Good afternoon. Thank you for standing by. Welcome to the Deckers Brands Third Quarter Fiscal 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. I would like to remind everyone that this conference call is being recorded. I'd now like to turn the call over to Erinn Kohler, VP, Investor Relations and Corporate Planning.

Hello, and thank you, everyone, for joining us today. On the call is Stefano Caroti, President and Chief Executive Officer; and Steve Fasching, Chief Financial Officer. Before we begin, I would like to remind everyone of the company's safe harbor policy. Please note that certain statements made on this call are forward-looking statements within the meaning of the federal securities laws, which are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements made on this call other than statements of historical fact are forward-looking statements and include statements regarding our current and long-term strategic objectives, capital allocation, anticipated impacts from our brand and marketplace management strategies, changes in consumer behavior, strength and performance of our brands, demand for our products, product and channel distribution strategies, including DTC, plans for and the launch timing of new products, marketing plans and strategies, disruptions to our supply chain and logistics, our anticipated revenues, product mix, margins, expenses, inventory levels, promotional activity and our anticipated rate of full price selling, the expected timing of adjustments to certain brand operations, the impact of the macroeconomic environment on our operations and performance, including fluctuations in foreign currency exchange rates and our ability to achieve our financial outlook. Forward-looking statements made on this call represent management's current expectations and are based on information available at the time such statements are made. Forward-looking statements involve numerous known and unknown risks, uncertainties and other factors that may cause our actual results to differ materially from any results predicted, assumed or implied by the forward-looking statements. The company has explained some of these risks and uncertainties in its SEC filings, including the Risk Factors section of its annual report on Form 10-K and quarterly reports on Form 10-Q. Except as required by law or the listing rules of the New York Stock Exchange, the company expressly disclaims any intent or obligation to update any forward-looking statements. Please note, as previously disclosed, the company effected a six-for-one forward stock split during the second fiscal quarter. The share per share and resulting financial amounts mentioned on this call have been adjusted to reflect the effectiveness of the stock split. On this call, management may refer to financial measures that were not prepared in accordance with generally accepted accounting principles in the United States, including constant currency. In addition, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open throughout the current and prior reporting periods. The company believes that these non-GAAP financial measures are important indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. With that, I'll now turn it over to Stefano.

