2023
ANNUAL
REPORT
Dear Stockholders,
As we celebrate our 50-year history of building innovative brands, I’m proud to share that in fiscal year
2023, Deckers Brands delivered a third consecutive year of double-digit revenue and earnings per share
growth. Over the three-fiscal-year period of 2020 to 2023, revenue and diluted earnings per share grew
at compound annual growth rates of 19% and 26%, respectively, and our portfolio of brands delivered
record revenue of $3.6 billion and diluted earnings per share of $19.37 in fiscal year 2023.
Our industry-leading performance this year resulted from the continued global expansion of the HOKA
brand, record levels of brand heat for the UGG brand, and the prioritization of DTC through disciplined
marketplace management. HOKA was the primary driver of revenue growth, adding more than half a
billion dollars to deliver $1.4 billion of revenue, representing 39% of total portfolio revenue. The UGG
brand’s compelling products and success with younger consumers led to slight revenue growth in constant
currency, as the brand increased its global DTC and international businesses.
Deckers Brands has experienced impressive growth over the past five years, while maintaining high levels
of operating profitability through focused investments in key strategies, and nimble expense management.
With our flexible operating model, our teams successfully offset the macro-driven impacts of significant
currency and freight headwinds during fiscal years 2023 and 2022, respectively, to deliver top-tier
operating margins. We are expecting abundant organic growth ahead, which we are continuing to support
by bolstering the Deckers enterprise infrastructure through key investments in fiscal year 2024.
Importantly, Deckers remains committed to its value to Do Good and Do Great - a foundational piece of
our company culture. During fiscal year 2023, we increased our influence through regenerative farming
practices to over 300,000 acres and 80 farms as part of the Savory Institute’s Land to Market program;
BIPOC (Black, Indigenous and People of Color) representation among U.S. leaders (director-level and
above) increased to 24%; and our global employees contributed approximately 15,000 volunteer hours
through the Deckers Gives’ Art of Kindness initiative. These highlights represent a sample of our broader
initiatives, which are detailed in our Creating Change Report, found at www.deckers.com/responsibility.
We believe our brands are well positioned to build on the momentum of the past few years to drive strong
performance in fiscal year 2024. With our talented and experienced management team, we will continue
to lean on our proven marketplace management strategies to deliver compelling products and consumer
experiences across our portfolio of in-demand brands. Thank you for your ongoing interest in Deckers.
Sincerely,
Dave Powers
Chief Executive Officer and President
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Fiscal Year Ended March 31, 2023
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 001-36436
DECKERS OUTDOOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
95-3015862
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
250 Coromar Drive, Goleta, California 93117
(Address of principal executive offices)
(805) 967-7611
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Trading Symbol(s) Name of each exchange on which registered
New York Stock Exchange
DECK
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required
to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer ☒
Non-accelerated filer
☐
Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s
assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-
Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
At September 30, 2022, the last business day of the registrant’s most recently completed second fiscal quarter,
the aggregate market value of the voting and non-voting stock held by the non-affiliates of the registrant was
approximately $8,242,483,771, based on the number of shares held by non-affiliates of the registrant as of that
date, and the last reported sale price of the registrant’s common stock on the New York Stock Exchange on that
date, which was $312.61. This calculation does not reflect a determination that persons are affiliates for any other
purposes.
As of the close of business on May 11, 2023, the number of outstanding shares of the registrant’s common
stock, par value $0.01 per share, was 26,159,846.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement on Schedule 14A relating to the registrant’s 2023 annual
meeting of stockholders, to be filed with the Securities and Exchange Commission within 120 days after the end of
the fiscal year covered by this Annual Report on Form 10-K, are incorporated by reference in Part III within this
Annual Report on Form 10-K. With the exception of the portions of the Proxy Statement specifically incorporated
herein by reference, the Proxy Statement and related proxy solicitation materials are not deemed to be filed as part
of this Annual Report on Form 10-K.
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
For the Fiscal Year Ended March 31, 2023
TABLE OF CONTENTS
Cautionary Note Regarding Forward-Looking Statements
Item 1.
Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Properties
Item 3.
Legal Proceedings
Item 4. Mine Safety Disclosures
PART I
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases
of Equity Securities
[Reserved]
Item 6.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10. Directors, Executive Officers, and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedule
Signatures
PART IV
Index to Consolidated Financial Statements and Financial Statement Schedule
Item 16. Form 10-K Summary
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for our fiscal year ended March 31, 2023 (Annual Report), and the information and
documents incorporated by reference within this Annual Report, contain “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended (Securities Act), and Section 21E of the Securities Exchange Act of 1934,
as amended (Exchange Act), which statements 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. Forward-looking statements include all statements other than statements of historical fact contained in, or incorporated by
reference within, this Annual Report. We have attempted to identify forward-looking statements by using words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or “would,” and
similar expressions or the negative of these expressions. Specifically, this Annual Report, and the information and documents
incorporated by reference within this Annual Report, contain forward-looking statements relating to, among other things:
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the operational challenges faced by our warehouses and distribution centers (DCs), wholesale partners, global
third-party logistics providers (3PLs), and third-party carriers, including as a result of global supply chain
disruptions and labor shortages;
availability of materials and manufacturing capacity, and reliability of overseas production and storage;
global geopolitical tensions, including the impact of economic sanctions on our transportation and energy costs;
global economic trends, including foreign currency exchange rate fluctuations, changes in interest rates,
inflationary pressures, changes in commodity pricing, and recessionary concerns;
the expansion of our brands and product offerings;
changes to the geographic and seasonal mix of our brands and products;
changes to our product distribution strategies, including product allocation and segmentation strategies;
trends impacting the purchasing behavior of wholesale partners and consumers;
changes in consumer preferences impacting our brands and products, and the footwear and fashion industries;
the impact of seasonality and weather on consumer behavior and the demand for our products;
our business, operating, investing, capital allocation, marketing, and financing plans and strategies;
expansion of and investments in our Direct-to-Consumer (DTC) capabilities, including our distribution facilities
and e-commerce platforms;
the impacts of the COVID-19 global pandemic (pandemic) and other incidence of disease on our business and
the businesses of our customers, consumers, suppliers, and business partners;
the effects of climate change, including changes in the regulatory environment and consumer demand to
mitigate these effects, and the resulting impact on our business;
the impact of our efforts to continue to advance sustainable and socially conscious business operations, and the
expectations and standards that our investors and other stakeholders have with respect to our environmental,
social and governance practices;
our interpretation of global tax regulations and changes in tax laws that may impact our tax liability and effective
tax rates;
our cash repatriation strategy regarding earnings of non-United States (US) subsidiaries and the resulting tax
impacts;
the outcomes of legal proceedings, including the impact they may have on our business and intellectual
property rights; and
the value of goodwill and other intangible assets, and potential write-downs or impairment charges.
Forward-looking statements represent management’s current expectations and predictions about trends affecting our
business and industry and are based on information available at the time such statements are made. Although we do not make
forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or
completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties, and other factors that
may cause our actual results, performance, or achievements to be materially different from any future results, performance or
achievements predicted, assumed, or implied by the forward-looking statements. Some of the risks and uncertainties that may
cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in
Part I, Item 1A, "Risk Factors," and Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations," within this Annual Report, as well as in our other filings with the Securities and Exchange Commission (SEC). You
should read this Annual Report, including the information and documents incorporated by reference herein, in its entirety and
with the understanding that our actual future results may be materially different from the results expressed or implied by these
forward-looking statements. Moreover, new risks and uncertainties emerge occasionally, and it is not possible for management to
predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor,
or combination of factors, may cause our actual future results to be materially different from any results expressed or implied by
any forward-looking statements. Except as required by applicable law or the listing rules of the New York Stock Exchange, we
expressly disclaim any intent or obligation to update any forward-looking statements. We qualify all our forward-looking
statements with these cautionary statements.
