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Please stand by, your meeting is about to begin. Good afternoon, and thank you for standing by. Welcome to the Decker's Brands second quarter fiscal 2027 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. Instructions will be provided at that time for you to queue up for questions. If anyone has any difficulties hearing the conference call, please press star zero for operator assistance at any time. I would like to remind everyone that this conference call is being recorded. I'll now turn the call over to Erinn Kohler, Vice President, Investor Relations and Corporate Planning.

Erinn Kohler Hello, and thank you everyone for joining us today. On the call are 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 are forward-looking statements and include statements regarding our ability to drive profitable growth, brand health, and long-term value, the macroeconomic and consumer environment, and related impacts on our business and operating results, including the expected persistence of current consumer and promotional trends, our current and long-term strategic objectives, the expected performance of our brands and demand for our products, The anticipated impacts of our brand, product, marketing, marketplace, distribution, and investment strategies, including the expansion of our wholesale presence and our brand's lifestyle, apparel, and year-round product offerings Our product development plans and the timing and anticipated performance of product launches Changes in consumer behavior Our ability to acquire new consumers and gain market share Our ability to achieve our financial outlook, including anticipated revenues, gross margin, SG&A expenses, operating margin, effective tax rate, promotional activity, anticipated rate of full price selling, and earnings per share. Our cost management and resource allocation actions, the anticipated effects of corrective actions related to our European third party logistics provider, the timing of wholesale and distributor shipments, our ability to maintain a premium full price global marketplace, Statements regarding tariff-free funds and our ability to generate free cash flow and execute our capital allocation strategy, including potential share repurchases. 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 such as changes in consumer demand, foreign currency exchange rate fluctuations, and changes to trade policies. including the amount and timing of any future tariff refunds 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 factor 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, free cash flow, and certain results and outlook measures presented excluding the net benefit of IEPA tariff refunds and related interest, such as diluted earnings per share, gross margin, and operating margin. For example, 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 these non-GAAP financial measures are useful supplemental indicators of its operating performance because they exclude items that are unrelated to and may not be indicative of its core operating results. The company defines free cash flow as net cash provided by operating activities for a particular period less capital expenditures made during that same period and believes free cash flow is a useful supplemental measure of liquidity as it reflects the cash generated from operations after investments required to support the strategic growth of the business. 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, Erin. Good afternoon, everyone, and thank you for joining today's call. In the second quarter, Becker's delivered another solid result. We expanded our global presence, performed well in multi-brand environments, and delivered a high mix of full-price sales. For the quarter, total company revenue grew 3.5% versus last year, with HOCA and UGG increasing 7% and 4% respectively. Diluted earnings per share was $2.31, including a $0.28 benefit from the impact of IEPA net tariff-free funds received in the quarter. Excluding this benefit, diluted EPS would have been $2.03, well above the high end of our guidance range and up 11.5% versus last year. Despite some top-line pressure, we maintained healthy gross margins, delivered global growth, and continue to invest in the long-term strength of our brands. Our commitment to full price selling and disciplined expense management demonstrates the resilience of our operating model and the value of our strategic approach to growth. As consumers face increasing economic pressure, our updated fiscal year outlook reflects a more measured approach to growth over the next two quarters. Consistent with our strategic framework, we're making deliberate choices about how we compete, win, and grow our brands. We will continue to prioritize margin preservation and long-term value over chasing potential incremental near-term revenue that could dilute our brands. We will use our flexible expense levers to stay agile and protect the integrity of our premium global brands. Against the backdrop, I will now share what we are seeing across the business and the operating environment. along with the actions we're taking to build on what's working and address the areas where we see opportunity for improvement. International continues to be an area of strength for our brands. Within international, APAC delivered our highest percentage growth and was a meaningful contributor to incremental year-over-year dollar growth in the second quarter. International markets serve as a proving ground for our brands and emerging categories. With Agenhoka still in the earlier stages of development in many of these markets, these consumers often view our brands through a broader lifestyle lens, helping to influence trends that later gain traction in other regions. In EMEA, demand signals remain strong. However, service disruptions at our third-party logistics provider during a peak shipping period affected the timing of certain shipments. While this impacted revenue in the quarter, we've taken corrective action with our partner to restore normal operations, improve visibility, and reduce the risk of future disruptions. In the U.S., we saw promotional activity increase throughout the quarter, particularly in athletic football, which weighed on our U.S. e-commerce performance as we maintained full price discipline. We also observed two shifts in consumer behavior. Consumers increasingly seeking discounts Concentrating traffic around promotional events and consumers becoming more purposeful in their spending and prioritizing products with immediate relevance and utility. Given the trends across our brands and the growing pressure on consumers, we've identified areas where improving execution can have a meaningful impact. Our objective is to deliver healthy market share gains even in a more challenging environment. These actions are grounded in our four guiding principles of consumer first, Brand-Led, Innovation Forward, and Globally Driven. Along with our playbook, these key pillars are designed to support sustainable brand growth and create long-term value for shareholders. As we look ahead, we're focused on first, delivering product excellence. We have a robust innovation pipeline designed to deliver tangible consumer benefits. reinforced the positioning and credibility of our brands and create meaningful new revenue streams. We will maximize its impact through sharper franchise segmentation, clear differentiation, elevated design, and purposeful innovation that is commercially relevant and directly connected to consumer demand. Second, elevating marketing capabilities. We're strengthening our global marketing capabilities so our products connect with consumers more meaningfully. Through sharper brand storytelling, More impactful consumer messaging and more compelling experiences will build deeper engagement across our growing global audience. This integrated approach will also enable us to deploy resources more effectively and generate greater consistency, leverage and returns from our marketing investments. Third, strengthening marketplace execution. Consumer behavior is changing rapidly and we're evolving how we show up. We're focusing our resources in the channels, platforms, and points of sale where consumers are most engaged and purchase intent is highest. By amplifying our digital presence, deepening engagement, enhancing loyalty programs, and elevating execution at point of sale, we can meet consumers more effectively and convert interest into demand. And finally, continuing to apply disciplined cost control and resource allocation. We're making clear choices, moving faster, and prioritizing initiatives that we believe will deliver the greatest results. This approach will help us manage cost pressures, spend efficiently, and concentrate resources on the actions that will most effectively support the long-term health of our brands. Steve will provide more detail on our second quarter financial performance and update a fiscal 27 outlook later in the call. Before that, however, I will review HOCA and UGG's second quarter performance and discuss how we expect current trends to develop through the balance of the year. Starting with HOCA, global revenue in the second quarter increased 7% versus last year to $677 million. HOCA growth versus last year was driven by both wholesale and DTC. HOCA wholesale increased 9% to $444 million, while DTC grew by 4% to $234 million. Hoka