Thank you, Erinn. Good afternoon, everyone, and thank you for joining today's call. It's great to be here with you today to discuss our superb third quarter, the largest and most profitable in Deckers' history. UGG and HOKA continued to drive our success, as both brands are creating unique and innovative products with purpose that are increasingly embraced by consumers worldwide. Highlights of our record third quarter performance include revenue growing 17% over last year to $1.8 billion, gross margins improving to 60.3%, and diluted earnings per share increasing 19% to $3. We are very proud of the exceptional quarter just completed, thanks to the hard work of our global teams. I want to especially recognize employees supporting our distribution centers, retail stores, customer and consumer experience, e-commerce, marketing, planning and allocation, merchandising and sales, who collectively contributed to the successful execution of our largest quarter ever. Once again, our brands were able to maintain a high degree of full price business while competing with more promotional brands in the global marketplace, choosing to prioritize brand health. As we continue to manage and build our brands and business for the long term, we're even more encouraged by what Deckers has delivered over the last nine months. Our fiscal year-to-date performance, as compared to last year, includes significant revenue growth in key areas, with HOKA increasing 29%, UGG growing 15%, international markets rising 28%, and balanced increases of 19% across the DTC and wholesale channels. The shape of our growth and evolution of our business is directly tied to our long-term strategies and guiding principles, which provide the foundation for how we manage our brands to maintain a pull model of demand. Overall, Deckers' third quarter and fiscal year-to-date performance has exceeded our expectations. Our increased revenue outlook for fiscal '25 now calls for 15% growth, which would be our fifth consecutive year of growing mid-teens or higher. Steve will provide further details on third quarter performance and this updated outlook later in the call. But before that, I will share brand highlights from the third quarter. Starting with UGG. Global revenue in the third quarter increased 16% versus last year to $1.2 billion. From a channel perspective, UGG delivered balanced revenue growth of 16% versus last year across both direct-to-consumer and wholesale. UGG DTC channel highlights in the third quarter include strong growth across all global markets, gains with new and existing consumers, as the brand experienced double-digit increases in both acquisition and retention, a 25% increase in UGG Reward members and encouraging progress for UGG Men's, with growth outpacing total brand growth in the channel. In the wholesale channel, UGG experienced growth across all regions, with the majority of the increased revenue coming from international markets. Close partnerships with influential retailers continue to elevate the UGG brand and enhance global exposure with target consumers. During the third quarter, I collaborated to create special corner shop takeovers with Selfridges in London and Nordstrom in New York City. Both of these partnerships were activated with on-site events and media that drove great brand buzz and connections with consumers. Across the global wholesale marketplace, we believe that UGG was a top performing brand in the holiday quarter, highlighted by exceptional levels of full price sell-through that drove healthy margins for our partners and lean inventory in the channel exiting the month of December. We believe the UGG brand's success around the world results from a purposeful product assortment that is informed by consumer insights and infused with UGG brand codes. This approach has driven consistent product performance throughout the fiscal year with progress in key segments, including reimagined icons, with the Tasman and Ultra Mini franchises continuing to experience strong global adoption from consumers. Hybrid versatility as the emerging Golden and Lowmel collections experienced rapid sellouts, while the Weather Hybrid collection more than doubled versus the prior year, a new winter lifestyle highlighted by the Mini Dipper's success in the U.S. and EMEA. The UGG team continues to build brand heat and relevance through powerful collaborations. During the quarter, I was able to reach a new audience and elevate the in-line assortment through the release of two highly sought-after collaborations with Los Angeles-based fashion brand Gallery Department and U.K.-based skate brand Palace. These partnerships featured iconic styles, such as the Tasman and the Ultra Mini, which gained global exposure from being spotted on influential professional athletes and music superstars. The success of these iconic styles is closely linked to the emerging hybrid styles in the assortment. The Goldenstar Clog continued to see strong global growth in the quarter, and we saw consumers in the U.S. and in Europe embrace the Lowmel as a lifestyle sneaker, lending the style to the UGG brand's top 10 during the third quarter. Adding to our enthusiasm for the UGG sneaker success, we've just added sizing for men's and kids and also launched a companion style, the Low Lowmel, that hits low to the ankle and is built with greater versatility for warmer months. In another hybrid collection that performed well in the quarter was the UGG brand's weatherized hybrids, featured as part of our men's focused marketing campaign starring Post Malone. This campaign drove significant increases in search and engagement, with over 3 billion impressions in the U.S. alone for both the product collection and the UGG brand overall. Through high impact out-of-home content, media placement with Amazon Thursday Night Football, ESPN and Spotify and a 10-day experiential field house retail pop-up store that culminated with a VIP performance by Post Malone. This campaign represents great progress in our journey to increase connections with male consumers around the world, even propelling the Tasman hybrid to become the UGG brand's number one