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PART I
References within this Annual Report to “Deckers,” “we,” “our,” “us,” “management,” or the “Company” refer to
Deckers Outdoor Corporation, together with its consolidated subsidiaries. UGG® (UGG), HOKA® (HOKA), Teva®
(Teva), Sanuk® (Sanuk), Koolaburra by UGG® brand (Koolaburra), UGGpure® (UGGpure), and UGGplushTM
(UGGplush) are some of our trademarks. Other trademarks or trade names appearing elsewhere within this Annual
Report are the property of their respective owners. The trademarks and trade names within this Annual Report are
referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their
respective owners will not assert their rights to the fullest extent under applicable law.
Unless otherwise specifically indicated, all figures included within this Annual Report are expressed in
thousands, except for per share or share data. The defined periods for the fiscal years ended March 31, 2023,
2022, and 2021 are stated herein as “year ended” or “years ended.” We also refer to these fiscal years as “fiscal
year 2023,” “fiscal year 2022,” and “fiscal year 2021,” respectively.
Item 1. Business
General
We are a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories
developed for both everyday casual lifestyle use and high-performance activities. We market our products primarily
under five proprietary brands: UGG, HOKA, Teva, Sanuk, and Koolaburra. Our brands compete across the fashion
and casual lifestyle, performance, running, and outdoor markets. We believe our products are distinctive and appeal
to a broad demographic. We sell our products through quality domestic and international retailers, international
distributors, and directly to our global consumers through our DTC business, which is comprised of our e-commerce
websites and retail stores. We seek to differentiate our brands and products by offering diverse lines that emphasize
authenticity, functionality, quality, and comfort, and products tailored to a variety of activities, seasons, and
demographic groups. All of our products are manufactured by independent manufacturers.
Products and Brands
UGG. The UGG brand is one of the most iconic and recognized brands in our industry, which highlights our
successful track record of building niche brands into lifestyle and fashion market leaders. With loyal consumers
around the world, the UGG brand has proven to be a highly resilient line of premium footwear, apparel, and
accessories with expanded product offerings and a growing global audience that appeals to a broad demographic.
The UGG brand is sold globally, including in the US, Canada, Europe, Asia-Pacific, and Latin America.
HOKA. The HOKA brand is an authentic, premium line of year-round performance footwear and apparel that
offers enhanced cushioning and inherent stability with minimal weight. Originally designed for ultra-runners, the
brand now appeals to world champions, taste makers, and everyday athletes. Strong marketing has fueled both
domestic and international sales growth for the HOKA brand, which has quickly become a leading brand within our
run and outdoor specialty wholesale accounts and is growing within selective key accounts. The HOKA brand’s
product line includes running, trail, hiking, fitness, and lifestyle. The HOKA brand is sold globally, including in the
US, Canada, Europe, Asia-Pacific, and Latin America.
Teva. The Teva brand was born in the Grand Canyon and for decades has served as a trusted companion for
outdoor adventure seekers around the world. Today, Teva builds upon sport sandal leadership, authentic outdoor
heritage, and a commitment to sustainability to drive growth through category expansion and a young, diverse, and
adventurous consumer. The Teva brand’s product line includes sandals, shoes, and boots. The Teva brand is sold
globally, including in the US, Canada, Europe, Asia-Pacific, and Latin America.
Sanuk. The Sanuk brand originated in Southern California surf culture and has manifested into a lifestyle
brand with a presence in the relaxed casual shoe and sandal categories, focusing on innovations in comfort and
sustainability. The Sanuk brand’s use of unexpected materials and unconventional constructions, combined with its
fun and playful branding, are key elements of the brand’s identity. The Sanuk brand is primarily sold in the US.
Other Brands. Other brands consist primarily of the Koolaburra brand. The Koolaburra brand is a casual
footwear fashion line using plush materials and is intended to target the value-oriented consumer to complement the
UGG brand offering. Our Other brands are primarily sold in the US and Canada.
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Sales and Distribution
US Distribution. In our wholesale channel, we distribute our products in the US through sales representatives,
who are organized by account type or geographically and by brand. In addition to our wholesale channel, we sell
products directly to consumers through our DTC business and fulfill online orders through our DCs and retail stores.
Our sales force is separated by brand, as each brand generally has certain specialty customers that expect a
dedicated sales team with specialized knowledge of the brand’s product offerings.
We currently distribute products sold in the US through our DCs in Moreno Valley, California, and Mooresville,
Indiana, as well as through a 3PL in Pennsylvania. Our DCs feature a warehouse management system that enables
us to efficiently pick and pack products for direct shipment to customers. We are further expanding our DCs and are
in the early stages of building out a third US DC located in Mooresville, Indiana.
Refer to Part I, Item 2, “Properties,” and Note 7, "Commitments and Contingencies," of our consolidated
financial statements in Part IV within this Annual Report for further information on our properties and related
minimum lease and other commitments.
International Distribution. Internationally, in our wholesale channel, we distribute our products through
independent distributors and wholly owned subsidiaries in many regions and countries, including Canada, Europe,
Asia-Pacific, and Latin America, among others. We also sell products internationally, particularly in China, through
partner retail stores, which are branded stores that are wholly owned and operated by third parties. In addition, in
certain countries we sell products through our DTC business. For our wholesale and DTC businesses, we distribute
our products through a number of DCs managed by 3PLs in certain international locations.
Reportable Operating Segments and Geographic Areas
Our six reportable operating segments include the five strategic business units responsible for the worldwide
operations of the wholesale divisions of our brands (UGG, HOKA, Teva, Sanuk, and Other brands), plus our DTC
business (reportable operating segments).
UGG Wholesale. We sell our UGG brand products primarily through fashion lifestyle retailers such as Urban
Outfitters, domestic higher-end department stores such as Nordstrom, Dillard’s, and Macy’s, streetwear and sports
style partners, such as Footlocker and Journey’s, and online retailers, such as Amazon.com, Zappos.com, and
Zalando.com. As the retail marketplace continues to evolve to reflect changing consumer preferences, we
continually review and evaluate our UGG wholesale distribution and product segmentation approach. For example,
as the UGG brand continues to amplify its audience with younger consumers, our distribution to these consumers is
expanding faster through our lifestyle and sports style partners.
HOKA Wholesale. We sell select HOKA brand footwear primarily through full-service domestic specialty
retailers such as Fleet Feet and Road Runner Sports, outdoor retailers, such as REI, select online retailers such as
Zappos.com, other strategic partners, such as DICK’s Sporting Goods and Running Warehouse, streetwear and
sports style partners, such as Footlocker, and higher-end department stores, such as Nordstrom. We continue to
expand our HOKA brand wholesale distribution in international markets, including through strategic partners such as
Intersport and Sport 2000 in Europe and Xebio Group and Himaraya in Japan.
Teva Wholesale. We sell our Teva brand footwear primarily through outdoor retailers, such as REI, fashion
lifestyle retailers, such as Urban Outfitters, other strategic partners, such as DICK’s Sporting Goods, large national
retail chains, such as Famous Footwear and DSW, higher-end department stores such as Nordstrom, and online
retailers such as Amazon.com and Zappos.com. We continue to expand our Teva brand wholesale distribution in
international markets, including through strategic partners such as United Arrows and ABC Mart in Japan.
Sanuk Wholesale. We sell our Sanuk brand footwear primarily through domestic sports style partners, such
as Journey’s, higher-end department stores, such as Dillard’s, larger national retail chains, such as DSW, and online
retailers such as Amazon.com and Zappos.com.
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Other Brands Wholesale. Other brands is primarily made up of the Koolaburra brand. We sell our Koolaburra
brand footwear primarily through larger national retail chains, including Kohl’s, DSW, Shoe Carnival, and Famous
Footwear, certain higher-end department stores, such as Macy’s, and online retailers such as Amazon.com and
Zappos.com.
