Good afternoon and thank you for being here. Welcome to the Deckers Brands Second Quarter Fiscal 2026 Earnings Conference Call. I want to remind everyone that this call is being recorded. I will now hand the call over to Ms. Erinn Kohler, VP of Investor Relations and Corporate Planning. Please proceed, ma'am.

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 today, other than statements of historical fact, are forward-looking statements and include statements regarding our ability to respond to the dynamic macroeconomic environment and the impacts on our business and operating results, including as a result of changes to global trade policy, tariffs, pricing actions and mitigation strategies and fluctuations in foreign currency exchange rates. Our current and long-term strategic objectives, including continued international expansion, the performance of our brands and demand for our products; anticipated impacts from our brand, product, marketing, marketplace and distribution strategies, product development plans and the timing of product launches; changes in consumer behavior, including in response to price increases, our ability to acquire new consumers and gain share in a dynamic consumer environment; our ability to achieve our financial outlook, including anticipated revenues, product mix, margin, expenses, inventory levels, promotional activity, anticipated rate of full price selling and earnings per share and our capital allocation strategy, including the potential repurchase of shares. 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 in 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. 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. For example, the company reports comparable direct-to-consumer sales on a constant currency basis for operations that were open through 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. Please review our earnings release published today for additional information regarding our non-GAAP financial measures. With that, I'll now turn it over to Stefano.