continue to perform well across our global wholesale accounts with strong sell-through in domestic and international regions. Consumers are increasingly turning to wholesale partners both in stores and online to explore and compare brands in multi-brand destinations. And Hoka continues to deliver a high degree of full price selling. This performance reinforces the brand's premium positioning and the strength of key franchises. While Hoka maintained strong performance in a competitive wholesale landscape, DTC results were uneven across markets. While the international DTC growth remained robust, U.S. performance was pressured amid a highly promotional U.S. environment, particularly in the athletic footwear category. Across the business, our core franchises performed well, led by Bondi. The introduction of CliftonPro, a well-received extension of the Clifton franchise, also contributed to that success. However, feedback from consumers and wholesale partners indicated that some other franchise updates in calendar year 26 did not resonate as well. This feedback highlights where we have an opportunity to improve for future seasons, starting with spring 2027. We remain focused on continuing to deliver high-quality growth with our wholesale partners while also improving DTC execution. Across the global marketplace, we'll continue to focus on distinctive performance product franchises that reinforce our innovation credibility, convert awareness into a broader base of lifetime consumers, and expand the Hoka brand's authentic relevance in lifestyle. As we advance these initiatives, we're confident they will improve our ability to capture market share moving forward. Specific to our product pipeline, our work to sharpen franchise segmentation is already in flight. Let me provide further insight into the work we're doing. On the performance side, we have a clear approach across the Glide and Fly collections that I shared on last quarter's earnings call. We will extend our leadership in max cushioning through Glide and expand our speed platform with Fly. Within the Glide Collection, Bondi 10 launches in January, introducing an upgraded dual-density, supercritically foamed midsole with streamlined design built for performance runners looking for premium cushioning and comfort. I'm confident Bondi 10 will be a standout performer. In our fly collection, we'll launch Mach Pro in April, which brings a bold new aesthetic and ATPU midsole to our fastest performance word franchise designed for daily training. Testing of Mach Pro has been exceptional and bookings are very strong. Then in early fall, we'll build on that momentum with another major update to the Mach franchise. We recently previewed Mach 8 with several major accounts and the reaction was excellent. In addition, we'll be expanding our price architecture in both directions, up and down, broadening access while elevating the pinnacle of the brand. In the first half of calendar 27, we'll introduce two powerful expressions of this strategy. FlyPace in January at $115 will welcome a new consumer into HOKA. And Bondi Ultra X in June at $325 will deliver our softest, most cushioned ride for consumers seeking the very best. Bondi Ultra X represents a major leap forward in HOKA innovation, featuring a triple-density ATPU midsole that takes maximum cushioning to a whole new level. Turning to lifestyle, we have a three-pronged approach. First, we're building on the success of archived models such as Mafati Speed 2 with modernized applications, taking insights from early success we're seeing in certain markets to influence opportunities across the globe. Second, we'll expand Bondi and Clifton through fresh colors and new materials that unlock more wearing occasions to drive greater franchise segmentation and differentiation across the marketplace. and third, we'll seed new models like Cielo 70, a lower profile silhouette inspired by running shoes from the 1970s and designed to bring new lifestyle consumers into the brand. As we build the lifestyle opportunity for Hoka, we're applying the same authentic approach that established the brand's performance credibility. We're staying grounded in our performance heritage while building lifestyle relevance through differentiated product, and consistent storytelling, refined season over season based on consumer and partner insights. Positive feedback from key accounts reinforces our belief that we're building momentum with our target consumer and have ample opportunity to take share in this category. We have a powerful product pipeline across performance and lifestyle, grounded in meaningful innovation, clear segmentation and disciplined distribution. That combination will help us reach more consumers Strengthen the brand at every level and drive the next phase of HOCA growth. Delivering differentiated products is only part of the equation. We must also connect innovation with consumers in more compelling and impactful ways. Working with external experts, we reviewed the deployment of our marketing investments and are making changes to improve its effectiveness and efficiency. We're clarifying HOKA brand messaging, sharpening product storytelling, and broadening our content to resonate with a larger audience. Specific to our third quarter, we're focused on executing a strong holiday season for HOKA, maintaining the strength of full price demand while preparing the marketplace for key launches in our fiscal fourth quarter. We remain focused on protecting what makes the HOKA brand distinctive, while raising the level of execution needed to capture the significant global opportunity ahead. Moving on to UGG. Global revenue in the second quarter increased by 4% versus last year to $786 million. Growth was driven by wholesale, which increased 7% to $641 million. This was partially offset by an 8% decline in DTC, which delivered $146 million in the quarter. With the second quarter being a largely selling quarter for the brand, wholesale performance was healthy across the U.S. and international regions, which sets the stage for the upcoming holiday season. In addition, we continue to see very positive indicators of brand health and interest, giving us confidence that UGG is well positioned for peak season. At the same time, pressures on consumers are prompting some to delay purchase until closer to need. We believe that this shift toward a more deliberate buy now or now purchasing behavior makes it even more important to give consumers compelling reasons to choose UGG across a broader range of styles and occasions. Across the globe, consumers are responding to elevated product that is distinctly UGG, gravitating toward fresh expressions of iconic franchises, as well as new styles that bring recognizable UGG brand codes into new and unexpected categories. In Q2, we drove success with Lomel, continuing to build the UGG brand's relevance in sneakers, Golden Star Evelina extending our presence in clogs, and Zora and Quill demonstrating the brand's ability to quickly adapt to fashion trends. We're also seeing growing demand for UGG head-to-toe, with fleece-led apparel driving engagement and reinforcing the brand's potential to cement itself as a premium global lifestyle brand. The goal now is to bring these innovation stories to a broader audience. Our most loyal consumers look to UGG for what is next, and we're focused on extending that excitement across a broader consumer base and all genders. Classics and Tasman are already well-established franchises, while we're building Lomel, Golden, Zora and Quill into more meaningful contributors. This deliberate season-by-season approach is designed to create hero franchises with lasting relevance. As awareness grows, these franchises can expand how consumers engage with UGG across categories and wearing locations. During the quarter, our teams created urgency through scarcity, timely restock messaging, and culturally relevant product stories. Sunburst, Classic Tall, and Classic Mini Dipper Leg Warmer demonstrated the effectiveness of the strategy, with early season demand exceeding our expectations. These successes show that consumers continue to respond to compelling styles and fresh expressions of the brand, even in a more selective spending environment. As we move deeper into ag season, our focus is on applying those learnings more broadly and raising our level of execution across the business. That means being more purposeful in how we tell our product stories, creating greater energy and urgency around key franchises and newness and driving elevated consumer engagement through sharper alignment across product, marketing, and marketplace execution. Building on the encouraging response to key styles, our teams are hyper-focused around a key action plan to deliver the brand's largest quarter in its nearly 50-year history. We will support peak shopping periods with coordinated marketing and enhanced digital experience and compelling product storytelling anchored in our Gift the Feeling holiday campaign. Throughout the third quarter, we'll remain disciplined in how we drive digital conversion and execute peak shopping periods while managing promotions selectively to protect the long-term health of the brand. I'm excited to see the brand activations come to life this holiday season. With that, I'll now hand over the call to Steve, who will provide more detail on our second quarter financial results and updated fiscal year 27 outlook.

