price actions didn't have a lot of impact on the demand. But obviously, that was kind of in the back-to-school time period. Is there something that you've seen either sell-through in the channel at your own DTC or maybe on the products that actually have those price increases that has given you a little bit more concern about the consumer?

And then Steve, my follow-on is how are you seeing -- it's a really good point on more points of wholesale distribution, right, because there's more places to buy the product. But how are you thinking about when we kind of see a more normalization in the DTC versus wholesale balancing?

[indiscernible] on the pricing question, with premium brands and premium brands have more elasticity than other brands. And we've been very selective and strategic in our price increases. And we have not seen any issues sell-throughs on key styles continue to be strong for both [indiscernible] -- no issues so far.

And then on the wholesale question, it's a good one, and we appreciate you asking it. I think if you go back 1.5 years or 2 years ago, we talked about how we are in the marketplace significantly underpenetrated in wholesale in comparison to many of our peers. So many of our peers are selling in a lot more points of distribution, wholesale distribution than we are. And we've talked about marketplace management for years now about how we do this. And this is how we lean into wholesale. And I know there's questions out there about, oh, their growth is coming through wholesale. Yes, we're putting more shoes on feet, right? And but we're doing it in a strategic long-term way, right? We're not chasing growth in a quarter or in a year, trying to blow out wholesale distribution just to show sales increases. This is how we're expanding our brand globally and sustaining longer-term growth over a longer period of time.

Does it mean that we deliver slightly lower levels of growth rates in the current period as we continue to expand but are able to longer-term growth rates? Yes, that's what we're doing. And so last year was a big year of wholesale expansion. We are anniversary-ing some of that this year as well as some additional wholesale expansion. This year, but that will begin to slow. It doesn't change our outlook on that balance that we talked about of getting to 50-50 wholesale to DTC. So we're still on that. You will begin to see wholesale growth so a little bit and DTC, again, begin to pick up. But again, this is about taking opportunities increasing demand in the marketplace, giving consumers more points to purchase product and overall leading to more shoes on feet. And that's what we're building.

Yes, when we operate in an omnichannel model, and we have the ability to flex and react to consumer demand is needed.

Next question is Samuel Poser from Williams Trading.

I got a handful. Number one, you talked about the healthy order book in for spring. I assume that's for both UGG and HOKA. Can you define what that means, please?

Sam, [indiscernible] those details We don't provide those details, but we are very happy with the order book that we have a spring summer of '26 and the early reaction to fall '26.

Yes. And I think, Sam, it's fair to say that it's up, right? And that's why we're happy, and we're seeing increases in order book.

And can you talk a little bit -- I'm going to get into a little bit of weeds here. Can you talk a little bit about like how, especially the UGG brand sort of in and out of back-to-school, how you saw both in your own DTC and within your wholesale partners because you got sales reports, how you saw that business like Peak and Valley? And are you seeing any big differences between the peak like peaks and valleys versus last year?

And I mean, because I'm really wondering what -- sorry, go ahead.

It's a good question, Sam. What we're experiencing, and this is probably due to the consumer uncertainty in the U.S., deeper valleys and higher peaks. Back to school are strong and anticipate to have a strong holiday season. but September, October, actively not the strongest months in our space.

And so that leads to are you -- is your guidance for the back half and I guess particularly holiday, is it more about what you saw turning back to school -- or is it more about sort of what's going on right now? Because given those peaks and valleys and given the fact that in your own DTC business, you'll do every day between Thanksgiving and Christmas, you'll do more business in a day that you're basically doing a weak, July through probably beginning of October. I'm wondering how much of this is just caution or my favorite saying, so I won't say that in front of everybody guys, but you do now the beach out there. And I'm just wondering how much of the -- because I mean consumer seems to put your product, it seems to -- and so the concern about the consumer seems like whatever, they're buying your stuff at full price. You're not getting margin pressure. You're not getting those things.

So the fact is they're not buying Joe's Perrigo brand. They generally want UGG, and they're not buying champions, sneakers because they want [indiscernible] and so either they want your brands or they don't, and you -- and you talked about the elasticity you had in price, which tells me that you actually believe that the consumer is buying your stuff regardless. So why so much caution around this macro consumer like, oh my god, the consumer in the U.S. might be hurting, but they still seem to go to your brands it's not UGG.

Yes. I think, Sam, on that, clearly, our guidance for the year, which is reflective of the next 6 months, is taking into consideration what we're currently seeing kind of right now. And so I think that's where the question is, right? It's not about a question about how we think our brands are placed in the marketplace. We think we're, again, positioned better than most. And in many cases, very well positioned. But we'll have to see how the consumer begins to show up. I think some of the economic signals are consumers are beginning to see higher prices inflation is starting to affect them more in the U.S. And so there is some caution on our part as we take that into consideration. And again, we don't want to just chase sales because we want to achieve a higher number. We're about building brands for the long term. And so we don't want to do something in the quarter that could be detrimental to us in the longer term. So to your point, yes, we're taking a little bit of caution in there. We don't know how the consumer is going to show up. But we do know if the consumer does show up, we're better positioned than most.

And then lastly, Stefano, with HOKA, are you -- are there -- are there any lower profile max cushioning? Or are we going to see any evolution to lower profile shoes out of out of HOKA.

Yes, you will see more lower profile solutions going forward, ready for spring. We have the new Solamar that's been very well received, been transport on a lower profile tooling. We have the [indiscernible] in lifestyle that is resonating and it's a profile that we had in the past. So you'll see a more vast array of products going forward.

The next question is from Jonathan Komp from Baird.