Thank you, Erinn. Good afternoon, everyone, and thank you for joining today's call. Deckers delivered outstanding second-quarter results ahead of our expectations on both the top and the bottom line. Specifically, in the second quarter as compared to last year, we drove revenue growth of 9% and a 14% increase in diluted earnings per share. These results closed out a solid first half for Deckers' fiscal year 2026 with highlights that include total company revenue growing by 12%, HOKA revenue increasing by 15%, UGG revenue rising 12% and diluted earnings per share growing by 17%. In the first half, our international regions remain the driving force behind UGG and HOKA revenue growth, increasing 38% versus last year. Year-over-year gains were led by the wholesale channel, in part from earlier shipment timing, while DTC also delivered strong growth for the first half. We continue to see progress from our brand-building marketing investments in these regions, helping grow HOKA awareness and expand UGG mind share with consumers around the world. I could not be more pleased with how our teams are executing our strategy and connecting with consumers who are increasingly looking to HOKA and UGG for innovation and newness. In the U.S., consumer sentiment is still under pressure, but we're encouraged by the signs of progress we have seen in our business and have maintained our focus to ensure HOKA and UGG remain positioned for long-term success. The U.S. marketplace remains dynamic, with recent consumer trends indicating a heightened preference for multi-brand shopping experiences. We believe UGG and HOKA are prepared to acquire new consumers and gain share in this environment with consumers wherever they wish to interact with our brands. With strong brand partnerships with premium wholesalers, which help elevate our brands, UGG resonates with consumers with high-quality distinctive products that provide a unique tactile experience. HOKA sees the highest consumer adoption when people can try its unique blend of technologies, geometries and materials firsthand on their feet. We view this as a strategic opportunity to continue expanding our consumer base across both brands while maintaining this relationship through our direct-to-consumer business. This approach supports our long-term objective of achieving a balance of 50% between direct-to-consumer and wholesale channels. As we enter our historically largest fiscal quarter, our brand and global marketplace teams are focused on delivering profitable growth and building UGG and HOKA for sustainable value creation. I'm confident that our solid foundation, sound financial discipline and nimble operations will serve us well to continue executing against our long-term strategic objectives. Steve will provide additional details on our second quarter financial results and an update on our latest fiscal year 2026 projections later in the call. Prior to that, I will share further details on first half brand performance as well as the forward direction we see for HOKA and UGG. Starting with HOKA. Global HOKA revenue in the first half increased by 15% versus last year. Performance was driven by consumer-led updates to the brand's three largest road running franchises, the Clifton, Bondi and Arahi, as well as exciting updates in the trail category with the expansion and evolution of the Mafate franchise. Bondi, Clifton and Arahi have continued to deliver strong growth and impressive sell-through rates for the brand as consumers embrace the significant enhancements implemented by our product team. The success of these top franchises helped HOKA gain market share. According to Circana, HOKA gained two points of market share in the overall U.S. road running category for the past rolling 12 months ended September 25 and also outpaced the competition in Europe as one of the fastest-growing road running brands across Italy, France and Germany for the first half of 2025. Beyond the success of top franchises, the HOKA team is making great progress developing product families deeply rooted in the brand's origins. We're leveraging a multilayered approach to build recognizable icons that resonate across multiple categories and use cases, including dimensions of peak performance, everyday performance use and versatile active lifestyle. The Mafate, HOKA's original shoe is the latest example of how we are aligning our products within these key dimensions. Mafate X was created to deliver peak performance through maximum cushioning and carbon plate propulsion for agile long-haul efforts on the trail. Mafate 5 was upgraded to adapt to all types of trail terrain with premium performance cushioning and traction. And the Mafate Speed 2 has been reintroduced on the archive with an updated aesthetic to achieve a contemporary active lifestyle look. This product family has already contributed meaningful growth during the first half of the year and now accounts for a larger share of total brand revenue, supported by targeted marketing initiatives that have strengthened consumer awareness, visibility and alignment with HOKA's brand heritage. We have previously discussed the importance of the UTMB World Series finals in Chamonix, France, where HOKA is a title sponsor. The event includes seven races attracting top trail runners from around the globe and nearly 100,000 spectators. HOKA reinforces leadership in UTMB, and it was the top brand in overall shoe share as well as among top five finishers, including first place finishes for HOKA athletes Jim Walmsley, Francesco Puppi and Martyna Mlynarczyk. Our marketing initiatives for the HOKA brand are designed to establish coherent product narratives that foster consumer engagement and encourage adoption across our portfolio. We're seeing traction with our approach to building product families that are supported by marketing investments. This approach will, over time, allow us to further segment and differentiate the marketplace. You will soon see this product strategy evolution come to life through the Mach franchise, where we recently introduced the X 3 peak performer in the lineup. And in spring ‘26, we'll be launching the Mach 7 and Mach Remastered for everyday road running and active lifestyle, respectively. From a regional standpoint, HOKA's performance in the first half was driven by the strength of our international business, where the brand continues to grow awareness and gain