Deckers Brands (DECK) Q2 2027 earnings review
Deckers cuts its sales plan, but tariff refunds lift profit
Deckers Brands, the maker of HOKA running shoes and UGG boots, raised its profit forecast on a one-time tariff refund while cutting its sales plan. Second-quarter revenue rose 3%, missing management's 5% target as direct-to-consumer sales shrank and US demand stalled. Profit per share jumped 27% to $2.31, boosted by $46 million in government tariff refunds and steady share buybacks. Chief executive Stefano Caroti praised the team's cost control, yet he lowered the full-year sales targets for both HOKA and UGG.
| HOKA and UGG combined sales | +5.0% total revenue +3.5% from a year ago |
|---|---|
| Direct-to-consumer comparable sales | -6.4% +6.8% last quarter |
| Profit per share | $2.31 $2.03 excluding tariff refunds (+11.5%) |
| Full-year revenue outlook | Cut $173M middle of the range: 4.4% growth |
⚖️ Verdict: 🔴 Bearish
The story got worse because Deckers abandoned its promise of a second-half sales rebound, cutting the full-year revenue plan to about 4% growth by our math. Direct-to-consumer comparable sales fell 6% after growing for three quarters, proving that slower demand is not just a European warehouse timing quirk. The good news: tariff refunds of $88 million through early October lifted the full-year profit outlook, and underlying gross margin still expanded by 1.2 percentage points.
The question now is whether HOKA is merely working through a tough comparison year or facing lasting saturation in the US market. If the slowdown is temporary, new shoe models and sporting-goods partnerships will lift growth back toward double digits; if saturation has set in, direct-to-consumer sales will stay negative. Third-quarter holiday results for both brands will settle it.
🐂 Bull Case
Tariff Refunds Funded the Entire Profit Outlook Raise
Deckers makes HOKA running shoes and UGG boots, importing most of its footwear into the United States. Trade duties were a major headwind last year, but the company collected massive refunds under the International Emergency Economic Powers Act (IEEPA, a US trade law) over the past three months.
- Q2 tariff refunds: $46.0 million, adding 3.1 percentage points to gross margin and $0.28 to profit per share
- Total refunds through October 8: $87.9 million plus $4.7 million of interest, adding $0.52 to the full-year profit per share plan
- Q2 gross margin excluding refunds: 57.4% by our math, still up 1.2 percentage points from a year ago
These cash refunds turned a trade risk into a windfall, and underlying profitability also improved because full-year gross margin excluding refunds stepped up to 57.0% by our math. However, removing the $0.52 refund leaves the full-year profit per share plan at $7.36 at the middle of the range, down 7 cents from the prior plan.
What to watch: the gross margin breakdown in the quarterly filing. It will show whether product mix or lower closeout discounting drove the 1.2-point underlying improvement.
Buybacks Lift Per-Share Profit as Sales Slow
The footwear group carries no debt and over $1.2 billion in cash, so it uses share repurchases to boost per-share growth. In the second quarter, it spent $299.3 million to buy back 3.2 million shares at an average price of $93.65, bringing first-half repurchases to $637.5 million.
Those purchases shrank the diluted share count by 8.4% from a year ago to 135.3 million. Because each remaining share claims a larger slice of earnings, profit per share excluding tariff refunds rose 11.5% by our math even though operating profit excluding refunds grew only 5.2%. Management now plans $1.0 billion of buybacks for the full year.
What to watch: third-quarter buyback spending against the remaining $362.5 million needed to reach the $1.0 billion full-year target. Faster spending would push per-share profit above the outlook range.
Operating Margin Expanded Even Before Refunds
Operating margin shrank in each of the previous two quarters because Deckers spent heavily on new stores and marketing. Chief executive Stefano Caroti said the team beat profit targets this quarter through "disciplined marketplace management and a focus on expense control in a challenging consumer environment".
Selling, general and administrative expenses (advertising, store rent and overhead) still rose 0.8 percentage points of revenue to 34.2% by our math, and the full-year overhead plan stepped up half a point to 35.5%. Yet the 1.2-point underlying gross margin gain more than covered that extra overhead, lifting Q2 operating margin excluding refunds by 0.4 percentage points to 23.2% and holding the full-year clean operating margin plan at 21.5%.
What to watch: fourth-quarter operating margin implied by the full-year outlook. It will show whether store rent and marketing costs keep rising faster than sales.
🐻 Bear Case
Full-Year Revenue Plan Cut by $173 Million
Three months ago, management kept its full-year revenue forecast at $5.86 billion to $5.91 billion, arguing that slow first-half European shipments were a warehouse timing shift that would catch up in the second half. Caroti said the company is now "taking deliberate actions to strengthen our connection with consumers" for the rest of the year.
- Full-year revenue outlook: cut to $5.70–$5.725 billion, or 4.4% growth at the middle of the range by our math
- HOKA full-year growth target: lowered from low-double digits to high-single digits after growing 6.8% in Q2
- UGG full-year growth target: lowered from mid-single digits to low-single digits after growing 3.5% in Q2
- Implied second-half revenue growth: 4.4% by our math, down from the 8.5% to 10.1% required under the old plan
Even stripping out smaller brands to remove the "phase-out of Koolaburra brand standalone operations", combined HOKA and UGG sales grew only 5.0% in Q2 by our math. Cutting the full-year forecast proves that slower demand, not just European warehouse timing, held back the first half. International growth also slowed to 9.0% from 29.3% a year ago.