men's style in China this past quarter, a region where the brand continues to make solid headway. At the same time, we're seeing strong adoption of our UGG Men's product among professional athletes, a group that often shapes the future of fashion. Altogether, this was a splendid quarter for UGG, as the brand continues to perform in a league of its own. Heading into the final stretch of fiscal '25, UGG is delivering on the objectives we set for the year, with balanced growth across channels driven by outsized growth from international markets and maintained strength in the U.S. We believe this special brand can continue to deliver sustainable growth through distinctive and ownable category segments that are uniquely UGG. Congratulations to Anne and her entire UGG team on these amazing accomplishments and the bright future ahead. As UGG has continued to solidify its positioning as a leading global lifestyle brand, I would like to provide an update regarding the Koolaburra brand. To maintain focus on our most significant organic opportunities, we're planning to phase out the Koolaburra brand standalone product collections and operations. As part of this change, we expect to sunset koolaburra.com at the end of this fiscal year and wind down Koolaburra in the wholesale channel throughout the calendar year 2025. We'll provide a more complete update on this forthcoming change during our earnings call in May as part of our forward-looking guidance for fiscal year 2026. Shifting to the HOKA brand. Global revenue in the third quarter increased 24% versus last year to $531 million. From a channel perspective, HOKA delivered impressive revenue growth versus last year throughout the global marketplace as DTC increased 27% with strong growth across every region and wholesale grew 21%, primarily driven by outside increases from international distributor markets, as we prepare the marketplace for upcoming key franchise upgrades. HOKA DTC channel highlights in the quarter include accelerated growth in the APAC region, with China contributing the largest incremental dollar revenue of all international regions, persisting gains in consumer acquisition and retention, the latter of which was particularly strong, indicating a high degree of loyalty from existing consumers and increased mix of business from trail categories, which drove outsized growth in part due to the introduction of the Kaha Frost weather collection. The Kaha Frost collection features the HOKA brand's first cold weather ready styles, including a $280 hiking boot and $200 slipper moccasin, both of which are trail-ready with Vibram mega grip outsole. The consumer response was excellent around the globe, driving impressive sell-throughs and generating great breadth for the brand, including being named the Best Multifunctional Hiking Shoe of 2024 by GOGO Shanghai, an influential annual publication of lifestyle awards in China. In the wholesale channel, our primary focus during the quarter was to set the stage for the Bondi 9 launch by moving through existing inventory of the Bondi 8 while also driving high full price sell-throughs across the lineup of innovative products we've introduced throughout the year. As brand awareness and consumer appetite for HOKA continues to build, we're excited to be adding select doors with our strategic partners worldwide in conjunction with the start of our Spring 2025 season. During the third quarter, the HOKA team did an outstanding job in driving consumer engagement with the brand through events and activations around the world. Key global moments included HOKA being the second most worn brand at the Foot Locker Cross Country High School National Championships in the U.S., hosting HOKA FlyLab experiences at the Frankfurt Marathon in Germany and the IRONMAN 70.3 World Championships in Taupo, New Zealand, and producing a benchmark consumer experience at the Shanghai Marathon, where HOKA was the fifth most worn brand. As you can tell, our marketing teams are working hard to maintain and build performance credibility while growing global brand awareness through activations in key cities. The HOKA brand's achievements are made possible by the HOKA product team's laser focus to build product solutions that deliver transformational experiences for consumers around the world. HOKA has two exciting products launching in the fourth quarter, which are the Bondi 9 and a 2.0 update to our fastest and most technically advanced race shoe, the Cielo X1. Having just launched a couple of weeks ago, we are very pleased with the early consumer response to the Bondi 9, with the new premium midsole, increased tack height, a 3D molded collar, this franchise has been upgraded from top to bottom, providing a soft yet resilient ride for everyday miles. The Bondi 9 release is the HOKA brand's most globally integrated launch to date, supported and enhanced by our Everybody Bondi Marketing campaign with out-of-home content on high traffic displays in key cities around the world, a Bondi 9-week Fitness Challenge that culminates in participants completing a 9-mile run, partnering with local and global influencers, including decorated U.S. Olympic gymnast Suni Lee, and activations at regional and global events such as the Miami Marathon, Paris Half Marathon, and London Winter Run. While the Bondi 9 represents a significant upgrade to one of our most accessible franchises, we've also enhanced our pinnacle ratio, the Cielo X1, making it faster and smoother for the highest performing athletes. In the 2.0 version of the Cielo X1, we've tweaked the rocker and geometry to provide greater stability without adding weight, enabling greater speed through the toe transition. Commercially available in February, this is a shoe that we have been testing with our athletes for months now and have high hopes to see on podiums in the future. HOKA has an exciting future ahead with a strong pipeline of new innovations and a growing global marketplace to serve the brand's increasing demand. Thanks, everyone. I'll now hand it over to Steve to detail our third quarter financial results and provide an update to our fiscal year '25 guidance.