market share. We tailor our strategy for each region, taking into account the unique stages of brand distribution and awareness while staying attuned to evolving consumer preferences. What remains consistent is our focus to maintain high levels of full price selling as we continue to expand our presence within the premium and elevated marketplace. And we're very pleased with the HOKA brand's results across the board. HOKA has seen consistently strong gains across all international regions throughout the first half, with notable incremental revenue contributions from EMEA and China. In the EMEA region, HOKA is driving impressive results across all countries and segments of distribution, including market share gains and robust reorders with our specialty partners as we continue to drive double-digit growth. Best-in-class sell-through with our key sporting goods partners, significant percentage gains with athletic and lifestyle specialty accounts, where we are just beginning to build our business and broad-based strength in our DTC channel across Germany, France, Italy, and the U.K. with our first German store opening in Berlin and a pop-up retail experience in Chamonix for UTMB. In China, the HOKA brand's premium positioning and product innovation continue to drive resilient consumer demand. Highlights include new store openings in key cities that are attracting strong consumer interest, substantial growth in loyalty membership with particularly strong gains with females and younger consumers, industry-leading full price selling and sell-through rates for wholesale exceeding the goals set for mono-brand partner locations. As we navigate a dynamic U.S. marketplace, HOKA continues to gain market share in the athletic footwear category, and we remain dedicated to controlling distribution and driving a pull model demand. There are a number of positive signals for the HOKA brand U.S. business that give us great confidence in the vast opportunities ahead for this brand with wholesale sell-through increasing double digits in the first half. DTC is delivering a sequential improvement from Q1 to Q2, maintaining a high-quality full-price business, a strong Spring/Summer ‘26 season order book, and positive feedback from retailers on our fall ‘26 product line. HOKA is a disruptive and transformational brand with the ability to further capture billions of incremental global market share dollars. Across both domestic and international markets, we'll continue to uphold our disciplined approach to marketplace management by building our DTC business and carefully exploring potential expansion into attractive wholesale channels and partnerships. We are committed to building sustainable growth for HOKA and are confident in the strategy we're executing to achieve this goal. As we enter the second half of fiscal '26, our priorities are driving healthy sell-through and gaining market share, leveraging our enhanced DTC loyalty program to drive consumer engagement, preparing the marketplace for spring '26 updates to Gaviota, Mach and Speedgoat franchises, and investing in marketing to build global HOKA awareness. Moving on to the UGG brand. Global UGG revenue in the first half increased by 12% versus last year. The UGG brand's first-half performance stayed consistent, fueled by our key brand initiatives. Top-performing styles remained in line with our 365 focus. Men's footwear achieved growth at twice the rate of the overall brand. International regions accounted for the lion's share of our growth. We are especially encouraged by the consumer response to newer products and expanded franchises aligned to our men's and 365 initiatives, including the Mel franchise, which across sneaker, chukka and Chelsea silhouettes has more than doubled versus last year in the first half. The Classic Micro, our most versatile derivative to the original Classic boot, debuting as a top 5 style across DTC and wholesale and also the Zora Ballet Flat, an unmistakable UGG version of the timeless silhouette that is significantly outperforming our expectations in its first month since launch. While these products have driven positive sell-throughs, I would note that wholesale sell-in was the driver for total UGG brand performance in the first half, which includes benefits from earlier shipments that were carefully curated in alignment with our marketplace management strategy. These shipments have provided greater opportunities for consumers to discover UGG at wholesale points of distribution, which we believe in combination with the shifts in consumer shopping habits has put pressure on our DTC business near term. From a regional perspective, as anticipated, international markets are leading our growth, but we have seen a very strong order book conversion across all regions. The consumer response to our fall ‘25 collection has been very consistent globally, with consumers gravitating towards fresh seasonal colors and transitional newness such as the Classic Micro, Astromel, PeakMod and Zora Ballet Flat. This quarter, these styles saw gains as consumers preferred versatile buy-now, wear-now items. As we prepare to ignite UGG season, our teams have created cohesive brand stories with our iconic style and iconic design global marketing campaigns, aiming to generate excitement and drive consumer engagement. In August, UGG's Iconic From the First Step campaign featuring Stefon Diggs, Sarah Jessica Parker and Founder Brian Smith to celebrate the brand's legacy. In September, UGG served as the official starting partner for Highsnobiety's New York Fashion Week opening ceremony party aimed at building fashion credibility with influential males. At the beginning of this month, to celebrate Paris Fashion Week, UGG took over the atrium of Galerie Lafayette to create a curated icons pop-up store. And tomorrow, UGG will launch an aspirational product collaboration with the renowned Japanese fashion label, Sacai. These brand activations help the UGG brand generate momentum with consumers, while at the same time, maintaining cultural relevance. And our team will continue to build upon the compelling content we've created to elevate the brand and amplify key seasonal product stories. I'm confident that the global marketplace is well-positioned for UGG season. Thanks, everyone. I'll now pass it off to Steve to discuss our second-quarter financial results and provide an update on fiscal year 2026.

