Physical retail stores by Hoka serve as the main platform for selling items at their original price
Deckers Brands, the parent company of Ugg and Hoka One One, have reported impressive growth in their wholesale and direct-to-consumer (DTC) sales.
In the first quarter of the fiscal year, Deckers' net sales rose nearly 17% year over year, reaching $964.5 million. Ugg's wholesale sales are up 30% year over year, both in the U.S. and internationally, with net sales growing nearly 19% to $265.1 million. Hoka's Q1 net sales increased nearly 20% to $653.1 million.
Men's growth was almost double the brand's overall growth, with sandal sneaker styles the main driver. This trend was particularly evident in Hoka's DTC sales, which grew 34.7% in Q2 2025, fueled by flagship stores where customers can physically experience technologies. Ugg similarly leverages store experiences like seasonal pop-ups to drive foot traffic and emotionally engage shoppers.
Brick-and-mortar stores are proving to be especially important to wholesale and DTC sales, according to Deckers CEO Stefano Caroti. Physical retail acts as a profit engine with Deckers optimizing store locations to enhance revenue per location, focusing on flagship stores in urban areas that serve as “showrooms.”
International sales drove most of Ugg's growth, with the largest gains in China and the Europe, Middle East and Africa region. The international net sales increased by 49.7% to $463.3 million. Domestic net sales decreased by 2.8% to $501.3 million.
DTC net sales barely budged, rising by 0.5% to $312.2 million. However, Ugg's DTC sales are down 1% in the period. Despite this, net income rose more than 20% to $139.2 million.
Gross margin shrank to 55.8% from 56.9% a year ago. Evercore ISI analysts question whether Deckers' tariff impact estimates are conservative enough, with potential drag of 200 to 300 basis points. If tariffs on goods from Vietnam rise from 10% to 20%, Deckers could face a $185 million tariff impact to its cost of goods sold in fiscal year 2026.
M Science's analyst, Drake MacFarlane, suggests that Deckers' margins will likely be impacted by tariffs, but it's challenging to fully gauge due to rapidly shifting trade policies. Hoka's DTC sales are impacted by sneaker style upgrades, resulting in a degree of cannibalization by the wholesale channel.
Despite these challenges, Deckers remains optimistic about its future. The company hopes to recapture about $75 million via price hikes and "partial cost sharing with factory partners." Tariffs weren't a major factor in Q1, but global trade policy uncertainty has prompted Deckers to not provide guidance for the full fiscal year.
In conclusion, physical retail stores, especially those providing experiential retail, have been crucial to Deckers' brands’ premium pricing and margin expansion, supporting stronger growth compared to e-commerce alone. E-commerce complements but does not replace the role of retail stores for Hoka and Ugg.
- The growth in Deckers Brands' net sales, driven by both wholesale and direct-to-consumer (DTC) sales, has been influenced by advanced technologies in Hoka's flagship stores.
- Ugg leverages store experiences like seasonal pop-ups to drive foot traffic and emotionally engage shoppers, recognizing the importance of brick-and-mortar stores in their sales strategy.
- Economic policies, particularly tariffs, are projected to impact Deckers' margins, as suggested by analysts like Drake MacFarlane from M Science, with potential implications for the company's future costs and pricing strategies.
- Deckers Brands is optimistic about its future, aiming to capture around $75 million via price hikes and cost-sharing initiatives with factory partners, despite challenges posed by trade policies and potential tariff increases.