Thanks, Stefano, and good afternoon, everyone. Our record third quarter performance illustrates the continued strength and robust momentum of the UGG and HOKA brands. As Stefano mentioned, UGG delivered another exceptional quarter of results as the brand attracts and maintains consumers around the world with a relevant and elevated product assortment. HOKA continues to deliver solid controlled global growth as the brand builds market share with performance products that consumers love. Our team's disciplined long-term approach to managing these brands' respective global marketplaces supports our pull model while sustaining exceptional levels of full price selling. Our results this quarter again demonstrate the power of our model and disciplined marketplace management. Maintaining this flexible operating model, we will continue to build these incredible brands with long-term health top of mind. Now let's get to the details of our third quarter results. Third quarter fiscal 2025 revenue was $1.83 billion, representing an increase of 17% versus the prior year on a reported and constant currency basis. Growth in the quarter was primarily driven by UGG increasing 16% versus last year, delivering record quarterly revenue of $1.24 billion, with particularly strong demand captured later in the quarter as we maintained favorable inventory on key styles relative to the prior year and consistent strength across the HOKA brand's global marketplace, with HOKA growing 24% versus last year to deliver quarterly revenue of $531 million. Further on UGG, I would note that the brand experienced a strong December selling period relative to our last year. Our increased and earlier inventory position aided our ability to fulfill orders during the third quarter on key styles compared to the prior year. Recall that in the third quarter of last year, we sold out of key styles that were later fulfilled in Q4. While this dynamic was a tailwind to our third quarter performance this year, it is highly likely to have an adverse comparison impact on the UGG brand's current quarter. Gross margin for the third quarter was 60.3%, up 160 basis points from last year's 58.7%. Third quarter gross margin benefited from favorable product mix, primarily due to higher margin products within UGG driving a larger percentage of growth, reduced closeouts to the wholesale channel, higher levels of full price selling for UGG and a small benefit from favorable foreign currency exchange rates, with partial offsets from higher freight costs and an increased discounting for HOKA as anticipated, primarily related to preparing the marketplace for key model upgrades. While we are proud to deliver this record gross margin, I would caution that the extremely high levels of full price selling and very low levels of wholesale closeouts are abnormal and not something we would normally expect to repeat going forward. Further, though we experienced a small revenue and gross margin benefit from favorable foreign currency exchange rates in the third quarter, we have since seen rates move against us, and as a result, expect to face an FX headwind in the upcoming quarter. SG&A dollar spend in the third quarter was $535 million, up 25% versus last year's $429 million, as we continue investing in key areas of the business. As a percentage of revenue, SG&A was 29.3%, which is above last year's rate of 27.5%, primarily driven by increased marketing spend, unfavorable impacts from foreign currency exchange rate remeasurement, and higher headcount across strategic growth areas of the business. Our tax rate for the quarter was 21.8%, which compares to 21.9% for the prior year. These results culminated in diluted earnings per share of $3 for the quarter, which is $0.48 above last year's $2.52 diluted earnings per share, representing EPS growth of 19%. Turning to our balance sheet. At December 31, 2024, we ended December with $2.2 billion of cash and equivalents. Inventory was $577 million, up 7% versus the same point in time last year and during the period, we had no outstanding borrowings. During the third quarter, we repurchased approximately $45 million worth of shares at an average price of $162.85. As of December 31, 2024, the company had approximately $641 million remaining authorized for share repurchase. Now moving into our updated guidance for fiscal year 2025. Based on the strong demand experienced in the third quarter, we are raising our full year revenue expectations to just above $4.9 billion, which equates to approximately 15% growth, which compares to our prior guidance for growth of approximately 12%. From a brand standpoint, we now expect UGG revenue growth of approximately 10%, up from our prior expectations of mid-single digits as a result of stronger global demand. And with continued execution against our full year expectation, we still expect HOKA to increase approximately 24% versus last year. While we do not provide quarterly guidance, we acknowledge that with only one quarter left in our fiscal year, this provides visibility into our anticipated fourth quarter growth expectations and we realized that while we have increased our full year guidance, this update highlights distorted growth rates implied in the fourth quarter for our two largest brands, each for unique reasons. For the UGG brand, as planned, our improved product in-stock positioning versus the prior year allowed us to satisfy incremental consumer demand during our third quarter. While in the prior year, we ran low on product availability and continue to catch up to fulfill demand through Q4 last year. This year, we believe this demand was captured in Q3. Given how strong UGG has performed year-to-date, we are limited in the fourth quarter by available inventory left to sell. For HOKA, our guidance implies the fourth quarter to be the largest volume quarter for the brand ever. This is on top of last year's fourth quarter that included a significant amount of sell-in to wholesale accounts related to door expansion as we set up fiscal year 2025. And while this creates some year-on-year variations in the quarterly growth rates, we are still on track to achieve an annual growth rate of 24%. Then, with the strong gross margin achieved in the third quarter, we are increasing our full year expectation to now be at or slightly better than 57% as we recognize the exceptional levels of full price selling UGG achieved in the third quarter and continued product mix benefits, but maintain our expectation for continued freight headwinds and a more promotional and closeout environment in the balance of the year as compared to last year's unusually low levels. And as mentioned, a headwind from unfavorable foreign currency exchange rates in the fourth quarter. SG&A is still expected to be approximately 35%, aligned with our commitment to continue investing responsibly to support the long-term sustainable growth of our business. With these adjustments, we now expect an operating margin of approximately 22%. We expect our effective tax rate to be approximately 23.5%. And as a result of our improved revenue and gross margin expectation, we are increasing our diluted earnings per share expectations to now be in the range of $5.75 to $5.80. Please note, this guidance excludes any unforeseen charges that may be considered non-recurring to our ongoing business or impact from any future share repurchases. Additionally, our guidance assumes no meaningful deterioration of current risks and uncertainties that may include, but are not limited to, fluctuations in foreign currency exchange rates, changes in consumer confidence and recessionary pressures, inflationary pressures, supply chain disruptions and geopolitical tensions. We are proud of the outstanding third quarter and year-to-date results that our brands have delivered thus far in fiscal year 2025. As our guidance for the full fiscal year indicates, we expect to report Deckers' fifth consecutive year of double-digit top line revenue growth while continuing to deliver top-tier levels of operating profitability. I remain confident in our in-demand brands, which benefit from our flexible model and robust financial profile, that we believe continue to position us well to drive sustainable growth over the long term. With that, I'll now hand the call back to Stefano for his final remarks.