Thanks, Stefano, and good afternoon, everyone. As Stefano outlined, second quarter performance reflected a combination of continued international momentum and solid performance in multi-brand environments, combined with softer U.S. BTC trends and fulfillment challenges associated with our EMEA third-party logistics transitions. As the quarter progressed, the U.S. marketplace became increasingly promotional. However, we remained disciplined in how we managed the marketplace, protecting full-price selling and prioritizing the long-term health of our brands. That discipline is reflected in our financial results. While revenue came in slightly below our expectations, our continued focus on full-price selling and expense management contributed to exceptional gross margin and earnings per share performance. Importantly, these results demonstrate the flexibility and the resilience of the Decker's operating model, even in a more pressured environment. As we execute against the actions Stefano outlined, our financial strength gives us the capacity to continue investing behind our brands while remaining disciplined in how we allocate resources. We believe that balance, protecting profitability today while investing behind our most compelling long-term opportunities, remains fundamental to how we aim to create sustainable value over time. Now let's get into the details of second quarter results. Second quarter fiscal 2027 revenue came in at $1.48 billion, representing an increase of 3.5% versus the prior year. Performance in the quarter was driven by HOCA and UGG, which increased 7% and 4% versus last year respectively. and our other brand segment was down 54% versus last year, primarily due to lapping the final quarter of impacts related to the wind down of standalone operations for the Culebra brand. As Stefano mentioned, we saw some top line pressure against our original expectation for the quarter as a result of shipping delays related to our European 3PL transition as well as some e-commerce softness. The amount of the 3PL shipment delays impacting the quarter was approximately $22 million. The softness in our domestic DTC business was largely offset by better than expected wholesale selling across the globe. Gross margins for the second quarter was 60.5%, up 430 basis points from last year's 56.2%. Second quarter gross margin included an approximate 310 basis point benefit, from IEPA Tariff Refunds net of cost sharing arrangements with our independent manufacturers. The underlying 120 basis point improvement was driven by favorable full price selling and favorable product mix. SG&A dollar spend for the second quarter was $506 million, up 6% versus last year's $477 million. The total SG&A expense was below our prior expectations for the quarter, reflecting cost management actions to better align spend with lower revenue growth, while marketing and technology remained the primary drivers of year-over-year investment. This led to an operating margin of 26.3%. Excluding the net IEPA refund benefit, our operating margin was 23.2%. Our tax rate was 22.4% which compares to 21.7% in the prior year quarter During the second quarter, we repurchased approximately $299 million worth of shares at an average price of $93.65 Over the first six months of fiscal year 2027, we have repurchased $637 million, representing approximately 5% of our outstanding common stock, pacing well ahead of what we signaled at the beginning of the year. This continues to demonstrate our commitment to returning capital to shareholders through disciplined share repurchases while utilizing our strong free cash flow. As of September 30, 2026, the company had approximately $4.4 billion remaining under its stock repurchase authorization. These results culminated in diluted earnings per share of $2.31 for the quarter, which is 49 cents above last year's $1.82 diluted earnings per share, representing EPS growth of 27%. Excluding the net impact of the IEPA tariff refunds and related interest, Deluded Earnings Per Share was $2.03, representing growth of 11.5% versus last year. Turning to our balance sheet at September 30, 2026, we ended September with $1.2 billion of cash and equivalents. We continued to tightly manage inventory, which was up 3% versus the same point in time last year to $861 million, and during the period, we had no outstanding borrowings. Now, moving into our updated outlook for fiscal year 2027. As Stefano outlined, our updated outlook reflects a measured approach to revenue growth in the current landscape, maintaining our focus on protecting brand health and profitability. Importantly, we are maintaining our operating margin outlook and in large part maintaining our prior EPS expectations before the benefit of net IEPA tariff refunds. Then, with the net impact of refunds received to date, we are increasing our full-year EPS outlook. With that in mind, let me walk you through our expectations for fiscal year 2027. Total company revenue is now expected to be in the range of $5.7 to $5.725 billion, with HOCA now increasing by a high single-digit percentage versus last year, and UGG now increasing by a low single-digit percentage. We are increasing our gross margin expectation to now be approximately 58.5%, reflecting slightly better performance as well as the approximate $88 million IEPA tariff refund benefit in cost of sales, which is net of cost sharing arrangements with our independent manufacturers for amounts received to date in both the second and third quarter, representing approximately 90% of the amounts we have submitted. We have not factored any remaining unreceived amounts in our forward-looking guidance. SG&A is now expected to be approximately 35.5% of revenue as we manage costs with disciplined and reduced dollar spend in response to lower revenue growth expectations, resulting in a slightly higher percentage of revenue. with these all culminating in a raised operating margin expectation of approximately 23% inclusive of the net IEPA tariff refunds received to date. Our effective tax rate is still projected to be approximately 23% and we now expect diluted earnings per share in the range of $7.80 to $7.95 This earnings per share guidance now includes IEPA net tariff refunds and associated interest received to date and assumes share repurchases with a value of $1 billion in fiscal year 2027. Excluding the benefit of IEPA net tariff refunds received that are now reflected in our outlook, gross margin would be increasing to 57% and our full year operating margin would still be slightly better than 21.5%, highlighting our discipline and expected preservation of high quality selling. To provide a little insight on the third quarter, as we are comparing to a very strong quarter last year, we are expecting third quarter total company revenue growth to be in the low single digits, with UGG expected to grow low single digits and HOKA anticipated to deliver low to mid single digits in the third quarter. Our expectations have factored continued strength internationally, along with anticipated ongoing pressures in the U.S. market, primarily impacting PPC. The third quarter diluted EPS is expected to be in the range of $3.52 to $3.60, which includes an IEPA net tariff refund benefit of approximately $0.24. With this third quarter context in mind and our updated full-year outlook, we recognize this implies acceleration of revenue growth in the fourth quarter for HOCA. This expectation reflects our confidence in continued international demand signals and includes the benefit of planned global product launches Stefano discussed earlier. As always, these forward-looking statements are subject to the risks Erinn outlined at the beginning of the call. In closing, our second quarter results represent the flexibility and the resilience of the DECRS operating model. Our high levels of profitability and strong balance sheet provide the opportunity to make targeted investments that we believe can support future market share gains and drive sustainable long-term growth. Thanks, everyone. I'll now turn the call back to Stefano for his final remarks.

