The company updated its reportable operating segments to a brand-focused approach (UGG, HOKA, Other brands) in Q4 FY2025, aligning with executive leadership and resource allocation decisions. This strategic shift includes the sale of the Sanuk brand (August 2024) and the planned phase-out of Koolaburra brand standalone operations by end of calendar year 2025, to concentrate on core organic opportunities.

HOKA brand's wholesale net sales grew 24.1% and DTC net sales grew 22.7% in FY2025, driven by global market share gains and new points of distribution. UGG brand also saw strong growth with wholesale up 15.0% and DTC up 11.1%, supported by international demand and retail store footprint expansion (42 HOKA, 137 UGG stores as of March 31, 2025).

The company's long-term strategy emphasizes building its Direct-to-Consumer (DTC) channel to differentiate the consumer experience and drive acquisition/retention. Simultaneously, a marketplace inventory management strategy, including segmentation and differentiation, resulted in higher full-price sell-through and benefited gross margins in FY2025.

Management successfully increased gross margin by 230 basis points to 57.9% in FY2025, primarily through favorable brand/product mix and higher full-price selling, despite increased SG&A expenses (up 17.1%). This indicates effective cost management relative to sales growth and product strategy.

To mitigate future disruptions, management continues to diversify third-party manufacturers and regions, with less than 5% of footwear production from China. Investments in global warehouses and DCs (e.g., new Mooresville, Indiana DC in Oct 2023) and a planned transition to a new international 3PL in FY2026 aim to support growing business and meet demand.

The company increased its employee base by 14.6% to approximately 5,500 employees as of March 31, 2025, reflecting investments in talent across brands and enterprise functions. High employee survey participation (91.5%) and pride in working for Deckers (89%) indicate successful talent retention and a positive culture.

The footwear, apparel, and accessories industry is subject to rapid changes in consumer tastes, making demand difficult to anticipate. The company acknowledges that volatile economic conditions, including inflation and interest rates, could reduce discretionary spending on premium products like UGG and HOKA, potentially impacting sales and profitability.

Reliance on independent manufacturers primarily in Southeast Asia exposes the company to risks from geopolitical tensions, trade policies, and natural disasters. While mitigation strategies are in place, disruptions could still lead to increased costs, production delays, and inability to fulfill orders, as highlighted by potential port congestion and rising freight costs.

The company stores significant sensitive information and relies on complex IT systems, making it vulnerable to cyber-attacks. The filing notes increased frequency and sophistication of cyber incidents, which could lead to business disruption, data loss, litigation, regulatory penalties, and reputational harm, despite existing cybersecurity programs.

UGG is highlighted as an iconic and recognized footwear brand with loyal consumers, while HOKA is a leading brand in performance footwear appealing to a broad demographic. The company emphasizes its ability to differentiate products through fashion, authenticity, functionality, quality, and comfort, which are crucial in a highly competitive market.

The industry is highly competitive, with larger competitors possessing greater financial and technological resources. The success of UGG and HOKA has attracted new entrants, leading to intense pricing pressure and the risk of market share decline if the company fails to adapt quickly to consumer preferences or manage excess inventory.

The company has mitigated the historical seasonality of the UGG brand by diversifying and expanding year-round product offerings. The increasing net sales contribution from the HOKA brand, which has more even sales throughout the fiscal year, further reduces the impact of seasonality, enhancing competitive stability.

Management's focus on SKU productivity, product purchasing decisions, and reduced production lead times, along with the sale of excess inventory through liquidation channels, enhanced inventory performance. This discipline resulted in increased levels of full-price selling, particularly for UGG, contributing to a 230 basis point gross margin increase to 57.9% in FY2025.

The company continues to invest in its global warehouses and DCs, including the addition of a third US warehouse and DC in Mooresville, Indiana, in October 2023. These investments are aimed at creating long-term capacity for domestic growth of UGG and HOKA brands and improving efficiency in product distribution.

Selling, General, and Administrative (SG&A) expenses increased 17.1% to $1,706,571 in FY2025, primarily due to higher advertising, marketing, and promotion expenses ($83,300 increase), increased payroll costs from higher headcount ($67,800 increase) for HOKA and UGG brands, and higher 3PL service fees and IT costs.

The company's success relies on continued innovation in materials and design, particularly for the HOKA brand, through timely introduction of new features and technologies. This includes investing in research and development to incorporate preferred materials and expand category offerings, ensuring products align with emerging consumer expectations.

The company continues to invest in and upgrade its IT infrastructure and systems, including those utilizing artificial intelligence (AI) and data analytics, to improve operational efficiency and competitiveness. These efforts are crucial for supporting global e-commerce websites (operating in 56 countries) and enhancing the consumer shopping experience.

Deckers holds 232 designs and inventions with patent registrations and 64 pending, actively protecting its trademarks for brands like UGG and HOKA. This strong IP position is considered a valuable asset and is vigorously defended against infringement, which is critical in a competitive industry.

The Board approved an additional $2,250,000 authorization for share repurchases on May 21, 2025, following $567,002 in repurchases during FY2025 (up 36.7% YoY). This reflects management's belief that shares are undervalued and demonstrates confidence in future cash flow generation and commitment to enhancing shareholder value.

Estimated capital expenditures for the next fiscal year are between $120,000 and $130,000, primarily allocated to expanding the HOKA brand retail store fleet, refreshing existing retail stores, and upgrading IT infrastructure and warehouses. This indicates a strategic investment in scaling operations to support future growth.

As of March 31, 2025, cash and cash equivalents stood at $1,889,188, a significant increase from $1,502,051 in the prior year. This robust cash balance, combined with available borrowing capacity under revolving credit facilities, provides ample liquidity to meet working capital needs, contractual obligations, and strategic initiatives.

The company has had a holistic ESG program since 2010 and received multiple recognitions in fiscal year 2025, including being named one of Barron’s 100 Most Sustainable Companies and America’s Greenest Companies. This demonstrates a sustained effort and external validation of their environmental, social, and governance practices.

The Corporate Responsibility, Sustainability & Governance Committee, composed of four independent Board members, provides ultimate oversight of the ESG strategy. Regular updates to the Audit & Risk Management Committee and Board, along with a Chief Administrative Officer (CAO) responsible for day-to-day management, ensure accountability and integration of ESG into corporate strategy.

The company increased its employee base by 14.6% and reported 89% of employees were proud to work for Deckers in a February 2025 survey. In FY2025, employees volunteered approximately 24,000 hours, and the company donated over $6,000 to non-profit organizations, aligning with their Sustainable Development Goals (SDGs) and fostering a positive social impact.

The company acknowledges ongoing macroeconomic factors, including inflationary pressures, increased tariffs, and geopolitical conflicts, are creating a complex and challenging environment. While these factors did not materially impact FY2025 results, their full future impact is difficult to quantify, suggesting potential future challenges.

International net sales increased significantly by 26.3% to $1,798,903 in fiscal year 2025, compared to domestic net sales growth of 11.3% to $3,186,709. This indicates strong global demand for the company's brands and successful execution of international expansion strategies.

The company faces risks from changes in US and foreign tax laws, including the 15% global minimum tax (Pillar Two), which could increase tax liabilities. Additionally, increasing focus on ESG matters is leading to more stringent legal and regulatory requirements, potentially increasing compliance burdens and costs.