Thank you, Steve. This was truly a special quarter, highlighting the strength of our industry-leading brands. UGG and HOKA continued to drive consistent full price growth through the purposeful creation of relevant, distinct, and innovative products that are meeting the demands of our consumers who are discovering our products in a well-managed global marketplace. I'm confident that we'll continue to execute our strategy in the fourth quarter to close another great year for Deckers. Looking ahead to fiscal '26, our teams have set the foundation for continued growth with an exciting pipeline of products to come. We remain dedicated to our long-term strategies of building HOKA to become a leading performance brand through disruptive innovation, growing UGG through the evolution of iconic franchises and the creation of new icons, expanding our DTC business through consumer acquisition and retention, and increasing our international business through the implementation of our successful domestic playbook. As we execute against these strategies, we remain committed to maintaining our financial discipline to deliver top-tier levels of profitability, and we'll continue to be guided by our consumer-first mindset, brand-led philosophy, emphasis on innovation and globally driven approach. On behalf of our management team, I want to express our sincere gratitude to all of our employees for their continued efforts to build the future of Deckers. Thank you all for joining us today, and thank you to our shareholders for your continued support. With that, I'll turn the call over to the operator for Q&A.

Thank you. We will now begin the question-and-answer session. Your first question comes from the line of Jay Sole from UBS. Your line is open.

Thank you. Stefano, could you elaborate on a few themes from your prepared remarks? I'm interested in how you are managing the HOKA brand for long-term success and maintaining its integrity in a promotional marketplace. Additionally, as we approach the fourth quarter, how are you viewing growth across different channels? You mentioned the upcoming Bondi 9 and the next version of the Cielo X1. Could you share details about other product launches planned after March? Do you still see HOKA as a brand capable of achieving 20% annual growth after this fiscal year? Thank you.

Hey, Jay. HOKA is a transformational brand that has the potential of becoming one of the major brands in the athletic footwear space. Our strategy for HOKA has stayed consistent throughout the globe. It's about building awareness and consideration, delivering compelling innovation stories and managing the marketplace for long-term and sustainable growth. In terms of the Bondi 9, we're very pleased with the Bondi 9 launch so far. It's happening in a controlled retail environment, but we are very, very encouraged with the early response to the Bondi 9. In terms of additional launches, as I mentioned in my prepared remarks, the Cielo X1 is launching in February, that's going to be our fastest shoe to-date. It's an upgrade over the previous model that we launched a year ago. We have the Clifton 10 launching in April. And as you guys know, Clifton 10 is our biggest franchise. In May, we are launching a new product in the trail category, not an enormous program, but it's a pinnacle, a shoe called the Mafate X, which is going to be followed by the Arahi 8, which is a motion controlled shoe and one of our biggest franchises. So we have a strong lineup of innovation stories hitting in Q4 and in the first half of fiscal '26. I think you may have another question?

I think it's essential to focus on how we manage the marketplace for HOKA. It's not about chasing growth for the sake of increasing rates. We're committed to building this brand for the long term and sustaining growth over time. We aim to grow our global market share at the right pace without rushing. We've been focused on building this brand and believe the global opportunity is present, as evidenced by our efforts. While we haven't set targets for next year yet, we'll provide guidance during our next call. The goal is to continue developing this brand successfully around the world, without simply chasing numbers, but rather focusing on establishing a strong foundation.

Got it. Okay. Thank you so much.

Your next question comes from the line of Laurent Vasilescu from BNP Paribas. Your line is open.