Direct-to-Consumer. Our DTC business is comprised of our e-commerce business, which we operate through
various websites and platforms, and retail stores. Our websites and retail stores are largely intertwined and
interdependent. In an omni-channel marketplace, we believe many of our consumers interact with both our retail
stores and our websites before making purchasing decisions. For example, consumers may feel or try on products
in our retail stores and then place an order online later. Conversely, they may initially research products online, and
then view inventory availability by store location and make a purchase in store. We have observed a meaningful
shift in the way consumers shop for products and make purchasing decisions, evidenced by decreases in consumer
retail store activity as consumers accelerate their migration to online shopping. We have optimized our digital
marketing strategy to capitalize on these trends, which has accelerated global online consumer acquisition and
retention rates. Although we continue to see consumers migrate to online shopping, our DTC online and retail sales
channels interact with each other and largely overlap to provide a fluid purchasing experience, which engenders
brand loyalty while increasing product sales and improving our inventory productivity. Further, our domestic and
international consumer loyalty programs allow our consumers to earn points and awards across the DTC business,
which has contributed to higher brand demand.
Our retail stores enable us to expose consumers to a more curated selection of products, directly impact our
consumers’ experience with our brands, and sell our products at retail prices thereby generating larger gross profit
as a percentage of net sales (gross margin). Our Company-owned mono branded retail stores are predominantly
UGG brand concept stores and UGG brand outlet stores, as well as new openings of HOKA brand retail stores.
Through our outlet stores, we sell some of our discontinued styles from prior seasons, full price in-line products, as
well as products made specifically for the outlet stores. We continue to open outlet stores in key markets to further
grow our brand presence and appeal to a broader consumer base. We also have several UGG brand flagship
stores and a HOKA brand flagship store, which are Company-owned premium mono branded concept stores in key
markets designed to showcase the UGG and HOKA brand products.
As of March 31, 2023, we operate our e-commerce business through Company-owned websites and mobile
platforms in 57 different countries and have a total of 164 global retail stores (including 18 HOKA brand retail
stores), which includes 81 concept stores and 83 outlet stores.
Refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of
Operations,” within this Annual Report for further disclosure and discussion of our DTC business.
Refer to Note 12, "Reportable Operating Segments," of our consolidated financial statements in Part IV within
this Annual Report for further information regarding our reportable operating segments. Additionally, refer to Note
13, "Concentration of Business," of our consolidated financial statements in Part IV within this Annual Report for
further information about geographic areas and concentration of related business risks.
Product Design and Development
The design and development functions for all of our brands are performed by a combination of internal design
and development staff and outside freelance designers. Our design and development staff work closely with brand
management to develop new styles and product lines. Throughout the development process, we have multiple
design and development reviews, which we then coordinate with our independent manufacturers. To ensure quality,
consistency, and efficiency in our product design and development process, we continually evaluate the availability
and cost of raw materials, the capabilities and capacity of our independent manufacturers, and the target retail price
of new products.
Manufacturing and Supply Chain
We outsource the production of our products to independent manufacturers, which are primarily located in
Asia. We generally purchase products from our manufacturers on the basis of individual purchase orders or short-
term purchase commitments, rather than maintaining long-term purchase commitments, which provides us greater
flexibility to adapt to changing consumer preferences, changes in international trade relations, and evolving
inventory management requirements. Production by our independent manufacturers is performed in accordance
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with our detailed product specifications and rigorous quality control and operating compliance standards. We
maintain a buying office in Hong Kong, as well as on-site supervisory offices in China and Vietnam, which
collectively serve as a strong link to our independent manufacturers. We believe our substantial regional presence
enhances our manufacturing processes by providing predictability of material availability and ensuring compliance
with laws and regulations, and adherence to quality control standards and final design specifications.
The majority of the materials and components used in the production of our products by these independent
manufacturers are purchased from independent suppliers that we designate. At our direction, our manufacturers
purchase the majority of the sheepskin used in our products from two tanneries in China, which source their
sheepskin primarily from Australia and the United Kingdom (UK). We maintain routine communication with the
tanneries to closely monitor the supply of high-quality sheepskin for our projected UGG brand production. To ensure
an adequate supply of sheepskin, we forecast our expected usage in advance at a forward price. We also enter into
fixed purchasing contracts and other pricing arrangements with certain suppliers of sheepskin, wool (primarily for
UGGpure, further discussed below), leather, and sugarcane derived ethylene vinyl acetate (EVA) to manage price
volatility. We believe current supplies are sufficient to meet our current and anticipated demand, but we continually
monitor our supply chain and investigate options to accommodate our expected growth, as well as unexpected
supply chain issues. Refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and
Results of Operations,” and Note 7, "Commitments and Contingencies," of our consolidated financial statements in
Part IV within this Annual Report for further information on our minimum purchase commitments.
We use a proprietary material, UGGpure, which is almost entirely repurposed wool woven into a durable
backing, and UGGplush, which is almost entirely repurposed wool and lyocell woven into a durable backing, in
some of our UGG brand products. In an effort to eliminate waste as part of our corporate sustainability efforts, at this
time, all of the wool in UGGpure and UGGplush is sheared from the sheepskin we are already using in our
products. In addition, we are continuing to drive our strategy of introducing counter-seasonal products through
category expansion, including the UGG brand’s spring and summer products, as well as the year-round
performance footwear product offering of the HOKA brand, which we believe will further reduce our dependence on
sheepskin.
Excluding sheepskin, UGGpure, UGGplush, and sugarcane derived resin or EVA, we believe that substantially
all raw materials and components used to manufacture our products, including wool, rubber, leather, and nylon
webbing, are generally available from multiple sources at competitive prices.
We require our independent manufacturers and designated suppliers, including our partners and licensees, to
adopt our Ethical Supply Chain Supplier Code of Conduct, which specifies that they must comply with all local laws
and regulations governing human rights, working conditions, anti-corruption laws, restricted substances, and
environmental compliance, including animal welfare and conflict minerals, before we are willing to conduct business
with them. Refer to the “Environmental, Social, and Governance” section below for further information.
Inventory Management and Product Returns
We have an extended design and manufacturing process, which involves the initial design of our products, the
purchase of raw and other materials, the accumulation of inventories, the subsequent sale of the inventories, and
the collection of the resulting accounts receivable. This production cycle results in significant liquidity requirements
and working capital fluctuations throughout our fiscal year. Because our production cycle typically involves long lead
times, which requires us to make manufacturing decisions several months in advance of an anticipated purchasing
decision by the customer, it is challenging for us to estimate and manage our inventory and working capital
requirements.
We seek to manage our inventory levels by considering existing customer orders, forecasted sales and
budgets for both our wholesale and DTC channels, and the delivery requirements of our customers. Our systems
and processes are designed to improve our product forecasting, inventory control and supply chain management
capabilities and we are making investments in a new end-to-end planning system to further support our scaling
business, including our e-commerce business. In addition, added discipline around SKU productivity, product
purchasing decisions, the reduction of production lead times, and the sale of excess inventory through our
liquidation channels, are key areas of focus that we expect will further enhance inventory performance.
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Our general practice, and the general practice in our industry, is to offer customers in our wholesale channel
the right to return defective or improperly shipped merchandise, and to accept returns from our consumers in the
DTC channel between 30 to 90 days from the point of sale for cash or credit.
We encourage our customers to place a significant portion of orders as pre-season orders, which are typically
placed up to 12 months prior to the anticipated shipment date, as well as in-season fill-in orders that can be shipped
immediately. We work with our customers through pre-season programs to enable us to better plan our production
schedule, inventory, and shipping requirements.