Thanks, Stefano, and good afternoon, everyone. We are extremely proud of the results achieved in the second quarter and first half of our fiscal year 2026. For the second quarter, HOKA delivered more balanced growth across wholesale and DTC led by the strength of international and included sequential improvement in U.S. DTC compared to the prior quarter as we continue expanding the brand's presence to gain global awareness and market share. The UGG brand drove robust wholesale growth also led by the strength of international as we prepare the global marketplace for the brand's peak season. Our disciplined approach, flexible operating model, and strong balance sheet continue to position us favorably in a dynamic marketplace as we head into the second half of our fiscal year 2026. We remain energized by the opportunities ahead for HOKA and UGG and look forward to further progress towards our long-term vision for these consumer-loved brands. Now let's get into the details of our second quarter results. Second quarter fiscal year 2026 revenue came in at $1.43 billion, representing an increase of 9% versus the prior year. Performance in the quarter was driven by HOKA and UGG, which increased 11% and 10% versus last year, respectively, with a small offset primarily from winding down stand-alone operations of smaller brands. For HOKA, wholesale remained the primary driver of growth, increasing 13% in the quarter as the brand continues to experience strong sell-in and healthy sell-through with innovative and compelling products that are resonating with consumers. HOKA DTC grew 8% versus last year as international momentum carried through from the previous quarter, and we saw improvements in the U.S. business as anticipated. For UGG, growth was driven by wholesale, increasing 17% in the quarter, which was partially offset by a 10% decline in DTC. Wholesale strength was driven by strong demand from our retail partners, including earlier demand as well as European shipments that were pulled forward related to our upcoming third-party warehouse transition. UGG DTC was softer than anticipated, as we have continued to experience pressures from better in-stock positions with our wholesale partners due to increased allocations delivered earlier in the year in an effort to match the demand that has continued to build in recent years. A more challenging macroeconomic environment for the U.S. consumers with shifts in consumer preference toward multi-brand in-store shopping experiences. Additionally, we believe these factors will continue to have an impact on UGG growth in the second half. Gross margin for the second quarter was 56.2%, up 30 basis points from last year's 55.9%. Second quarter gross margins compared to last year benefited from price increases, favorable product mix, favorable foreign currency exchange rates and factory cost sharing with partial offsets from incremental tariffs on U.S. goods and channel mix headwinds. As a result of our price increases being implemented at the beginning of July, in combination with actions to bring additional inventory in ahead of increased tariff rates being implemented, we saw a slight delay in the net headwind of tariffs and did not experience a meaningful negative impact in the second quarter compared to the prior year result. However, this is unique to the second quarter, and our expectation of net tariff headwinds in the back half of fiscal year remain largely unchanged. SG&A dollar spend in the second quarter was in line with expectations at $477 million, up 11% versus last year's $428 million as we continue investing in key areas of the business. As a percentage of revenue, SG&A was 33.4% versus last year's 32.7%. Our tax rate was 21.7% compared to 24% for the prior year as a result of one-time benefits recorded in the quarter. These results culminated in diluted earnings per share of $1.82 for the quarter, which is $0.23 above last year's $1.59 diluted earnings per share, representing EPS growth of 14%. In terms of our second quarter performance relative to the guidance we provided in July, gross margin was the primary driver of EPS favorability. Again, the better-than-expected gross margin result was largely driven by favorable timing of tariff-related variables unique to the second quarter, with benefits of our pricing actions flowing through in advance of the full burden from increased tariffs. Turning to our balance sheet. At September 30, 2025, we ended September with $1.4 billion of cash and equivalents. Inventory was $836 million, up 7% versus the same point in time last year. And during the period, we had no outstanding borrowings. During the second quarter, we repurchased approximately $282 million worth of shares at an average price of $109.31. As of September 30, 2025, the company had approximately $2.2 billion remaining authorized for share repurchases. Now moving into our forward-looking update. We are now providing an outlook for our full year fiscal 2026 and expect total company revenue of approximately $5.35 billion, with HOKA increasing by a low teens percentage versus last year and UGG growing in the range of a low to mid-single-digit percentage. Gross margin of approximately 56% as we anticipate headwinds from the impact of tariffs as this becomes material in the back half of this fiscal year with partial offsets from our mitigation strategies and normalized levels of promotion in a more pressured macroeconomic environment. SG&A to be approximately 34.5% of revenue, reflecting our commitment to investing in the long-term opportunities of our powerful brands. This results in an expected operating margin of approximately 21.5%, which remains at a top-tier level of profitability relative to our peers. We are projecting an effective tax rate of approximately 23%. And finally, we expect earnings per share in the range of $6.30 to $6.39. This guidance assumes a blended growth rate of approximately 9% from our two largest brands as we have streamlined our brand portfolio to focus on our most profitable long-term opportunities and expect to yet again deliver record years for UGG and HOKA, each with annual revenues north of $2.5 billion and significantly contributing to our best-in-class profitability profile. Within this revenue guidance, we continue to expect international to outpace U.S. growth and global wholesale to outpace DTC for this fiscal year. Over the longer term, our focus remains to create a balanced business across regions and channels as we continue building our consumer base, bolstering connections with consumers through direct relationships and capturing incremental market share for years to come. Regarding tariffs, with timing-related favorability seen in the second quarter results and our expectation of tariff impact in the second fiscal half largely unchanged, we now expect the unmitigated tariff impact on fiscal year 2026 to be approximately $150 million. Further, we now estimate that our mitigation efforts for this fiscal year will offset approximately $75 million to $95 million of this pressure, including benefits from select strategic and staggered pricing increases as well as partial cost sharing with factory partners. Please note, this guidance excludes any unforeseen charges that may be considered nonrecurring to our ongoing business or impact from any future share repurchases. Additionally, our guidance assumes no meaningful deterioration of current risks and uncertainties, which include, but are not limited to, further updates to imposed tariffs or other global trade policy, changes in consumer confidence and recessionary pressures, inflationary pressures, fluctuation in foreign currency exchange rates, supply chain disruptions and geopolitical tensions. Overall, our second quarter and first half fiscal year 2026 results illustrate the strong demand for our brands and strength of our disciplined model, giving us conviction to provide and achieve a compelling outlook for fiscal year 2026. We remain confident in the growth trajectory of our consumer-loved brands as our top-tier levels of profitability provide opportunities for targeted investments supported by our fortified balance sheet, all of which position us effectively to drive sustainable growth over the long term. Thanks, everyone. I'll now hand the call back to Stefano for his final remarks.