Thank you, Steve. As you look ahead, we remain confident in the power of HOKA and UGG and the significant long-term opportunities in front of both brands. We recognize that the consumer landscape continues to evolve and we are operating with the agility and discipline required to respond. We will remain laser-focused on protecting our premium brand positioning, driving growth with a high degree of full-price business, managing inventory with discipline, building clear channel and franchise segmentation, while preserving industry-leading levels of profitability. Fundamentally, our long-term goals remain intact. and we believe in the significant runway ahead for both HOKA and UGG. Our brands are strong, our balance sheet provides flexibility, and our operating model allows us to move decisively without sacrificing the long-term health of our brands. We believe that this combination positions Decker's well to navigate the near term and capture the substantial opportunities ahead. Before turning to Q&A, I'd like to mention a board update we announced today. We're pleased to welcome Rati Sahilavesk to the Decker's board effective December 1st. Rati brings more than 15 years of leadership experience in the retail industry with deep expertise in digital innovation, brand positioning, elevating brands online, and consumer engagement. I'm super excited to have Rati join the board and bring her expertise, especially her deep knowledge within the digital commerce channel. We look forward to working with Rathi to advance our disciplined growth strategy. I also want to thank Lori Shanahan, who will retire from the board when Rathi joins. Lori has been a tremendous asset to me and to Decker's through a period of exceptional growth. Her knowledge, passion, and insights have been incredibly valuable, and we're grateful for Lori's immense contribution, dedication, and service to Decker's. We wish her all the best. Thank you for joining us today. We'll now open the call for questions.