Similar to other companies in our industry, we continue to monitor pressures on the global supply chain, which
have shifted the timing of shipments across our brands compared to the fiscal year ended March 31, 2022 (the prior
period). However, we have seen improvements in transit lead times and related freight costs, compared to the prior
period. Refer to Part I, Item 1A, “Risk Factors,” within this Annual Report for further information on the impacts on
our business of supply chain disruptions and the associated risks. Refer to Part II, Item 7, “Management's
Discussion and Analysis of Financial Condition and Results of Operations,” within this Annual Report under the
sections entitled “Trends and Uncertainties Impacting Our Business and Industry,” “Liquidity,” and “Contractual
Obligations” for further information on the impact of supply chain disruptions on our results of operations, our
working capital and operating requirements, as well as our purchase obligations for product, respectively.
Environmental, Social, and Governance (ESG)
As a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories, our
worldwide reach and impact is significant. We believe consumers are increasingly buying brands that deliver quality
products while striving for minimal environmental impact by employing sustainable business practices. Our
sustainability policies and strategies are informed by our ongoing efforts with multi-stakeholder initiatives, which
involve our stockholders, employees, suppliers, and customers, as well as other brands and non-governmental
organizations. Through our holistic ESG program, which has been in existence since 2010, we are committed to
advancing our sustainable business initiatives. As a result of our efforts, we have been recognized by Investor’s
Business Daily as one of the Best ESG Companies, by Sustainalytics as one of the Top-Rated ESG Companies, by
Newsweek as one of America’s Most Responsible Companies, and included on the Bloomberg Gender Equality
Index during fiscal year 2023.
ESG Oversight. Our Board of Directors, through its Corporate Responsibility, Sustainability & Governance
Committee (Corporate Governance Committee), which is comprised of four independent directors. Our Board of
Directors oversees our ESG strategy and has ultimate oversight over all sustainability initiatives, strategies, and
programs, including economic, social, and environmental risks. The Corporate Governance Committee and Board
of Directors regularly receive updates on the status of our ESG program. In addition, the Audit & Risk Management
Committee (Audit Committee) of the Board periodically assesses risk management, including climate-related risks
and policies to ensure a consistent corporate strategy. The Board of Directors considers whether the ESG program
adequately identifies material risks in a timely fashion, implements appropriate responsive risk management
strategies, and transmits necessary information with respect to material risks within the organization. Our Chief
Administrative Officer (CAO) is responsible for the day-to-day management of our ESG program. The program’s
execution is driven by our leadership team and various cross-functional teams including our ethical sourcing,
facilities, DCs, brands, innovation, materials, and supply chain teams.
Our ESG program aligns our internal teams with our Sustainable Development Goals (SDGs), detailed below,
and establishes policies to encourage our partners and suppliers to employ sustainable business practices. We
annually assess risks related to ESG issues as part of our overall enterprise risk management approach. In
addition, our internal audit team provides periodic targeted reviews of our ESG-related policies and procedures to
the Audit Committee.
ESG Education. During fiscal year 2023, our Corporate Governance Committee, together with our CAO,
enrolled in the Diligent ESG and Climate Leadership Certificate Program. Additionally, as set forth in our Corporate
Governance Guidelines, our Board of Directors is required to complete annual training on our Code of Ethics.
Together, we believe these efforts further evidence our ongoing commitment to sustainable business practices and
strong ESG performance.
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ESG Performance Metrics. Our pay-for-performance philosophy demands that we offer performance-based
compensation that is directly linked to factors that the Talent & Compensation Committee of our Board of Directors
believes will lead to the creation of stockholder value. During fiscal year 2023, for our executive leadership team,
our annual cash incentive award program included a 10% modifier tied to specific ESG initiatives.
Stakeholder Engagement. We highly value stakeholder input and have consistently demonstrated our
commitment to maintaining open and interactive dialogue on ESG matters with our stakeholders, including non-
governmental organizations, employees, stockholders, suppliers, industry groups, communities, and governments,
to ensure their views are actively considered in executing our ESG program. Our stakeholder outreach program is
led by a cross-functional team that includes members of our investor relations, compliance, sustainability, diversity,
equity, and inclusion (DEI), and legal teams. Additionally, we actively engage with our employees to obtain valuable
feedback and track progress, including through regular employee engagement surveys.
Sustainable Development Goals. Achieving measurable sustainability success is critical to our future
economic and business growth, and we work to establish SDGs that we believe are the most relevant to our
business, our operations, our stockholders, and the communities in which we operate. We are a member of the
United Nations Global Compact (UNGC), the world’s largest voluntary corporate sustainability initiative. This
membership requires an annual statement of progress, which is reflected in our Corporate Responsibility and
Sustainability Report (Creating Change Report). Our CAO identifies specific SDGs established by the UNGC, which
we adopt to guide our ESG strategy.
The following is a brief overview of our SDGs and related achievements during fiscal year 2023:
Environment Indicators
Many of our facilities were designed with sustainability in mind. Our corporate headquarters and our Moreno
Valley, California, DC are Leadership in Energy and Environmental Design (LEED)-certified silver and our first
Mooresville, Indiana, DC is LEED-certified gold. To further our commitment to monitoring the environmental
performance of our supply chain partners, in fiscal year 2023 we began utilizing the HIGG Facility Environmental
Module, a sustainability assessment tool used by our factory partners to collect detailed and standardized
information about a partner’s waste, water, and energy consumption and identify and prioritize opportunities for
sustainability performance improvements.
•
Materials. We strive to maximize the amount of environmentally preferred materials (which we define
as recycled, renewable, regenerated, and natural materials) in our products. Where possible, we utilize
third-party certifications to assess our environmentally preferred materials, such as the Leather
Working Group, Forest Stewardship Council, Responsible Wool Standard, and the Global Recycling
Standard. During fiscal year 2023, we sourced all of our leather supplies used in our footwear from
Leather Working Group-certified tanneries, which promote sustainable and environmentally friendly
business practices within the leather industry. We also continue to utilize our third-party, science-based
Lifecycle Assessment (LCA) tool to guide our brands toward leveraging preferred materials.
During fiscal year 2023, all wool used in our footwear products was sourced from preferred sources,
including Responsible Wool Standard certified or upcycled from certain sheepskin product. We require
our supply chain partners to comply with our Ethical Sourcing and Animal Welfare Policy and have
amplified our requirements for leathers sourced from South America by implementing detailed
traceability standards to address deforestation. In addition, we do not believe in the exploitation or
killing of animals solely for the purpose of their fur. Our strict policy requires that we only use hides that
are the byproduct of the meat industry and, in fiscal year 2023, we continued our evolution moving
away from virgin wool by transitioning from UGGpure in support of UGGplush which utilizes
TENCEL™ Lyocell rather than virgin wool.
Additionally, our brands continue to seek more preferred sources (either recycled or sugarcane) of
EVA, and, during fiscal year 2023, we saw a significant increase in the use of preferred sources of
EVA, largely influenced by the UGG brand’s decision to transition away from petroleum-based
ethylene to sugarcane-based ethylene in certain high volume, classic silhouette styles.
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Waste. We aim to sustainably reduce waste generated at our facilities and partner facilities through
reduction, recycling, and reuse. Our DCs in Moreno Valley, California, and Mooresville, Indiana, have
undertaken efforts to become zero-waste facilities by calendar year 2023. Further, we have taken
steps to remove most single-use plastic from our packaging at our corporate headquarters, strive to
use minimal plastic in our product packaging, and have eliminated single-use plastic bags from our
retail stores. We have also implemented tracking programs with the majority of our manufacturing
partners to monitor waste generation and waste diversion methods, and we continue to monitor and
engage with our supplier partners through our ongoing LCA outreach efforts.
Water. We strive to mitigate water scarcity in the countries in which we operate by reducing water
consumption and improving water quality throughout our operations. We monitor certain manufacturing
and supply chain partners and have set water use reduction targets for each of them. We expect our
partners to adhere to the highest standards of water efficiency and discharge.
Chemistry. We seek to achieve environmentally sound management of chemicals and reduce the
discharge of hazardous substances among our key business partners. Since fiscal year 2021, our
Restricted Substances team manages and controls over 1,600 restricted substances and continues to
explore cleaner chemistries where possible.