Thank you, Steve. Before we take your questions, I would like to highlight that our brands have continued to perform very well through the first half of this fiscal year. More importantly, we remain committed to supporting and strategically managing our brands to ensure sustained long-term growth. We believe that both HOKA and UGG are well-positioned across the global marketplace as we enter the holiday quarter, and our teams are energized and hyper-focused to deliver our full-year guidance. HOKA has established itself as a prominent global performance brand, extending far beyond its disruptive origins. HOKA is just beginning to realize its full potential and capability to innovate, and we are excited to continue building this transformational brand. And the UGG brand continues to inspire generations of consumers with its iconic products and its global appeal. This powerful brand has established a unique position in the marketplace with a strong, loyal customer base and an ability to capture new audiences through compelling product evolution. These two premium brands maintain a strong commitment to the original values, consistently creating purposeful products while adapting to the evolving demands of their respective global customer base. We are very excited about the opportunities ahead and remain focused and disciplined on our approach to delivering long-term sustainable growth and value creation. I'd like to sincerely thank all of our valued employees across the Global Deckers team for their continued commitment to our collective success. 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.

Our first question comes from Laurent Vasilescu at BNP Paribas.

Stefano and Steve, I'm very glad to hear that you are reinstating guidance here. And I wanted to ask about that. Originally, Steve, the framework, I think, on the fourth quarter call was calling for HOKA to grow mid-teens for this year, UGG to grow around mid-single digits. I think last quarter, I think there was greater confidence in that framework. With today's guide, lower expectations on those two metrics, can you maybe just unpack that a little bit more? Is there just a degree of conservatism? And I didn't hear anything about weather with regards to UGG of the low single to mid-single, but do you think that's a factor playing into your guidance?

Laurent, this is Stefano. We have two of the healthiest brands in the global marketplace with a very strong and loyal consumer base and a growing global demand. Our first half demonstrates the strength of these brands. For the back half, we are anticipating a more cautious consumer as the full impact of tariffs and price increases will be felt here in the U.S. Having said that, our brands are well-positioned when the consumer shows up for the holidays. And as always said, we don't manage our business month-to-month and quarter-to-quarter. We build brands for long-term profitable, sustainable growth.

Yes, Laurent, this is Steve. I want to discuss our guidance and remind everyone of what we outlined at the start of the year. You're right; we didn't provide full-year guidance initially, and I appreciate your acknowledgment of that. Offering guidance now demonstrates our confidence in the performance of our brands in the market and the outlook we have. At the beginning of the year, we suggested that if tariffs did not affect consumers, we could expect certain growth. We still hold that belief, but we are now observing some effects on U.S. consumers. As they face price increases, their purchasing behavior in the consumer discretionary space is changing. Looking at the next six months, we still anticipate a low teen performance for HOKA in the back half, which aligns closely with our original expectations, albeit with some reduction as we account for the impact of tariffs. This reflects that our brand is performing better than we initially expected in this challenging environment, which is encouraging. To Stefano's point, we're focused on managing our brands for the long term rather than pursuing short-term growth that might harm their reputation. Our guidance indicates that we are committed to maintaining the brands while fostering sustainable growth over time. Although our revenue projections may be lower than consensus, we are mindful of the cautious consumer. There is potential for better performance if consumer sentiment improves, which we are considering. Regarding inventory, we have a sufficient supply that could allow us to benefit if consumer demand increases. We remain confident in our brands' performance both domestically and internationally, even as the U.S. consumer faces some challenges, which we are reflecting in our six-month outlook. Overall, we are demonstrating our ability to manage the business strategically. Even with a conservative revenue outlook, we are still on track to deliver profitability within the consensus range for the year. We will continue to manage our brands in a healthy manner and focus on long-term growth.

Very helpful. And then, Steve, just to understand a little bit more on the back half guide for HOKA, low double digits. I know you don't guide anymore by quarter out, but any nuances we should consider just because there are some compares that we can look at between 3Q and 4Q. I thought it was also interesting that you mentioned there's some positive reception regarding spring/summer order books. Maybe can you unpack that a little bit more?

Yes, absolutely. In terms of our outlook for the second half of the year, we're expecting to face more challenges in the third quarter, but we anticipate stronger growth in the fourth quarter. We're particularly focused on how consumer behavior will unfold from Thanksgiving through the holiday season, as this will be a key area for us to monitor closely. We believe our brands are better positioned than others to take advantage of consumer demand if it materializes. Therefore, we're being more cautious with our growth expectations for the third quarter while aiming for more aggressive growth in the fourth quarter. Regarding the order book, I am confident about how things are developing and the positive response from consumers to our products.

