DECK — Q2 FY2027 Financial Report Analysis

Deckers Brands, the owner of HOKA running shoes and UGG boots, reported record sales of $1.48 billion for its fiscal second quarter (the three months ended September 30, 2026), up 3.5% from a year earlier. Diluted earnings per share (EPS, profit divided by the number of shares) rose 27% to $2.31. That headline overstates how well the business itself did: $0.28 of EPS came from a one-time refund of US tariffs the Supreme Court struck down, and an 8.4% smaller share count did most of the rest. At the same time management lowered its full-year sales forecast by roughly $170 million at the midpoint, with both HOKA and UGG now expected to grow more slowly than it said in July.

The full Form 10-Q has not been filed yet, so this analysis is based on the earnings release (Exhibit 99.1 to the October 22, 2026 Form 8-K). The release does not split brand sales by channel or give segment profit, and it has no cash flow statement.

Key figures

Figures excluding the refund are our calculation from the company's stated $46.0 million refund in cost of sales, its stated ~310 basis-point margin benefit and its stated $0.28 EPS benefit. "DTC" is direct-to-consumer: Deckers' own stores and websites. "Comparable" DTC sales count only stores and sites open in both years, at constant exchange rates, so they strip out growth from new openings.

HOKA and UGG

HOKA sales rose 6.8% to $677.2 million. That follows 7.7% in the first quarter, so the brand has now grown in the 7-8% range for two quarters running, well short of the low-double-digit growth management guided to in May. The company has now lowered its full-year HOKA outlook to a high-single-digit increase. For a brand that grew 15.9% last fiscal year, that is a clear slowdown.

UGG sales rose 3.5% to $786.4 million. The September quarter is when retailers stock up on boots ahead of autumn and winter, so it matters a lot for UGG's year. Full-year UGG growth is now expected to be a low-single-digit percentage, down from mid-single-digit in May.

Other brands fell 54.3% to $17.0 million as Deckers winds down Koolaburra as a standalone brand. The company says that phase-out also pulled down its wholesale and US ("domestic") sales figures this quarter.

Where the sales came from

Growth came from selling to retailers and from outside the US. Wholesale sales rose 5.5% while sales through Deckers' own stores and websites fell 1.8%, and comparable DTC sales fell 6.4%. That is the weakest signal in the release: when shoppers buy less in a brand's own stores and websites, it is the most direct read on consumer demand, and the CEO described "a challenging consumer environment." The total DTC decline is smaller than the comparable decline, which suggests newer stores and currency moves filled part of the gap.

International sales rose 9.0% to $644.7 million and now make up 43.5% of the total, while US sales slipped 0.4%. Currency added about 0.7 points of growth company-wide (3.5% reported vs 2.8% at constant currency); the release does not give the currency effect by region.

What the headline numbers hide

A one-time refund inflated margins and EPS. In February 2026 the Supreme Court struck down tariffs imposed under the International Emergency Economic Powers Act (IEEPA). This quarter Deckers received $46.0 million of net refunds, booked as lower cost of sales, plus $3.0 million of interest, booked in other income. The company puts the benefit at about 3.1 points of gross and operating margin and $0.28 of EPS. Without it, operating margin (the share of sales left after product costs and running the business, before interest and tax) was about 23.2%, only 0.4 points higher than a year ago, and operating income rose about 5%, not 19%.

Underlying gross margin did improve. Excluding the refund, gross margin was about 57.4%, 1.2 points above last year, even with more of the sales going through lower-margin wholesale. The release does not explain the drivers; the 10-Q should.

Spending grew faster than sales. Selling, general and administrative expenses (SG&A: marketing, stores, staff and overhead) rose 5.9% to $505.7 million against 3.5% sales growth, taking them to 34.2% of sales from 33.4%. That absorbed most of the underlying gross margin gain.

Buybacks did most of the per-share work. Deckers bought back 3.2 million shares for $299.3 million in the quarter and $637.5 million in the first half. Diluted shares were 8.4% lower than a year ago. Taking out the refund after tax (about $38 million, using the company's $0.28 per share), net income was roughly $275 million, up about 3%, while EPS on the same basis rose about 11.5%. Neither the tax rate (22.4% vs 21.7%) nor interest helped: other income fell to $14.0 million from $15.8 million even with the $3.0 million refund interest, because the company holds less cash.

Inventory is in line; cash flow is not disclosed yet. Inventory was $860.8 million, up 3.0% from a year earlier, close to the 3.5% sales growth, so there is no sign of a stock build that would need discounting. Cash was $1.21 billion against $1.41 billion a year earlier, with no borrowings; the drop reflects the buybacks. The release has no cash flow statement, so how well profit turned into cash this half can't be checked until the 10-Q.

Takeaway: Strip out the tariff refund and Deckers' quarter was modest: sales +3.5%, operating margin up 0.4 points and net income up about 3%, with an 8% smaller share count turning that into double-digit EPS growth. The raised EPS guidance is entirely the refund; the underlying outlook went down, led by HOKA slowing to high-single-digit growth and falling comparable sales in Deckers' own stores and websites.

Did last time's read hold up?

Our fiscal 2026 annual analysis named three things to watch. HOKA returning to low-double-digit growth: no. It grew 6.8% this quarter and management has cut the full-year target to high single digits. US sales continuing to grow: no. Domestic sales slipped 0.4%, though part of that is the Koolaburra wind-down. Whether any of the roughly $120 million of IEEPA tariffs Deckers had paid would be refunded: yes. It has received $87.9 million of net refunds through October 8, 2026, which the outlook now includes. Our point that per-share growth leans on buybacks held up even more strongly than expected.

Outlook

Management's updated fiscal 2027 outlook (year ending March 31, 2027), compared with what it said earlier:

"n/a" means our record of the July update does not include a brand-level figure. The new outlook assumes $1.0 billion of buybacks for the year (about $360 million more after the first half's $637.5 million), a tax rate of about 23%, SG&A of about 35.5% of sales, and no tariff refunds beyond those received by October 8.

The new sales range means about 4-5% growth for the year, against 9.8% last year. It also implies second-half sales of $3.20-$3.23 billion, up roughly 4-5% on last year's second half. Without the refunds, the margin guidance works out to roughly 57% gross and 21.5% operating, so the expected gross margin is a bit better than in July but the operating margin is about the same, and the EPS range of about $7.28-$7.43 sits a little below July's.

Our view: the business is still profitable, has no debt and has inventory under control, but growth has slowed noticeably for both brands at once and the weakness is showing up in Deckers' own stores and websites, the channel closest to the shopper. The December quarter is UGG's biggest, so it will show whether the low-single-digit UGG forecast is conservative or still too high. The CEO's reference to "deliberate actions" to sharpen execution and "concentrate resources" in the second half is worth checking in the 10-Q and the next release for specific cost or brand changes.