Climate and Clean Energy. We aim to reduce energy consumption and carbon emissions throughout
our operations. We set ambitious Scope 1, 2, and 3 carbon reduction targets filed with and approved
by the Science-Based Targets initiative, which provides guidance to companies to set targets in line
with the latest climate science. We have also engaged a third-party expert, Carbon Trust, to oversee
our carbon accounting, and have collaborated with them to establish our carbon reduction targets. We
are founders of the Savory Institute's Land to Market program, working to protect and reverse
environmental degradation through regenerative farming practices. During fiscal year 2023, we
established a long-term grant with Savory Institute to support regenerative farming practices on sheep
farms in Australia, influencing over 300,000 acres and 80 farms.
Our brands are committed to sustainable business practices, embrace our sustainability targets, and work to
launch sustainable collections. For example, the UGG brand’s Classic Mini Regenerate and Tasman Regenerate
are crafted with raw materials from ranches that practice regenerative agriculture, a conservation and rehabilitation
approach focused on topsoil regeneration, encouraging wildlife diversity, and supporting carbon capture in the
ground. UGG also offers a consumer-facing repair service, UGGrenew, to extend the life of Classic Boots. The
HOKA brand continues to focus on integrating more environmentally preferred materials in its footwear and apparel
collections. Teva continues to work with TerraCycle® to give well-worn Teva sandals new life as downcycled
materials. The Sanuk brand’s Veg Out Collection features 100% plant-based sneakers crafted using plant-based
and recycled materials.
Social Indicators
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Gender Equality and Quality Education. We are committed to accelerating our DEI efforts to make a
meaningful difference for our employees, our customers, and the communities in which we operate.
During fiscal year 2023, we once again appeared on the Bloomberg Gender-Equality Index, which
helps bring transparency to gender-related practices and policies at publicly-listed companies around
the world. In addition to our own corporate DEI efforts, we promote gender equality and quality
education at our supply chain partners through our partnership with the Business for Social
Responsibility’s HERproject, which positively impacts the well-being of women through workplace-
based education and training to promote health, gender equality and financial inclusion. We also
partner with Better Work to provide anti-harassment training to key supply chain partners and the
International Labour Organization (ILO) training program covering topics such as international labour
standards, social protection, social dialogue, innovation, gender equality and diversity, sustainable
development, and the future of work. Our current goal is to empower 100,000 women through
workplace-based education and training. Since setting our target in fiscal year 2020, we have
empowered approximately 87,000 women through our engagement efforts and working with valued
third-party programs, including HERproject, Better Work and the ILO. Further, each of our brands has
committed to represent Black, Indigenous, and people of color (BIPOC), Lesbian, Gay, Bisexual,
Transgender, Queer, Intersex, and Allies (LGBTQIA+), and diverse body types and abilities in their
marketing campaigns.
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•
Human Rights. We are committed to operating responsibly in the communities in which we operate,
including encouraging industry leading human rights practices within our supply chain. We have
established robust criteria in our Ethical Supply Chain Supplier Code of Conduct (Supplier Code of
Conduct), based on ILO standards, which outlines our expectations for our partners on various topics
including child labor, forced labor, slavery and human trafficking, harassment, discrimination, health
and safety, compensation, working hours, freedom of association, and environment. Topics covered in
our Supplier Code of Conduct, health and safety ratings, and environmental performance are included
in our performance scorecards for our business partners, which are regularly reviewed by our
leadership team. Partners who underperform are placed on corrective action plans and monitored
more frequently. We are members of the Transparency Pledge to promote a standard for supply chain
disclosure in the garment and footwear industry. We publish a list that includes all of our Tier 1 and Tier
2 supply chain partners and ensure it is regularly updated to include key details like number of
employees at each site, location, and types of products made. We are also members of The Social &
Labor Convergence Program, a multi-stakeholder initiative whose goal is to increase the effectiveness
of factory audits.
Our annual Creating Change Report for the year ended March 31, 2023, which will be published under the
“Responsibility” tab of our website located at www.deckers.com, will provide more information regarding our fiscal
year 2023 ESG achievements with a focus on the SDGs discussed above. We believe the progress of our corporate
responsibility efforts is served by disclosing goals and relevant metrics and, to that end, we have aligned the
reporting standards included in our Creating Change Report with the Financial Stability Board’s Task Force on
Climate-Related Financial Disclosures (commonly referred to as TCFD), Global Reporting Initiative’s (commonly
referred to as GRI) Core Standards, and Sustainability Accounting Standards Board’s (commonly referred to as
SASB), and now part of the International Finance Reporting Standard (or IFRS) Foundation Consumer Goods
Sector Apparel, Accessories and Footwear Index. The content of our website, including our Creating Change
Report, is not incorporated by reference into this Annual Report or in any other report or document we file with the
SEC.
Human Capital - Our People and Our Culture
Employees. As of March 31, 2023, we employ approximately 4,200 employees (an increase of 11.2%
compared to the prior period) in North America, Europe, and Asia. This includes approximately 1,500 employees in
our retail stores worldwide, which excludes temporary and seasonal employees.
Culture. We strive to positively impact the world by uniting purposeful brands with diverse people driven to
succeed and create change. Our key values, which guide our journey onward together to improve our business and
create a better world around it, help hold us accountable to deliver on this purpose:
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Come as you are. Authentic employees create an authentic company.
Better together. The power of independent spirit, united for a common goal.
Commit to create. Curiosity fuels creativity, which in turn fuels innovation.
Own it. We set high targets and hit them and take accountability when we don’t.
Do good and do great. We act with integrity and humility and respect each other and our communities
to drive a sustainable business.
Our values define our Company and serve as the driving force behind how we work together and work with
customers, consumers, partners, suppliers, and communities. We also have detailed ethics and compliance policies
that support our commitment to ethical behavior and legal compliance across our Company. Through our open-door
policy and culture, employees are encouraged to approach their managers if they believe violations of standards or
policies have occurred and are also able to make confidential and anonymous reports using a 24/7 online or
telephone hotline hosted by an independent third-party provider.
At Deckers, we believe our culture makes us unique. We regularly conduct employee surveys to understand
our employee’s experiences on a variety of topics focused on employee engagement. Our latest survey completed
in February 2023 had a participation rate of 88%. Of those employees who completed the survey, 87% noted they
were proud to work for Deckers.
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Promoting Diversity, Equity, and Inclusion. We promote DEI and believe that creating a diverse and
inclusive workplace is critical to ensuring all of our employees can come as they are and bring their authentic selves
to work each day. We believe the inclusion of diverse perspectives, and amplifying voices of underrepresented
communities brings a unique set of experiences, opinions, and thoughts on critical issues that help enhance our
business and drive better outcomes. To that end, as of March 31, 2023, our Board of Directors is comprised of a
total of ten directors, 60% of whom are from underrepresented communities. Further, as of March 31, 2023, over
24% of our director-level and above employees in the US are from BIPOC communities, which represents an
increase of over 3% compared to fiscal year 2022 and an overall increase of more than 12% since fiscal year 2020.
Further, during fiscal year 2023, 45% of all new hires reporting into the US corporate office and call center were
from BIPOC communities. At Deckers, we strive to have gender parity in leadership positions and our Board of
Directors. As of March 31, 2023, over 49% of our director-level and above employees are female and 40% of the
members of our Board of Directors are female.
.
Our Code of Ethics, on which we train our employees biennially, as well as our annual Creating Change
Report, codifies these values and our commitment to DEI. We have a robust collection of programs designed to
support creating a more inclusive workplace, as well as policies and practices aimed at increasing diversity. We
have implemented a comprehensive, global strategy for DEI, including the following:
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Our brands have committed to having at least 60% of individuals in our marketing campaigns
represent the BIPOC and LGBTQIA+ communities and diverse body types and abilities.