Good afternoon, Stefano and Steve. Thank you very much for taking my question. I wanted to follow up on Jay's question regarding the HOKA launches that are coming up. I think Stefano, to your point, you've mentioned that Clifton is the largest franchise. I think Arahi is maybe potentially the third largest franchise. I know you don't have any DTC read-throughs on that, but I'd just love to get what the reception is from some of your key retail partners. And then on the domestic growth in 3Q of 11%, just curious to know if there was a balance there between the two key brands and how should we think about domestic growth over time? That would be very helpful. Thank you.

Yes. We're very pleased with the Bondi launch, and the response to both Clifton and Arahi 8 has been very positive from the trade. We don't have any consumer feedback yet, but both models performed well and met our expectations. We want to manage the environment, drive a pull model, and continue to maintain the scarcity we've created so far.

I think Laurent's question about the growth rates between quarters is important. At the start of this year, we mentioned that growth rates would fluctuate between quarters and wouldn't be consistent throughout the year. You're seeing that in Q4, but it doesn't reflect any change in demand. The demand for these brands remains strong. It's about how we're managing the marketplace with our available inventory, as demonstrated by the success of UGG in Q3. We operate using a scarcity model, which continues to fuel demand. We're not pursuing excessively high numbers just for the sake of appearances; our focus is on long-term sustainable growth. Regarding HOKA, in Q4, you're seeing the effects of last year's comparison, as we expanded our wholesale distribution, with much of the sell-in occurring in Q4 and sell-through taking place in FY '25. This creates a somewhat misleading comparison. Again, this isn't about a shift in demand; it's about how we're managing these brands for the long term. That's why we don't provide quarterly guidance, and we don't get preoccupied with quarterly comparisons. These brands continue to connect well with consumers and are performing exceptionally.

Very helpful. Regarding the longer term, about 18 months ago, it was mentioned that the company could potentially achieve $5 billion to $6 billion in sales over time. Today's guidance effectively reaches that range. What are our thoughts on the longer-term opportunities moving forward? Is there a possibility of reaching $7 billion to $8 billion? Are there any limitations pertaining to the brands that could hinder reaching those numbers over time?

I don't think there are any limitations to the brands. The brands are performing very well in the marketplace. UGG is stronger than it's ever been. UGG, remember, used to be a boot and a slipper brand, and now we're playing in sneakers, we're playing in clogs, we're playing in sandals. So the brand is more solid and more balanced than it's ever been across seasons, genders. All our genders are growing in double digits. It's been fantastic. And the HOKA brand has the potential of being one of the major players in the performance base. So I think, yeah, aspirationally, we definitely want to get there over time.

Yeah. And I think, Laurent, we're not giving any long-term targets on here. But I think as we've demonstrated this year, right, both brands continue to perform above our level of expectations. But we're not going to let them run away either. So this is again about how do we continue to fulfill the demand that we're seeing in the marketplace, but at the same time, keep control of our brands in the marketplace. And that's what you're going to see us deliver, that hasn't changed. We still have incredible confidence in our ability to grow the brands. But again, I think you would agree we are disciplined managers of the marketplace. And you see the benefit of that in terms of the growth that we're delivering combined with the gross margins that we're delivering. So good question. Nothing has changed on the front of how we're thinking about the opportunity, other than we continue to see these brands perform very well with consumers.

Yes. We don’t want to be in a position to have to trade brand equity for short-term revenue.

Very helpful, Stefano and Steve. Thank you very much and best of luck.

Thanks, Laurent.

Your next question comes from the line of John Kernan from TD Cowen. Your line is open.

Good afternoon. Thanks for taking my question. So maybe just to go back to Laurent's question a bit. How did the 12% growth in the U.S. compare to your expectations? And maybe talk to the drivers of that growth? Also, within that, how should we think about international growth potential both in Q4 and then where you see the most opportunity internationally into fiscal '26?

Yeah. The U.S. grew to our expectations. It's our biggest market. As you know, it's two-thirds of our business, and they performed super well. So we'll expect international to outpace the U.S. in terms of percentage growth. That's what we said over time, we'd like international to be 50% of sales. And going into Q4 and fiscal '26, yes, we continue to expect international to outpace the U.S.

Yeah. I think, John, just a little bit more color kind of on how we saw a bit of that play out in Q3 and how that is impacting Q4. So to Stefano's point, definitely kind of continuing to see our brands perform well, largely aligned with our expectation. I think some of the timing of that probably happened a little bit earlier than what we anticipated. And so you saw some of those UGG sales especially come forward from our expectations. So it's part of the inventory issue that we're dealing with in Q4 and an ability with the stock-outs that you're seeing on our most popular styles. So that's a bit of a limitation. But again, that's okay because it continues to drive brand heat and demand for our brands. In terms of then how we're thinking about the international growth, again, as we said a few years ago, continue to grow these brands domestically, but to large numbers, knowing that the percentage growth would be a little bit less, turning much more focus on the international growth rates. And I think the quarter demonstrated how strong our international business performed. And we're continuing to see these brands resonate extremely well across the globe and in the international markets.