The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. In the interest of time, and to get to as many questions as possible, we ask that you please limit yourself to one question and one follow-up. Our first question is coming from Jay Soule with UBS. Please go ahead. Your line is open.

Great, thank you so much. I'm going to start with one question, then I do have a follow-up. Stefano, clearly you're protecting the health of the brand, you're playing the long game. Lowering the guidance for both brands right now to high single-digit and low single-digit, how do we think about the long-term guidance that we talked about in May with Helga being a potential growing low double digits through fiscal 30 and being mid-single digits? Can you get back to that algo going forward next year? If so, how? If you can tell us how you feel about that, that'd be great to start. Thank you.

Yeah, of course.

Hey, Jay.

We're only shared. The near-term challenges do not change my belief in our brands and their potential for growth. As you know, growth is never straight-lined, and in this environment, we don't want to trade brand equity for short-term revenue. We need to manage the next couple of quarters with discipline. At the same time, we need to keep investing in the opportunities that will drive long-term growth. and the discipline starts really with the quality of our growth. Not all growth is healthy. Not all growth is profitable. Not all growth is brand enhancing. And I assure you, we'll compete aggressively, but we're not participating in a race to the bottom. Experience has taught really all of us that the right approach in this environment is to continue to build your brand, to keep inventories tight, and to really focus on full price selling. So our brands continue to be healthy. Engagement is strong. Our strategy, we believe, is sound. And our premium model continues to support attractive management. So our vision remains largely intact at this point in time.