We have created a framework for the creation of Employee Resource Groups (ERGs), which are
formed around common interests, backgrounds, or characteristics, including gender, race, ethnicity,
and other affinities. We have ten ERGs as of March 31, 2023.
We have deployed mandatory annual anti-racism and implicit bias training, as well as a suite of
additional learning and development resources available to employees, including Inclusive Interviewing
and Selection for managers, Disability Awareness & Inclusion, and Applying DEI Practices to Product
Lifecycle, among others aimed at increasing employee acumen about DEI-focused topics.
We have a global mentorship program to help provide our existing talent with networking and
engagement opportunities.
Charitable Giving and Volunteering. Our charitable contributions, product donations, and employee
volunteer efforts are an essential part of our culture. We annually contribute to our local communities through
monetary donations, volunteer efforts, and in-kind donations. During fiscal year 2023, we donated over $4,000 to
various non-profit organizations around the globe, primarily to organizations focused on DEI initiatives,
environmental impact mitigation, and community support. We also continued our ‘Art of Kindness’ events, where
employees volunteer during a week-long event in our local communities multiple times during the fiscal year. Our
employees volunteered approximately 15,000 hours in fiscal year 2023. Our strategic giving and community-
engagement efforts continued to be aligned with our SDGs, including DEI, the environment, uplifting youth,
education, and community support. We also encourage our employees to volunteer by compensating each
employee for up to 24 hours of volunteer time each calendar year and offer incentives for payments to employees’
charity of choice when achieving 100 hours of volunteer time in a calendar year.
Talent Development and Retention. The ability to attract, develop and retain employees is critical to our long-
term success. We focus on our employees’ growth, creating experiences that align with our strategic priorities and
promote inclusion, performance, connection, and opportunities for development. For example, we offer a week fully
dedicated to employee learning, connection, and development across the globe (Explore Week), a monthly global
employee gathering dedicated to peer sharing and learning about different parts of the organization and careers in
each space (Biz Breaks), and a global leadership development program for new leaders (Trailblazers). Our
leadership team also mentors rising talent on a formal and informal basis, which we believe accelerates the
development and engagement of our top performers, increases organizational learning, and improves employee
performance and retention. Further, our executive leadership team and Board of Directors commits substantial time
to succession planning, evaluating the bench strength of our leadership and supporting their career development
while seeking to improve organizational performance. We are proud to offer a wide range of programs intended to
support global employee development and retention.
We have demonstrated a history of investing in our workforce by offering competitive salaries and wages, and
annual increases based on merit, as well as annual cash bonus compensation, which is based on Company and
individual performance. We provide tuition reimbursement for eligible US employees up to $5 thousand per calendar
year. Further, to foster a stronger sense of ownership and align the interests of management with stockholders,
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time-based restricted stock units and long-term incentive plan performance stock units are granted to a substantial
proportion of our leadership team under our stock-based compensation programs. In addition, employees across
the US business have the opportunity to purchase stock at a discounted price through our Employee Stock
Purchase Plan. Further, we engage an independent compensation consultant, FW Cook, which provides us with
information to evaluate the effectiveness of our executive compensation program, including competitive pay
practices and trends in our industry, the design and structure of our executive compensation program, as well as the
formulation of and benchmarking against our peers within our industry.
Employee Wellness. We strive to be one of the best places to work and recognize our employees are at
different stages of life and have specific individual needs. We offer affordable, innovative, comprehensive, and
competitive benefits package that range from health insurance, retirement plan, life insurance, disability, accident
coverage, paid time off, paid, and unpaid leave including parental leave, mental health benefits, and other voluntary
benefits such as health savings accounts or our recently adopted solar and electric car reimbursement program. We
also provide resources to support our many employees who work from home as part of our new flexible work model,
including equipment and furniture for their home office setup and workshops and tools for leading remote teams.
Employee Health and Safety. The health and safety of our employees is our highest priority. We have
comprehensive safety training programs to help ensure our employees know how to do their jobs safely and in
compliance with laws and regulations. We prioritize the safety of our facilities and work to ensure they are modern
and efficient.
Seasonality
Our business is seasonal, with the highest percentage of UGG and Koolaburra brand net sales occurring in the
quarters ending September 30th and December 31st and the highest percentage of Teva and Sanuk brand net
sales occurring in the quarters ending March 31st and June 30th. Net sales for the HOKA brand occur more evenly
throughout the year, reflecting the brand's year-round performance product offerings. Due to the magnitude of the
UGG brand relative to our other brands, our aggregate net sales in the quarters ending September 30th and
December 31st have historically significantly exceeded our aggregate net sales in the quarters ending March 31st
and June 30th. However, as we continue to take steps to diversify and expand our product offerings by creating
more year-round styles, and as net sales of the HOKA brand continue to increase as a percentage of our aggregate
net sales, we have seen and expect to continue to see the impact from seasonality decrease over time. However,
our seasonality has been impacted by supply chain challenges and it is unclear whether these impacts will be
minimized or exaggerated in future periods as a result of these disruptions.
Refer to Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management's Discussion and Analysis of
Financial Condition and Results of Operations,” within this Annual Report for further discussion of the impacts of
seasonality and other factors that may cause our actual results to differ materially from our expectations.
Competition
The industry and markets in which we operate are highly competitive. Our competitors include athletic and
footwear companies, branded apparel companies and retailers with their own private labels. Although the industry is
fragmented, many of our competitors are larger and have substantially greater resources, several of which compete
directly with some of our products. In addition, access to offshore manufacturing and the growth of e-commerce has
made it easier for new companies to enter the markets in which we compete, further increasing competition in the
footwear, apparel, and accessories industry. In particular, and in part due to the popularity of our UGG brand and
HOKA brand products, we face increasing competition from a significant number of domestic and international
competitors selling products designed to compete directly or indirectly with our products. We believe our ability to
successfully compete depends on numerous factors, including our ability to predict, assess, and respond quickly to
changing consumer tastes and preferences, produce appealing products that meet expectations for product quality
and technical performance, maintain and enhance the image and strength of our brands, price our products
competitively, and weather the impacts of supply chain disruptions, among others. In addition, we believe our key
customers face intense competition from other department stores, sporting goods stores, retail specialty stores, and
online retailers, among others, which could negatively impact the financial stability of their businesses and their
ability to conduct business with us.
Refer to Part I, Item 1A, “Risk Factors,” within this Annual Report for further discussion of the potential impact
of competition on our business and results of operations.
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Patents and Trademarks
We utilize trademarks for virtually all of our products and believe having distinctive marks that are readily
identifiable is an important factor in creating a market for our products, promoting our brands, and distinguishing our
products from the products of others. We currently hold trademark registrations for “UGG,” “Teva,” “Sanuk,” “HOKA,”
“Koolaburra by UGG,” “UGGpure,” and other marks in the US, and for certain of the marks in many other countries,
including Canada, China, the UK, various countries in the European Union (EU), Japan, and Korea. As of March 31,
2023, we hold 190 designs and inventions with corresponding design or utility patent registrations, plus 62 designs
and inventions which are currently pending registration. These patents expire at various times. We regard our
proprietary rights as valuable assets and vigorously protect such rights against infringement by third parties.
Government Regulation
Compliance with federal, state, and local environmental regulations has not had, and it is not expected to have,
any material effect on our business, results of operations, financial condition, or competitive position based on
information and circumstances known to us at this time.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy
statements and information statements (and any amendments or supplements to the foregoing) filed with or
furnished to the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge on our
website at www.deckers.com. Such documents and information are available as soon as reasonably practicable
after they are filed with or furnished to the SEC. We also make the following material corporate governance and
responsibility documents available through our website: Audit & Risk Management Committee Charter, Talent &
Compensation Committee Charter, Corporate Responsibility, Sustainability, & Governance Committee Charter,
Code of Ethics, Creating Change Report, Accounting and Finance Code of Ethics, and Corporate Governance
Guidelines. The information contained on or accessed through our website does not constitute part of this Annual
Report, and references to our website address within this Annual Report are inactive textual references only.