Yes. So, I'm very happy with what the teams have done specifically in the U.S. market for HOKA. We are growing awareness. We're gaining share really across every country. But specific to the U.S., the marketplace is clean. Sell-throughs are stronger than sell-in. Our full-price business is very, very strong. Our key franchises, Clifton, Bondi and Arahi are performing well in the marketplace. And our most recent product launches have also performed well, referring to Challenger, the Mafate family, Mafate X, Mafate 5, Rocket X 3, Rocket X Trail. Our order books are healthy. We're gaining share in Performance Run. We're back to #1 in specialty. And we're well set up with the transition to these new models I just mentioned. So our marketing also has been resonating, and we're seeing improvements also in our DTC business. So all is good on the HOKA side of the U.S.

The next question is from John Kernan, TD Cowen.

Steve, can you provide more details on the split between direct-to-consumer and wholesale in the third and fourth quarters? The comparisons for direct-to-consumer become much easier as we move into the fourth quarter. You already shared some insights related to Laurent's question. I'm interested in understanding the distribution between wholesale and direct-to-consumer, as well as what strategies you are implementing to boost direct-to-consumer same-store sales or omnichannel comparisons, especially in the U.S.

We anticipate ongoing improvements in our direct-to-consumer business throughout Q3, followed by additional enhancements in Q4. It's important to note that much of our wholesale growth this year occurred in the first half, which has already been delivered and even exceeded our expectations. This reflects the strong demand for our brands, as wholesale partners sought products earlier to showcase them. Consequently, this has slightly impacted our DTC performance in the first half. The expanded distribution demonstrates the growing demand for our brands, and the fluctuations we see are largely timing-related rather than a sign of declining demand. Overall, demand has continued to rise throughout the year. As we saw greater wholesale shipments in the first half, it is reasonable to expect a rebound in DTC growth percentage-wise in the latter half of the year, with more significant increases in Q3 and Q4. Additionally, having moved more products to the wholesale channel earlier will lead to lower DTC numbers as a result.

That's helpful. And you obviously called out the company's top-tier profitability. I think you have the highest operating margin structure of anybody in the athletic footwear and apparel space. I was just curious, as we look into next year, obviously, tariff pressure is going to be pretty significant in the first half of the year. How do we put guardrails on the long-term margin structure of the business? We're finishing this year around 21.5%. Is north of 20% plus operating margins how you look at the business long term?

Yes, it's a great question, and we appreciate it. Last year, we achieved exceptional levels, and I believe this year will also be remarkable despite half of it being affected by tariffs. Next year will present similar challenges that could impact margins. However, you can see how we manage our business effectively, as demonstrated in Q2. We are continuing to grow organically, and the demand for our brands is on the rise. We're handling the uncertain and volatile environment well, mitigating some of the tariff impacts observed in Q2, where we managed to take actions that improved our situation. This is reflected in our gross margin. We will maintain our disciplined approach. However, we anticipate continuing tariff pressures as we approach FY '27, and we are not yet ready to provide guidance on that, but further pressure can be expected.

And our strong financial profile will also allow us to invest in capabilities we're building, whether it's innovation or apparel, or technology digital.

Got it. And then the gross margin pressure you're guiding to in the back half of this year, it's safe to assume at least that magnitude carries into the first half of next year, I would assume.

Yes, correct. If the tariffs stay in effect the way they currently are, yes, equivalent.

Up next, we'll hear from Adrienne Yih from Barclays.

Can both Stefano and Steve discuss the price actions taken at both brands earlier in July? During the back-to-school period, those price actions didn't seem to significantly affect demand, but that was during back-to-school time. Have you noticed anything regarding sell-through in your channels or DTC products that had price increases which raised your concerns about the consumer? Additionally, Steve, regarding your earlier point on the increase in wholesale distribution, how do you view the balance between DTC and wholesale as we see more normalization?

Adrienne, on the pricing question, we have premium brands and premium brands have more elasticity than other brands. And we've been very selective and strategic in our price increases. And we have not seen any issues. Sell-through on key styles continues to be strong for both UGG and HOKA. No issues so far.