Yeah, Jay and Steve, just to kind of add on that, I think the most important thing is these brands are healthy and we're controlling them in the marketplace. And so the takedown that you're seeing reflected in this year is more an indication of what we're seeing in the current environment. It is not indicative of what we see for these brands kind of going forward. So the brands are in healthy shape. This is our ability to control the market and to control pricing and margins and profitability. We just think given some of the pressures that we're seeing in the market, some of the level of promotion that's going on in the market, especially with our competitors, this is the right step for us and for our brand health. And in the long term, these brands will continue to do well. And I would just be careful about kind of extrapolating what we're doing in a quarter or two into any indication of what this represents for the brand over the long term. We believe and have high confidence in what these brands can do over the long term.

I mean, that makes total sense. If I can follow up on that. Obviously, I think gross margin this quarter better than the street had modeled, even though wholesale grew a lot faster than DTC. Can you just talk about what drove the gross margin upside? And then maybe Stefano, obviously, there's a lot of promotions out there from your competitors in the athletic footwear space across the wholesale channel. When do you think the marketplace gets clean? When do you think that sort of like this Maybe irrational pricing that's out there sort of gets back to a more rational level where maybe full-price selling doesn't get hit so much.

Yeah, you go first. Yeah, I'll start first. So, Jay, kind of in terms of that 120 basis point improvement that we talked about outside of the benefit.

Right, XDIU per se, XDIU per se.

So that really was kind of split evenly between full-price selling and product mix. And so I think it was, you know, as we look at it, what drove that it was higher margin product selling through better as well as us maintaining our full price selling environment. So where we saw others being more promotional or heavily promotional, we stayed out of that. We were not getting as aggressive in our promotion levels. We do know that weighed on our DTC performance in the US as a result. But again, to Stefano's point, we don't want to chase It's your question about the marketplace and how soon it will be clean, Jay? I don't have a crystal ball, but what I see is that the second summer 2017,

and the fall will look better. What I can assure you is that in the transition of our models, there was a bit still of an overhang of Clifton 10 when we introduced Clifton 11, but we'll be very, very clean of Bondi 9 when we introduce Bondi 10 in January. So I'm confident that, you know, we will be quite clean in the marketplace and that will allow us to continue to drive for price business.

Yeah, and I think just one more thing to add on that, Jay. We're also watching to see what competitors are doing. We don't want to enter that race to the bottom. There's a lot of promotional product out there. There's a lot of product in the inventory that's weighing especially in the athletic footwear space. Our belief is we steer clear of that. It maintains better brand health over the long term. You're seeing in the current quarter how it's driving better margins. So this will serve us better in the long run. And that's really a big driver of, again, the reduction.

Our next question is coming from Adrian Yee with Barclays. Your line is open.

Thank you very much. Good afternoon. Stefano, I guess my question will still be on the promotional environment. We know that there's kind of an excess of inventory in kind of that lifestyle category, but it now also sounds like it's kind of also in the performance category. Is it broadly that athletic footwear in general It's promotional, and therefore you end up competing against lifestyle products that are also promotional in the marketplace. And then secondarily, UGG is really, in my mind, and the call-out has been, it really is UGG brand moment. A little bit more on the brown shoe, a little bit of a non-athletic look to it. So I guess the question there is, are you holding back some sell-in because it is promotional out there? Do you see the order book sort of building into spring-summer? As I said before, I think that you have some of the most newness that you've had in a couple of years, and it really looks very on the salesman there. Thank you.

Yes. Let me start with that. Buy now, wear now is real, and consumers are purchasing closer to need. To your point, what is very encouraging is that our 360 strategy is paying off, and it's really working across categories and also seasons and wearing occasions. Our growth is increasingly driven by sneakers, shoes, flats, clogs, apparel, and consumers are indeed responding to newness. Keep in mind that we've also been allocating our key styles to ensure scarcity at full price selling. So some of the new products that the team has delivered, Quail, Zora, Evelina Klang, have been really standout. And the way that we've also dimensionalized the low-mail franchise has been really resonating. So we are looking forward to have – things are slower than we would like at this present time, but we're confident the consumer will show up because the brand is super healthy and consumer engagement is strong.