Item 1A. Risk Factors
Our short and long-term success is subject to numerous risks and uncertainties, many of which involve factors
that are difficult to predict or beyond our control. As a result, investing in our common stock involves substantial risk.
Before deciding to purchase, hold or sell our common stock, stockholders and potential stockholders should
carefully consider the risks and uncertainties described below, in addition to the other information contained in or
incorporated by reference into this Annual Report, as well as the other information we file with the SEC. If any of
these risks are realized, our business, financial condition, results of operations, and prospects could be materially
and adversely affected. In that case, the value of our common stock could decline, and stockholders may lose all or
part of their investment. Furthermore, additional risks and uncertainties of which we are currently unaware, or which
we currently consider to be immaterial, could have a material adverse effect on our business.
Certain statements made in this section constitute “forward-looking statements,” which are subject to
numerous risks and uncertainties including those described in this section. Refer to the section entitled “Cautionary
Note Regarding Forward-Looking Statements” within this Annual Report for additional information.
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Risks Related to Our Business and Industry
The footwear, apparel, and accessories industry is subject to rapid changes in consumer preferences,
and if we do not accurately anticipate and promptly respond to consumer demand and spending patterns,
including by successfully introducing new products, we could lose sales, our relationships with customers
could be harmed, and our brand loyalty could be diminished.
The footwear, apparel, and accessories industry is subject to rapid changes in consumer preferences and
fashion tastes, which make it difficult to anticipate demand for our products and forecast our financial results. Our
success is driven to some extent by brand loyalty, and there can be no assurance that consumers will continue to
prefer our brands. Consumer demand for our products depends in part on the continued strength of our brands,
which in turn depends on our ability to anticipate, understand, and promptly respond to the rapidly changing
preferences and fashion tastes, as well as consumer spending patterns, with appealing merchandise. As our brands
and product offerings evolve, it is necessary for our products to appeal to an even broader range of consumers
whose preferences cannot be predicted with certainty. Many of our products, particularly from our UGG brand,
include a fashion element and could go out of style at any time. New footwear models that we introduce may not be
successful with consumers or our brands may fall out of favor with consumers. If we are unable to anticipate,
identify, or react appropriately to changes in consumer preferences, our revenues may decrease, our brands’ image
may suffer, our operating performance may decline, and we may not be able to execute our growth plans. Even if
we develop and manufacture new footwear products that consumers find appealing, the ultimate success of a new
style may depend on our pricing, and we may set the prices of new styles too high for the market to bear.
Further, the value of our brands is largely based on evolving consumer perceptions, including as a result of
shifting ethical, political or social standards, and concerns with respect to factors such as product quality, product
design, technical performance, product components or materials, including the sustainability of products or
materials, or customer service, could result in negative perceptions and a corresponding loss of brand loyalty and
value. These concerns may be exacerbated by legislation restricting our ability to use certain materials in our
products, as well as negative publicity regarding us or our products, brands, marketing campaigns, partners, or
celebrity endorsers, which could adversely affect our reputation and sales regardless of the accuracy of such
claims. Social media and digital marketing campaigns, which accelerates the dissemination of information, can
increase the challenges of containing any such negative claims. If consumers begin to have negative perceptions of
our brands, whether or not warranted, our brand image would become tarnished and our products would become
less desirable, which could have a material adverse effect on our business.
Failure to gain market acceptance for new products could impede our ability to maintain or grow current
revenue levels, reduce profits, adversely affect the image of our brands, erode our competitive position, and result
in long-term harm to our business and financial results.
Changes in economic conditions may adversely affect our financial condition and results of
operations.
Volatile economic conditions and general changes in the market have affected, and will likely continue to affect,
consumer spending generally and the buying habits and preferences of consumers. A significant portion of the
products we sell, especially those sold under the UGG and HOKA brands, are premium retail products. The
purchase of these products by consumers is largely discretionary and is therefore highly dependent upon the level
of consumer confidence and discretionary spending, particularly among affluent consumers. Sales of these products
may be adversely affected by factors such as worsening economic conditions, consumer confidence in future
economic conditions, changes to fuel and other energy costs, labor, and healthcare costs, declines in income or
asset values, and increases in consumer debt levels, inflation and interest rates, and unemployment rates.
Uncertainty in global economic conditions continues, particularly in light of an anticipated economic downturn,
causing unpredictability in consumer discretionary spending trends. During an actual or perceived economic
downturn, fewer consumers may shop for our products, and those who do may limit the amount of their purchases
or substitute less costly products for our products. As a result, we could be required to reduce the price we can
charge for our products or increase our marketing and promotional expenses to generate additional demand for our
products. In either case, these changes could reduce our sales and profitability, which could have a material
adverse effect on our financial condition and results of operations.
We sell a large portion of our products through higher-end specialty and department store retailers, as well as
through online marketplaces such as Amazon.com. The businesses of these customers may be affected by factors
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such as changes in economic conditions, recent failures in the US banking system, reduced consumer demand for
premium products, decreases in available credit, and increased competition. If our customers face financial
difficulties, it could have an adverse effect on our estimated allowances and reserves, and potentially result in us
losing key customers.
We face intense competition from both established companies and newer entrants into the market, and
our failure to compete effectively could cause our market share to decline, which could harm our reputation
and have a material adverse effect on our financial condition and results of operations.
The footwear, apparel, and accessories industry is highly competitive and subject to changing consumer
preferences and tastes. Our inability to compete effectively could cause our market share to decline, which could
harm our reputation and have a material adverse effect on our financial condition and results of operations. Our
competitors include both established companies and newer entrants into the market. In particular, we believe that,
as a result of the growth of the UGG and HOKA brands, certain competitors have entered the marketplace
specifically in response to the success of our brands, and other competitors may do so in the future. A number of
our larger competitors have significantly greater financial, technological, engineering, manufacturing, marketing, and
distribution resources than we do, as well as greater brand awareness in the footwear, apparel, and accessories
markets among consumers. Further, these competitors may have relationships with our key retail customers that
are potentially more important to those customers because of the significantly larger volume and product mix that
our competitors sell to them. Our competitors’ greater resources and capabilities in these areas may enable them to
more effectively compete on the basis of price and production, develop new products more quickly or with superior
technical capabilities, market their products and brands more successfully, identify or influence consumer
preferences, increase their market share, withstand the effects of seasonality, and manage periodic downturns in
the footwear, apparel, and accessories industry or in economic conditions generally. With respect to newer entrants
into the market, we believe that factors such as access to offshore manufacturing and changes in technology will
make it easier and more cost effective for these companies to compete with us.
As a result of the competitive environment in which we operate, we have faced, and expect to continue to face,
intense pricing pressure. Efforts by our competitors to dispose of their excess inventories may significantly reduce
prices of competitive products, which may put pressure on us to reduce the pricing of our products to compete, or
cause consumers to shift their purchasing decisions away from our products entirely. We have also faced, and
expect to continue to face, intense pressure with respect to competition for key customer accounts and distribution
channels. Further, we believe that our key customers face intense competition from their competitors, which could
negatively affect the financial stability of their businesses and their ability to conduct business with us.
If we are unsuccessful at managing product manufacturing decisions to offset the inherent seasonality
of our business, especially given our evolving product offerings, we may be unable to accurately forecast
our inventory and working capital requirements, which may have a material adverse effect on our financial
condition and results of operations.