That's helpful. Maybe just one follow-up. A lot of questions on top line so far, but the operating margin profile of the business is the highest among the sector peers. As you look at HOKA and UGG, what opportunities are left to improve or maintain this level of margin rate while still reinvesting to grow the business?

Good question. The scarcity model's effectiveness is evident, as people are willing to pay full price for these brands. However, as these brands grow, maintaining this level of margin will be challenging. We are experiencing pressures from inflation and foreign exchange rates, which are impacting our Q4 results. As you plan for the year, keep in mind that these factors, along with freight costs, are influencing our margins. While we strive to keep these brands strong and command high gross margins, other elements will affect our ability to do so. We will continue to assess the situation throughout the year and expect some pressures in Q4. However, these brands continue to perform exceptionally well, generating impressive margins. Despite the broader macroeconomic effects that will impact everyone, we anticipate facing some additional challenges in the months and year ahead.

Understood. Thank you. Best of luck.

Your next question comes from the line of Jonathan Komp from Baird. Your line is open.

Yeah. Hi. Good afternoon. Thank you. The commentary on the fourth quarter was really helpful, but the consolidated growth rate looks very low and the lowest you've seen in a while. So I'm just wondering, given the positive commentary you have on consumer demand, as we look forward into 2026, should we be thinking that double-digit growth is possible again or just any other context that you could provide?

We are not providing guidance for next year. Our perspective on these brands and their appeal to consumers remains consistent. Demand continues to be strong, as evidenced by our website where many popular UGG styles are sold out. This is why we emphasize not becoming overly focused on quarterly results, as they do not accurately reflect the brand's overall health. These brands are performing exceptionally well with consumers. However, we will be managing our market share and will not necessarily try to meet all existing demand. This strategy is what contributes to our high gross margin levels. Regarding the fourth quarter, we anticipated some fluctuations in product flow affecting growth rates, and this has occurred as expected. We have raised our outlook for the year based on our performance, and we will keep managing the business as we have been. Our view of the business has not changed over the past weeks or months. These brands are outstanding, and we will continue to focus on managing them effectively.

Yeah. That's really helpful. And if I could just ask one follow-up on HOKA. Could you share what you're seeing out there in terms of the competitive dynamics, either now or over the next few quarters? And then just updated thoughts on how you're thinking about distribution going forward for HOKA. Thank you.

Yeah. As I said in my prepared remarks, Jonathan, we are going to be very selective and thoughtful in our distribution of HOKA. Yes, we’ll be opening a few more doors, especially internationally. But we continue to be very thoughtful. In terms of competitive landscape, all brands are offering better products. What is fortunate for us is that we have a strong lineup of great innovation stories that we believe will do well in the marketplace. As I said, Bondi 9 early read is very positive. And some of the innovation stories that I mentioned booked very well in wholesale for the back – for Q4 and the first half of next year.

That’s great. Thanks again.

Your next question comes from the line of Paul Lejuez from Citi. Your line is open.

Thank you. Can you remind us what percentage of your business is considered specialty running within the wholesale channel and how that channel has performed? Also, looking ahead to fiscal year 2026, how many new HOKA stores do you have planned and on what base is that? Additionally, could you provide any information on where those stores are expected to open? Thanks.

We're focused on expanding our presence in key cities and while we don't disclose the exact number of stores, we've established a strong brand presence in locations like London, Paris, New York, Los Angeles, Tokyo, Shanghai, and Beijing, where we've seen successful store openings this year. A flagship store is set to open in Shanghai on May 7 next year. We will also be launching partner stores, particularly in Asia, as our partners continue to grow the brand in those regions.

HOKA wholesale.

HOKA wholesale, on specialty, we don't disclose the percentage of business we do by channel. But the HOKA brand continues to perform well in that channel and some of the exclusive we've given that channel like the Skyflow has performed super well.