On the first question, Adrian, maybe I'll take it first shot and then Stefano can jump in. In terms of kind of the difference between performance and lifestyle, clearly I think one dynamic that we're seeing in the current environment is some people are wearing performance as lifestyle. So anytime you have heavy promotion in performance, it is carried over to performance. and an individual who may be wearing performance for livestock. So that is creating kind of this promotional cloud, I think, over the environment. That's what we're trying to stay out of. Clearly, there are going to be elements that will always be promotional, your closeout product and so forth. What we don't want to get into is a heavy promotional environment where you're seeing a lot of promotion across multiple franchises, and that includes both brands. And so this is just our step to say, Some of our competitors want to be very promotional. We don't need to enter that competitive promotional environment. Our brands are healthy. We can maintain better health just by staying clean with a bigger focus on that fuller price cell.

Our next question is coming from Laurent Vasilescu with BNP Paribas. Your line is open.

Thank you. Good afternoon. Thank you very much for taking my questions. I wanted to ask Steve, Stefano, I think at the beginning of the year you guys called out that OCA DTC would outpace OCA wholesale. I'm just curious, and I think on UGG it was supposed to be an equal balance growth between both channels. So with the revised guidance, any chance you can give us some updated thoughts on how we should think about those channels across both brands? for the year, and then I've got a follow-up question on gross margin. Thank you.

Yeah, sure. Just related on POCA, I think, you know, from an international perspective, we still believe that to be true, what you stated. Where we're seeing the pressure more is in the U.S. market. So that dynamic has changed a little bit. With the pressure that we're seeing in the U.S. and where we're trying to remain as clean as possible within our e-commerce platform especially, that's where we're seeing some of the pressure where consumers may be finding product through wholesalers, through Wholesale Online at heavier promotions. We don't want to enter into that promotional environment within our e-commerce. Again, we'll have some level of promotion, but we don't want to get overly promotional. That's putting a little bit of pressure on that DTC growth so that dynamic within the U.S. has shifted a little bit where we'll now expect to see wholesale growth in the U.S. outpace DTC growth.

Okay, very helpful. And then I wanted to ask a housekeeping question. The $22 million shift in Europe, is that a shift, Steve, or is that kind of just lost sales? And then on the gross margin question specifically, ex-Gaifa tariffs, they were up. I think you were calling them to be down for 2Q. For 3Q, it's a little bit hard for us to model. So far, but because there's an IEPA benefit in 3Q on EPS, but should we think about your 3Q gross margin upward down? Thank you very much.

Yeah, sure. So first, starting on the European shift, so that 22 million, it's not a full shift into Q3. Some of it will get potentially pushed out longer, and some of it may get canceled, right? So again, we'll have to see how the environment plays out. Right now, the way we've modeled it is not all of it carries through into the back half of the year. A portion of it will move in, and some of it is risk of cancellation. In terms of the gross margin, I think your question was, how does it compare to the prior guide? We didn't give a prior guide on the quarter. Really, the assumption, if you look at A bit of Q3 is there is the IFA benefit, which we haven't necessarily called out, but you can calculate it. That's going to drive an overall net improvement in the gross margin. There will be some slight offset to that that we're anticipating, which is higher freight rates. as well as a slight increase in the promotion environment. So again, we won't get highly promotional, but we are anticipating the promotional level to increase slightly. So net overall positive driven by the IEPA tariff refund that we've received to date, partially offset by some pressure on rising freight rates and a slightly increased promotion assumption.

Our next question is coming from Sam Poser with Williams Trading. Your line is open.

Sam Poser Thank you very much for taking my question. I'm just going to follow up on Laurent's question. I believe he asked if, compared to last year, how to think about the gross margin, last 3Q, how to think about the gross margin in 3Q27 without the IEPA refund. That's what he wants. I think that was the question. So I want to give a good answer to it.

Yeah, no, I think that's the way we're thinking about it. In terms of kind of compared to last year as well, we will get a net improvement driven by the IETHA refund and then a partial offset from higher freight rates this year versus last year, and a slight increase in promotional activity this year versus last year.

Okay. All right. The thing is, is that we're going to have to take out these benefits in Q2 and Q3 of next year. So if you gave us a click, like we know that you were at 57.1%, I believe, in Q2. to without Laipa. Can't you just give us where you're guiding without it? Because we're going to have to take it out next year anyway, and it's going to be – all the numbers are going to be wrong unless you give it to us.

Sure, sure. So if I give it to you in terms of last year, last year Q3, we're at 59.8% on the gross margin. And what we're implying is just north of 60 in the current quarter. The way you can break that out is a little more than 200 basis point IEPA tariff refund impact offset by 150 related to Mostly freight with a little bit of promo. So up, call it 210, off by 150. That net is the increase you're seeing year over year.

Thank you. And then with the Bondi transition from the 9 to the 10, when are you going to break price on the 9 to ensure that you're clean when the 10 comes out in January?