I want to follow up on HOKA. Hoping that maybe you can be a little bit more specific when you think about changes to the product launch plans into 2026, just any more details on what we should expect broadly? And then maybe for some of the key styles going forward, the big 3 in terms of cadence and plans? And then just bigger picture on HOKA, as you talk about having potential to add billions of revenue yet.

Can you give somewhat of a buildup or some of the big buckets or growth opportunities that you see when you make that comment?

Yes. Let's start with the latter. So we're focusing on [indiscernible] categories for HOKA, it's performing run a trail, it's hike, it's fitness, it's lifestyle. And over time, you also see apparel. So those are the 5 key areas of growth for us. And we compete in a $0.5 trillion market. and there's plenty of upside for HOKA, both in the U.S. and internationally. As we continue to grow awareness and consideration, we should continue to grow our brand in a healthy way. regarding product transitions, we have tightened inventory of a [indiscernible] going style as we prepare for the upcoming launches of Gaviota mark transport and speed. So you should see experience less noise in the marketplace as we have bought less and tightened inventories. And in regards to cadence you will see an update to our biggest franchise, the Clifton in fall '26. So Clifton and Bondi will no longer overlap.

Okay. That's helpful. Steve, one follow-up then on margin. It looks like the back half margin for operating margin reported in the low 20% range. Historically, when the back half was in the low 20s, the full year margin was more in the high teens, below 20% on an annual basis. Is that the run rate for the business currently as we think about annualizing some of the second half pressures? Or how should we think about the back half margin guide in relation to the current annual run rate that you're performing at.

Yes. I think, Jon, just on that, as we look at the back half kind of this year in comparison to kind of last year, the declines that we're reflecting are really being driven by the tariffs, right? So in terms of how we're running the business, how we think about margins and the margin profile of the business, really, the change that you're seeing in the back half is tariff driven. So that's what we expect, again, based on the tariffs as they are imposed today.

And just a follow-up, given the discussion about maintaining premium positioning, should we view that pressure and the unmitigated portion that you guided to for tariffs, is that more temporary? Or is that a permanent step down in the margin that you're willing to give up essentially?

Yes. So the margin change that you're seeing between last year and this year is going to be driven by the tariffs. And then we'll see kind of if promotion changes. We do have an element of promotion assumed for the back half. So we'll see that, again, the biggest driver being tariffs. That's the overall driver, but there is a level of promotion given the environment today. That will, again, to the earlier question, I think that John asked is that, that will also trickle into FY '27. Again, we haven't given any update on '27. But the first half will be pressured by that margin. But -- so there will be an overall headwinds.

We have done, I think, a very good job of mitigating that in Q2, and that's what you saw us deliver. We don't have the same levers necessarily going into the back half, nor will we have those levers kind of going into. We were able to take advantage of inventory movements that now that the tariffs are fully into effect, you won't necessarily get that you'll get that benefit into future periods. So -- but we'll continue to look as we talked about some of our mitigation strategies, we'll again continue to review pricing to an earlier question, we didn't really see much pushback on some of our price increases. So we'll always -- with a strong brand that's well positioned in the marketplace, we'll continue to evaluate levers that we have. But the way we're kind of currently looking at it, we still have headwinds in the back half that will continue into FY '27.

And our final question today comes from Jay Sole from UBS.

Great. Maybe Stefano, first question for you. As you just think about calendar '25 for HOKA brand, do you see this year as a little bit of a transition year where you had sort of the accelerated life cycles of Bondi 8 and Clifton 9 and then you have this tariff situation where next year, maybe a sort of not a transition year where you have a lot of newness and clean inventories in the marketplace and a good brand momentum, where you might see different kind of momentum financially?

And then I guess, Steve, the question for you is that I know this was asked on an earlier question, but the guidance before was, say, mid-teens for HOKA, assuming no tariffs. Now you're saying low teacher HOKA with tariffs. So if we had gone back to the beginning of the year, and you would have given guidance for HOKA with tariffs, what would it have been? Or without giving us an exact [indiscernible] of what would have been, with the guidance you gave today, have been in line with that, would it have been better than that, would it have been worse than that. Maybe you could just [indiscernible] for us, that would be super helpful.

Yes. Sure, Jay. I'll start kind of with that question, then Stefano can kind of talk about a bit of the transition year of 2025. So to your point, if we look back, I think 1 way to answer your question is that how we've seen HOKA perform, especially with the product transitions, we're very encouraged by the year. So to the point where in a pre-tariff environment, we saw mid-teens and the fact now with a tariff imposed world in the back half were low teens, I'm very encouraged by that, right? Because what it shows is even in a tariff imposed world, consumers are still showing up for our brands, probably a little bit better than what we may have thought at the beginning of the year. So I think that speaks to how well some of our updates are resonating with consumers in the U.S. and globally, too, and you're seeing that in the global numbers.

So where the tariff is impacting a U.S. consumer, I think we've seen a good response, and then we've seen a very good response from an international perspective, which gives us a view into that nontariff imposed world of a consumer response. So having seen that be very positive, it's actually very positive on the brand because I do think tariffs are having an impact on the U.S. consumer.

Yes. And we got the question on transition. Yes, it's -- '25 is a bit of a transition here. We probably have masked if you too many big product launch in the first half of the year, and we didn't face them out enough, there are a few learnings from us. in the transition to the model. So I think it was a learning year for us. And hopefully, this will help going forward.

Everyone, that does conclude our question-and-answer session. This does conclude our conference for today. We would like to thank you all for your participation. You may now disconnect.