Deckers Q1 FY26: HOKA & UGG Fuel Growth as Inventory Risk Rises

Deckers Outdoor Corp., the parent company behind the wildly popular HOKA running shoes and iconic UGG boots, just released its financial results for the first quarter of fiscal year 2026. For anyone following the high-stakes footwear and apparel industry, digging into these filings provides a clear picture of a company's health and strategy. Let's break down the key takeaways from their latest 10-Q filing for the quarter ending June 30, 2025.

The HOKA and UGG Powerhouse

Deckers' growth story is a tale of two incredibly strong brands. The company's total net sales for the quarter jumped an impressive 16.9% year-over-year, reaching $964.5 million. This growth wasn't evenly distributed; it was overwhelmingly driven by its two star players:

• HOKA: The brand continues its meteoric rise, with sales soaring 19.8% to $653.1 million. HOKA now represents more than two-thirds of the company's entire revenue, cementing its position as the primary growth engine.
• UGG: Proving its enduring appeal, the UGG brand also posted a strong quarter, with sales increasing 18.9% to $265.1 million. This robust performance from a more mature brand is a testament to its successful product innovation and marketing.

Combined, HOKA and UGG accounted for over 95% of Deckers' total sales, highlighting the company's reliance on this powerful duo. Meanwhile, the "Other brands" segment, which includes Teva and the now-divested Sanuk brand, saw sales decline by 19.0%.

To see how these revenue streams flow through the company's costs and contribute to the bottom line, this chart provides a helpful visual breakdown of the income statement.

A Story of Global Growth and Shifting Channels

While the brand performance is straightforward, the geographic and channel data reveals a more complex picture. The quarter's growth was fueled entirely by overseas demand.

• International Sales: Skyrocketed by a remarkable 49.7% to $463.3 million.
• Domestic Sales: Unexpectedly decreased by 2.8% to $501.3 million.

This divergence shows that Deckers' current expansion is an international affair. This trend is also reflected in how it sells its products. Sales channels are the methods companies use to get their products to customers, primarily through wholesale (selling to other retailers) or Direct-to-Consumer (DTC), which includes their own stores and websites.

• Wholesale Channel: Grew by a substantial 26.7%, reaching $652.4 million. This aligns with the international push, as Deckers expands its presence in retail stores globally.
• Direct-to-Consumer (DTC) Channel: Remained nearly flat with just 0.5% growth. The filing further notes that comparable DTC sales actually decreased by 2.2%.

This suggests that while Deckers is successfully placing more products with its retail partners abroad, its own e-commerce and physical stores are not keeping pace.

Profitability and A Big Bet on Inventory

Despite a slight dip in gross margin (down 1.1 percentage points to 55.8%), Deckers demonstrated excellent cost control. The company's income from operations grew by 24.5% to $165.3 million, outpacing its revenue growth. This efficiency resulted in an improved operating margin of 17.1%, up from 16.0% last year, and a healthy net income of $139.2 million.

However, a look at the cash flow statement reveals a significant strategic move. Cash from operating activities fell sharply to $36.1 million from $112.7 million in the same period last year. The primary reason? A massive $354 million increase in inventories. This is a calculated risk. A large inventory build-up can position a company for strong future sales, but it also carries the risk of tying up cash and potential markdowns if that demand doesn't materialize.

In conclusion, Deckers is leveraging the incredible momentum of HOKA and the resilient strength of UGG to fuel a major international expansion. While the slowdown in the domestic and DTC channels warrants attention, the company's ability to drive strong top-line growth and manage expenses is impressive. The key challenge ahead will be to successfully sell through its significantly expanded inventory, particularly as it navigates a competitive global marketplace.