Regarding the wholesale question, it's a great one, and we appreciate you bringing it up. If we look back 1.5 to two years, we mentioned that we were significantly under-penetrated in wholesale compared to many of our peers. Many of them are present in far more locations for wholesale distribution than we are. We've discussed marketplace management for years and how we approach this, which is our way of engaging with wholesale. While there may be questions suggesting that our growth is solely stemming from wholesale, we are indeed getting more shoes on people's feet, but we are doing this strategically for the long term. We are not focused on short-term growth for a quarter or a year by rapidly expanding wholesale distribution just to show increased sales. This strategy is aimed at expanding our global brand presence and achieving sustainable long-term growth. It may result in slightly lower growth rates for now as we continue our expansion, but we believe it will sustain higher growth rates over time. Last year was significant for wholesale expansion, and we are marking some of that this year alongside additional wholesale growth, which will start to slow down. However, this does not alter our goal of achieving an even balance of 50-50 between wholesale and direct-to-consumer. You will notice a slight slowdown in wholesale growth while direct-to-consumer picks up again. Ultimately, this is about seizing opportunities, boosting demand in the marketplace, providing consumers with more purchasing options, and ultimately putting more shoes on people's feet. That's the vision we are building towards.

Yes. And we operate an omnichannel model, and we have the ability to flex and react to consumer demand as needed.

The next question is Samuel Poser from Williams Trading.

I got a handful. Number one, you talked about the healthy order book in for spring. I assume that's for both UGG and HOKA. Can you define what that means, please?

Sam, we provide those details, but we are very happy with the order book that we have for spring/summer '26 and the early reaction to fall '26.

Yes. And I think, Sam, it's fair to say that it's up, right? And that's why we're happy that we're seeing increases in order book.

Can you discuss the performance of the UGG brand during the back-to-school season, specifically in your direct-to-consumer channels and among your wholesale partners? How did sales fluctuate during that period? Are there any notable differences in the peaks and valleys of this year's performance compared to last year? I'm very curious about this.

It's a good question, Sam. What we're experiencing, and this is probably due to the consumer uncertainty in the U.S., is deeper valleys and higher peaks. Back-to-school is strong, and we anticipate to have a strong holiday season. But September and October are typically not the strongest months in our space.

Is your guidance for the second half of the year, particularly the holiday season, based more on your observations during back-to-school or on current trends? Considering the fluctuations in your business, it’s notable that during the period between Thanksgiving and Christmas, your direct-to-consumer sales can exceed a week’s worth of sales from July to early October. I'm curious if this represents just cautious optimism. The consumer seems inclined to purchase your products, and it appears they are buying at full price without putting pressure on your margins. They clearly prefer your brand over others, like UGG over Jo's Frye boots or HOKA over Champion sneakers. You mentioned the price elasticity indicates confidence in the consumer’s willingness to buy your products. So, why is there such concern regarding the broader economic situation when consumers continue to choose your brands?

Yes. I think, Sam, on that, clearly, our guidance for the year, which is reflective of the next six months, is taking into consideration what we're currently seeing kind of right now. And so I think that's where the question is, right? It's not about question about how we think our brands are placed in the marketplace. We think we're, again, positioned better than most and in many cases, very well positioned. But we'll have to see how the consumer begins to show up. I think some of the economic signals are consumers are beginning to see higher prices. Inflation is starting to affect them more in the U.S. And so there is some caution on our part as we take that into consideration. And again, we don't want to just chase sales because we want to achieve a higher number. We're about building brands for the long term. And so we don't want to do something in the quarter that could be detrimental to us in the longer term. So to your point, yes, we're taking a little bit of caution in there. We don't know how the consumer is going to show up, but we do know if the consumer does show up, we're better positioned than most.

And then lastly, Stefano, regarding HOKA, will there be any lower profile max cushioning options, or will we see any developments in lower-profile shoes from HOKA?

Yes. You will see more lower-profile solutions going forward. Ready for spring, we have the new Solimar that's been very well received. The new transport on our lower profile tooling. We have the Speedgoat 2 in lifestyle that is resonating and it's a lower profile than what we had in the past. So you'll see a more vast array of products going forward.

The next question is from Jonathan Komp from Baird.

I want to follow up on HOKA. Hoping that maybe you can be a little bit more specific when you think about changes to the product launch plans into 2026, just any more details on what we should expect broadly and then maybe for some of the key styles going forward, the big three in terms of cadence and plans? And then just bigger picture on HOKA, as you talk about having potential to add billions of revenue yet. Can you give somewhat of a buildup or some of the big buckets or growth opportunities that you see when you make that comment?