Yeah. And I think also, just to recall because your referencing kind of the wholesale growth. So I think just recall that a year ago, in FY ‘24, we really didn’t grow wholesale. So FY ‘25 was the year that we were expanding wholesale doors, so more distribution points. That is what led into that Q4 last year higher wholesale number because we were selling in product that would sell through after April 1. This year, we don’t have that dynamic. So we’re not increasing our wholesale door count going into FY ‘26 like we were in FY ‘25. So continued expansion, not the extent this year that you saw last year.

Got it. Thank you. Good luck.

All right.

Your final question comes from the line of Samuel Poser from Williams Trading.

Good afternoon. Thanks for taking my question. I guess, Erinn, I only have two, the Teva and the other since he gave us everything else.

Sure, Sam. I believe you're probably referring to global wholesale and distributor for each brand for the third quarter. So I can provide that. So for the UGG brand, global wholesale and distributor was approximately $468 million. HOKA was approximately $305 million. Teva was approximately $19 million, and that leaves Other of approximately $24 million.

Thanks. Steve, you mentioned that there are more normalized markdowns expected in Q4, which you anticipated throughout the year. However, I don't think that's the case with HOKA, as there are planned markdowns due to the transition to the Clifton 10. So, why should we expect markdowns? It seems like unless this occurs in March, we won’t have anything left since all the information we’ve received indicates that everything is being sold at full price right now.

We are closely monitoring the situation, and we'll see how it develops in Q4. We expect the products sold in Q3 to have a strong year-on-year performance, with many selling at full price. However, there may be some inventory left over in Q4, which could lead to additional closeouts. We anticipate that this year will see more seasonal closeouts than last year, especially due to model changes. Consequently, we are preparing for some additional closeouts in Q4 to help clear out that inventory.

Could you provide the EBIT margin for UGG wholesale, HOKA wholesale, and DTC, or do we need to wait for the Q for that information?

Yeah. Why don't you wait for the Q? That will be out early next week, so...

I still don't understand it. You mentioned that the business is managed well, and despite markdowns, you achieved a record gross margin in the quarter. Now, in Q4, you're expecting more normalized promotional activity. We know about the Clifton, and while you face some foreign exchange headwinds, there is also substantial international growth, which could offset that. Furthermore, the direct-to-consumer focus might help due to last year's significant shipments with HOKA. I'm confused about this situation, and it seems like foreign exchange could also positively impact selling, general and administrative expenses, which you have maintained.

To move on, Sam, there are two main issues affecting gross margin. First, the freight issue we are experiencing in Q4 is something we did not encounter last year. We benefited from unsustainably low freight rates in Q4 of last year, which we had previously mentioned. This year, freight costs started to rise earlier than expected, creating a significant headwind for us, likely impacting us by around 150 basis points in Q4. Second, while you correctly noted the impact of foreign exchange on gross margin, there is also a benefit reflected in SG&A. However, as the dollar has strengthened, there will be another headwind in Q4. Overall, macroeconomic conditions are influencing our gross margins in ways that are largely out of our control.

Can you provide an estimate of the gross margin outlook, considering the 150 basis points impact from freight? Additionally, what do you anticipate for foreign exchange as a headwind? Can you also address promotions as a potential headwind? Lastly, are there any tailwinds related to product mix that we should consider?

Sure. I think the foreign exchange impact is around 50 basis points. The closeout promotions could increase that by up to 100 basis points.

And then on the other side of it, like mix and geographic and channel mix, I assume those are positive?

Yeah, they will be, but less – I would call it less than 50 basis points all-in.

Okay. All right. Thanks very much continued success.

All right. Thanks, Sam.

And your final question comes from the line of Chris Nardone from Bank of America. Your line is open.

Great. Thanks, guys. Good afternoon. Can you elaborate some more on the Clifton 10 launch? Just want to confirm if most of the initial sell-in will be recognized in the fourth quarter? And if there's any changes to your product segmentation strategy since you have an expanded door count? Then on the Clifton 9, is there any way we can think about the impact to sales and margins from sunsetting that product ahead of the Clifton 10 launch?

Yeah. So just on the margins, a little bit on the Clifton 10. We're going to be flowing that product. So it won't necessarily all be a Q4 event. Some of that will trickle into Q1. We haven't disclosed kind of that. Some of that will be wholesale selling in Q4 that is included in our guidance and anticipated. Some of the flow will actually also happen in Q1. In terms of the margin hits on the Clifton 9, that's embedded. And so in that number I just gave Sam of around 100 basis points anticipated as a part of that among other product is part of that Clifton 9 closeout. So that's embedded in some of that gross margin movement that we've guided to.

Got it. That’s very clear. Thank you.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.