First of all, it's already pretty clean because the Bond i9 continues to perform very, very well across the marketplace at full price. I believe the markdown cadence starts around cyber. But let me get back to you on that, Sam.

Part of that, Sam, will depend on inventory levels and kind of when we want to go. But to Stefano's point, the sell-through of Bondi 9 right now continues to be very strong at full price.

Our next question is coming from Jonathan Komp with Baird. Your line is open.

Yeah, hi, thank you. Good afternoon. I want to follow up just on HOKA and the U.S. wholesale marketplace. When you look at indicators of sell-through and wholesale, are you seeing any similar dynamics where you maybe are losing out on some sales to brands that are being more promotional? And if you think about total growth for the wholesale category for HOKA, How far of a runway or visibility do you have on the distribution front from the new doors that could sustain total growth even though it's a more difficult sell through the marketplace?

Let me start with the second part, John. As you know, we're still in much less distribution than many of our peers in sporting goods, athletic specialty especially. In run specialty, we're pretty covered. So ample opportunities for us in terms of expansion. And now that we have a line, a collection, an offer that allows us to segment the market more purposefully, we'll be able to and many more. Part of your question. We continue to gain share above $120, and we continue to be the leading performance-running brand in the U.S. at premium price points. Where we potentially lose share to others are the more compressed price points, below $120, where the competition is greater.

Okay, and can you comment at all, when you look at a few of the new model changeovers that Dinko has planned, are you making significant changes as you look ahead, or is it more tied to the product features on the Bondi 10 and others, just any more comment there? No, no, no.

Good question. So, as I referred in that presentation, Remarks. Some products didn't go as planned. They referred to Transport, Kawana, and Solomer. Others have performed super well. Speedo 7, Arahi 9, Cincinnati continue to do well, are doing very well across the marketplace. I am very encouraged by what the Robin and team have crafted and created for spring, summer, The lineup of new products, and I'm talking about not just Bonner and Clifton, which have been received very, very well, but the supporting cast. Well received. Booked super well. Mocked eight early in the fall. Best mocked to date. Also been very, very well received by the market. So the supporting lineup of products and some of the upgrades that are coming across performance and lifestyle will be very strong. Cielo 70 will help us attract a new consumer. and these extensions of Bondi and Clifton with material applications and colors to appeal to the lifestyle consumer also very well received. So I am very confident that the lineup we have, the collection we have for spring and fall will allow us to get the U.S. market back to growth.

I think I'll match on to some of the updates that you'll see in 27 are more significant than the updates you saw in 26. And that's kind of really what Stefano is highlighting is that the updates you saw on some of these were not as significant as what you will see next calendar year.

Our next question is coming from Peter McGoldrick with Stifel. Your line is open.

Hey guys, thanks for taking my question. I wanted to ask on the UGG brand as we enter holiday, with UGG wholesale performing better than DTC, can you help us think about the assumptions around retail sell-through and replenishment embedded in the low single-digit growth outlook for the December quarter? And then how do those assumptions compare to the current trends you're experiencing in the marketplace right now?

Yeah, I'll start. Maybe just a little bit about kind of how we're thinking about the setup. So coming out of Q2, we definitely saw some of the impact on the consumer. You know, I think as we mentioned a little bit in the prepared remarks, we are seeing consumers kind of buying closer to wearing occasions. We're also seeing sales events driving kind of higher level of sales as opposed to kind of We've seen some strong early reaction to the opening of UGG season. But again, it's still very early days in that. A lot of sales will come in November through December. So very early on in that. In terms of the assumptions then, we aren't necessarily making the same Thank you for joining us today. but we'll see what happens. You know, we think our brands are well positioned in the market. If the consumers show up, we believe we've got the product out there that will resonate and we'll see what happens.

Yeah, I appreciate that. The way consumers are responding to newness is fantastic. And some of the heritage styles that we're bringing back, like Sambar's Tall, Disket Heritage, Classic Mini Dipper, Leg Warmer, are all performing well. So that gives us confidence that the consumer will show up.

Okay, thanks. And then on the HOKA opportunity, and zooming out a bit, I wanted to ask how the current environment is influencing your multi-year opportunity to penetrate more meaningfully in the athletic specialty, sporting goods, and run specialty environments.

Our strategy doesn't change. As we shared previously, we're going to slowly expand where it makes sense. And now that the offer gives us more differentiation opportunities, that's what we'll be doing. So our strategy and outlook doesn't change for HOKA.

Thank you. This concludes today's Decker's Brand second quarter fiscal 2027 earnings conference call. Please disconnect your line at this time and have a wonderful day.