Yes. Let me begin with the latter. We are concentrating on a few key categories for HOKA: performance running, trail, hiking, fitness, and lifestyle. Eventually, we will also expand into apparel. These five areas represent our main growth opportunities. We operate in a $0.5 trillion market, providing significant potential for HOKA in both the U.S. and international markets. As we enhance brand awareness and consideration, we anticipate healthy growth for our brand. Regarding product transitions, we have reduced inventory of key outgoing styles in preparation for the upcoming launches of Gaviota, Mach, Transport, and Speedgoat. As a result, there should be less disruption in the marketplace due to tighter inventories. In terms of cadence, we will introduce an update to our flagship franchise, the Clifton, in fall 2026, meaning Clifton and Bondi will no longer overlap.

Okay. That's helpful. Steve, one follow-up then on margin. It looks like the back half margin for operating margin pointed in the low 20% range. Historically, when the back half was in the low 20s, the full year margin was more in the high teens, below 20% on an annual basis. Is that the run rate for the business currently, as we think about annualizing some of the second-half pressures? Or how should we think about the back-half margin guide in relation to the current annual run rate that you're performing at?

Yes. I think, John, just on that, as we look at the back half kind of this year in comparison to kind of last year, the declines that we're reflecting are really being driven by the tariffs, right? So in terms of how we're running the business, how we think about margins and the margin profile of the business, really, the change that you're seeing in the back half is tariff-driven. So that's what we expect, again, based on the tariffs as they're imposed today. We will evaluate any changes in promotions as we assume some promotional activity for the second half of the year. The main factor affecting us continues to be tariffs, which are the primary driver of our situation. Given the current environment, there will also be a level of promotion involved. This situation will influence fiscal year '27 as well, although we have not provided updates for that year yet. The first half of fiscal year '27 will face margin pressure due to these factors, leading to an overall headwind. However, we have effectively managed this in the second quarter, which is reflected in our results. We may not have the same options available for the second half, as we previously capitalized on inventory adjustments that will no longer apply now that tariffs are fully implemented. In the future, we will continue to explore our mitigation strategies, including pricing reviews. So far, we haven't encountered significant resistance to our price increases. With a strong brand and market positioning, we'll keep assessing our available options. Nevertheless, we anticipate headwinds will persist in the second half, extending into fiscal year '27.

And our final question today comes from Jay Sole from UBS.

Maybe, Stefano, first question for you. As you just think about calendar '25 for HOKA brand, do you see this year as a little bit of a transition year where you had sort of the accelerated life cycles of Bondi 8 and Clifton 9 and then you have this tariff situation where next year maybe is sort of not a transition year where you have a lot of newness and clean inventories in the marketplace and good brand momentum where you might see a different kind of momentum financially? And then I guess, Steve, the question for you is that I know this was asked on an earlier question, but the guidance before was, say, mid-teens for HOKA, assuming no tariffs. Now you're saying low teens for HOKA with tariffs. So if we had gone back to the beginning of the year and you would have given guidance for HOKA with tariffs, what would it have been? Or without giving you the exact would have been, would the guidance that you gave today have been in line with that? Would it have been better than that? Would it worse than that? Maybe if you could just frame that clearly for us, that would be super helpful.

Yes, sure, Jay. I'll start kind of with that question, then Stefano can kind of talk about a bit of the transition year of 2025. So to your point, if we look back, I think one way to answer your question is that how we've seen HOKA perform, especially with the product transitions, we're very encouraged by the year. So to the point where in a pre-tariff environment, we saw mid-teens, and the fact now with a tariff-imposed world in the back half, we're low teens. I'm very encouraged by that, right? Because what it shows is even in a tariff-imposed world, consumers are still showing up for our brand, probably a little bit better than what we may have thought at the beginning of the year. So I think that speaks to how well some of our updates are resonating with consumers in the U.S. and globally too, and you're seeing that in the global numbers. So where the tariff is impacting a U.S. consumer, I think we've seen a good response. And then we've seen a very good response from an international perspective, which gives us a view into that non-tariff-imposed world of a consumer response. So having seen that be very positive is actually very positive on the brand because I do think tariffs are having an impact on the U.S. consumer.

Yes. Regarding the transition, 2025 will be somewhat of a transition year. We may have introduced too many significant product launches in the first half of the year without spacing them out properly. We have learned some lessons during this transition to the new model. I believe this year has been a learning experience for us, and it should benefit us in the future.

Thank you, everyone. That does conclude our question-and-answer session. This does conclude our conference for today. We would like to thank you all for your participation. You may now disconnect.