What to watch: third-quarter HOKA revenue growth during the holiday quarter. A reading below 8% would make even the lowered high-single-digit full-year target hard to reach.
Direct-to-Consumer Sales Turned Negative
Direct-to-consumer (DTC, sales through Deckers' own stores and websites) was the company's brightest spot for the past nine months, growing 13.0% last quarter and lifting gross margins because direct sales carry no wholesale middleman. That momentum stopped in the second quarter.
Total direct-to-consumer revenue fell 1.8% from a year ago to $387.5 million, while comparable direct sales (stores and websites open at least a year) dropped 6.4%. Wholesale revenue grew 5.5% to $1.093 billion, so the growth gap between direct and wholesale flipped from positive 10.8 percentage points in Q1 to negative 7.3 percentage points by our math. Domestic sales across all channels also dipped 0.4% to $835.8 million.
What to watch: third-quarter comparable direct-to-consumer sales during the peak UGG holiday season. Another drop would show that shoppers are pulling back at full price.
Risks this quarter didn't answer
Four standing items from prior quarters depend on disclosures that live in the quarterly filing or conference call rather than the earnings release.
- HOKA retail store count: not in the release; the quarterly filing will show whether Deckers stayed on its pace of opening 20 to 25 stores a year.
- Brand-level gross margins: not in the release; the filing's segment note will show whether UGG kept expanding its margin.
- New HOKA models and wholesale doors: no figures in the release on the Mach Pro running shoe or new sporting-goods retail partners.
- Tariff class-action lawsuits: no update in the release on the two consumer lawsuits over tariff-related pricing.
💲 Other KPIs
Money owed by retail partners jumped 25.3% from a year ago by our math, far outpacing the 3.5% rise in total revenue and 5.5% growth in wholesale sales. That gap indicates wholesale shipments landed late in the quarter or retail partners are taking longer to pay, tying up working capital.
Unsold footwear and apparel rose 3.0% from a year ago by our math, matching the 3.5% increase in quarterly sales after shrinking 4.9% in the first quarter. Keeping inventory in line with slower sales reduces the risk of forced discounting during the holiday season.
Cash on hand fell 14.5% from $1.414 billion a year ago and dropped from $1.907 billion at the end of March. The footwear maker spent $637.5 million on share buybacks in the first half and built seasonal inventory for the holidays while remaining debt-free.
🔮 Guidance
Cut. The middle of the range dropped by $172.5 million to $5.713 billion, lowering full-year growth to 4.4% by our math from 7.5% previously. After 4.4% growth in the first half, the new plan implies 4.4% growth for the second half, abandoning the 8.5% to 10.1% second-half rebound management previously projected.
Cut. Management lowered the running brand's full-year target by roughly 3 percentage points after growth slowed to 7.7% in Q1 and 6.8% in Q2. Reaching ~8% for the year requires second-half growth near 9% against a tough third-quarter comparison when HOKA grew 18.5%.
Cut. The sheepskin boot brand's target stepped down after growing 4.9% in Q1 and 3.5% in Q2. Because UGG generates most of its sales in the third quarter, the lower outlook points to a cautious holiday season across direct stores and wholesale partners.
Raised. The outlook jumped nearly 2 percentage points, including a 1.5-point boost from $87.9 million of tariff refunds collected through October 8. Excluding those refunds, the underlying full-year target is 57.0% by our math, still up from the prior plan.
Raised. Overhead and marketing costs will take a 0.5-point larger share of revenue than previously planned. That increase comes from spreading fixed store and corporate costs over a $172.5 million smaller revenue base after the top-line outlook cut.
Raised. The full-year target rose roughly 1.5 percentage points, matching the 1.5-point benefit from tariff refunds. Excluding refunds, the underlying operating margin plan holds steady at 21.5% by our math because higher underlying gross margin offsets the 0.5-point rise in overhead costs.
Unchanged. The full-year tax rate plan stays at 23% after the company recorded a 22.4% rate in the second quarter and 22.6% across the first six months.
Raised. The middle of the range rose $0.45 to $7.88 (up 12.2% from last year), leaving 8.0% growth for the second half by our math. However, tariff refunds add $0.52; excluding them, the underlying midpoint falls 7 cents to $7.36 and implies 2.5% second-half growth.
Raised. Management switched from a percentage of free cash flow to a fixed $1.0 billion commitment. After spending $637.5 million in the first half, the plan leaves $362.5 million of buybacks for the second half.
❓ Key Questions
Why did comparable direct-to-consumer sales drop 6.4%?
Comparable direct sales grew 6.8% in the first quarter and 8.2% in the fourth quarter before falling 6.4% in Q2. Management did not say whether lower store traffic, weaker online conversion, or fewer markdown events caused the sudden drop.
Why did trade receivables jump 25% on 5.5% wholesale growth?
Trade accounts receivable reached $675.2 million, up 25.3% from a year ago while wholesale revenue rose only 5.5%. Investors need to know whether shipments landed in the final weeks of September or if retail partners received extended payment terms.
How many HOKA stores opened in the second quarter?
The company ended June with 68 HOKA stores and a plan to open 20 to 25 stores annually, which drove rent costs higher in Q1. The press release did not include the Q2 store count table.
Will Deckers keep all $87.9 million of tariff refunds?
Deckers booked $87.9 million of net tariff refunds through October 8, but it previously disclosed two consumer class-action lawsuits over tariff-related pricing. Management did not say whether any portion of the refunds faces legal claims or supplier sharing.