Like other companies in our industry, we have an extended design and manufacturing process, which involves
the initial design of our products, the purchase of raw and other materials, the accumulation of inventories, the
subsequent sale of the inventories, and the collection of the resulting accounts receivable. This production cycle
requires us to incur significant expenses relating to the design, manufacturing, and marketing of our products in
advance of the realization of revenue from the sale of our products, and results in significant liquidity requirements
and working capital fluctuations throughout our fiscal year. Because this cycle involves long lead times, which
require us to make manufacturing decisions months in advance of an anticipated purchasing decision by the
consumer, it is challenging to estimate and manage our inventory and working capital requirements. This may be
exacerbated by supply chain disruptions that may drive higher inventory procurement positions that could negatively
affect our gross margins resulting from a need to sell excess quantities though close out channels. Further, once
manufacturing decisions are made, it is difficult for our management to predict and timely adjust expenses,
accurately forecast our financial results, and meet the expectations of analysts and investors, in reaction to various
factors, including the following:
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the effects of unfavorable or unexpected weather patterns on consumer spending and demand for
our products, as the sales of a majority of our UGG brand products are inherently seasonal and the
further effects of climate change may pronounce these conditions;
changes in consumer preferences, tastes, discretionary spending, and prevailing fashion trends;
market acceptance of our current products and new products, and of competitive products;
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future sales demand from our customers;
the competitive environment, including pricing pressure from reduced pricing of competitive
products, which may cause consumers to shift their purchasing decisions away from our products;
delays in resource or product availability due to effects from the pandemic; and
uncertain macroeconomic and political conditions.
The evolution and expansion of our brands and product offerings has made our inventory management
activities more challenging. For example, if we overestimate demand for any products or styles, we may be forced
to incur significant markdowns or sell excess inventories at reduced prices, which would result in lower revenues
and reduced gross margin, and we may not be able to recover our investment in the development of new styles and
product lines. On the other hand, if we underestimate demand, or if our independent manufacturing facilities are
unable to supply products in sufficient quantities, we may experience inventory shortages that may prevent us from
fulfilling customer orders or result in us delaying shipments to customers. If that occurred, we could lose sales, our
relationships with customers could be harmed, and our brand loyalty could be diminished. In either event, these
factors could have a material adverse effect on our financial condition and results of operations.
We rely upon a number of warehouse and distribution facilities to operate our business, and any
damage to one of these facilities, or any disruptions caused by incorporating new facilities into our
operations, could have a material adverse effect on our business.
We rely upon a broad network of warehouse and distribution facilities to store, sort, package and distribute our
products. In the US, we distribute products primarily through self-managed US DCs, including in Moreno Valley,
California, and in Mooresville, Indiana, which feature a complex warehouse management system that enables us to
efficiently pack products for direct shipment to our customers. Further, as part of our strategy to expand our DCs in
the US, in February 2023, we began the build-out of a third US DC located in Mooresville, Indiana, and expect it to
be operational during our next fiscal year ending March 31, 2024 (next fiscal year). We expect our domestic DC
expansion to create long-term capacity for the domestic growth of the UGG and HOKA brands. We could face a
significant disruption in our domestic DC operations if our warehouse management system does not perform as
anticipated or ceases to function for an extended period of time, which could occur due to damage to the facility,
failure of software or equipment, cyber-security incidents, power outages or similar problems. In addition, if our
domestic DC operations and scaling efforts are impeded or delayed for any reason, it could result in shipment
delays or the inability to deliver product at all, which would result in lost sales, strain our relationships with
customers, and cause harm to our reputation, any of which could have a material adverse effect on our business.
We depend on 3PLs to manage the operation of their DCs as necessary to meet our business needs in certain
markets. Internationally, we distribute our products through DCs managed by 3PLs in certain international locations.
We also distribute our products through a domestic 3PL located in Pennsylvania. If our 3PLs fail to manage these
responsibilities, our distribution operations could face significant disruptions. The loss of or disruption to the
operations of any one or more of these facilities could materially adversely affect our sales, business performance,
and results of operations. Although we believe we possess adequate insurance to cover the potential effect of a
disruption to the operations of these facilities, such insurance may not be sufficient to cover all of our potential
losses and may not continue to be available to us on acceptable terms, or at all.
We rely upon independent manufacturers for most of our production needs, and the failure of these
manufacturers to manage these responsibilities would prevent us from filling customer orders, which
would result in loss of sales and harm our relationships with customers.
We rely on independent manufacturers and their respective material suppliers for most of our production
needs, the majority of which are located in China and Vietnam, and we do not have direct control over these
manufacturers or their suppliers. We expect these manufacturers to finance the production of goods ordered,
maintain manufacturing capacity, comply with our policies, including our Supplier Code of Conduct and restricted
substances policy, and store finished goods in a safe location pending shipment. If these manufacturers fail to
manage these responsibilities, or if they experience significant disruption to their business, we may be unable to
ensure timely delivery of products, products may not be delivered in sufficient quantities, or products may fail to
meet our quality standards. Further, because most of our independent manufacturers are concentrated in Asia, we
may be subject to an increased risk of supply chain disruption, particularly in the event of a natural disaster,
epidemic, geopolitical tensions, or other event affecting the region outside of our control. If any of these were to
occur, we may not be able to timely source raw and other materials, manufacture product, or fill customer orders, or
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product delivered may not meet our quality standards, which would result in lost sales and harm to our relationships
with customers.
We do not currently have long-term contracts with our independent manufacturers, and there can be no
assurance of a long-term, uninterrupted supply of products from them. While we do have long-standing relationships
with most of these manufacturers, any of them may unilaterally terminate their relationship with us at any time, seek
to increase the prices they charge, or extract other concessions from us, and we may not be able to substitute
alternative manufacturers that are capable of providing products of a comparable quality, in a sufficient quantity, at
an acceptable price, or on a timely basis. If we are required to find alternative manufacturers, we could experience a
delay in the manufacturing of our products, increased manufacturing costs, as well as substantial disruption to our
business, any of which could negatively affect our results of operations.
Interruptions in the supply of our products can also result from adverse events that impair the operations of our
manufacturers. For example, we keep proprietary materials that are required for the production of our products,
such as shoe molds and other materials, under the custody of our independent manufacturers. If these independent
manufacturers were to lose or damage these proprietary materials, we cannot be assured that the manufacturers
would have adequate insurance to cover such loss or damage, and, in any event, the replacement of such materials
would likely result in significant delays in the production of our products, which could result in a loss of sales and
earnings.
Our financial success is influenced by the success of our customers, and the loss of a key customer
could have a material adverse effect on our financial condition and results of operations.
Much of our financial success is directly related to the ability of our retailer and distributor partners to
successfully market and sell our brands directly to consumers. If a partner fails to satisfy contractual obligations or
otherwise meet our expectations, or experiences a closure or other operational issues, it may be difficult to locate
an acceptable substitute partner. If we determine that it is necessary to make a change, we may experience
increased costs, loss of customers, or increased credit or inventory risk. In addition, there is no guarantee that any
replacement partner will generate results that are more favorable than the terminated party.
We currently do not have long-term contracts with our customers. As a result, we face the risk that key
customers may not increase their business with us as we expect or may significantly decrease their business with
us or terminate our relationship. Although no single customer accounted for 10.0% or more of our net sales during
fiscal year 2023, the failure to increase or maintain our sales with our key customers as much as we anticipate
would have a negative effect on our growth prospects and any decrease or loss of these customers’ business could
result in a material decrease in our net sales and net income or loss if we are unable to capture these sales through
our DTC channel. Further, as of March 31, 2023, we have no customers that represent 10.0% of trade accounts
receivable, net. Trade accounts receivable, net are typically unsecured and are thus subject to the increased risk of
us being unable to collect on overdue amounts, or us doing so in a timely manner, which could affect our revenue
and liquidity. Further, while we have distributor contracts with terms of up to five years, these contracts may have
annual purchase minimums which must be met to retain the distribution rights, and these distributors are not
otherwise obligated to purchase our products. Sales to our customers are generally on an order-by-order basis and
may be cancelled or rescheduled by our customers. We rely on purchase order delivery dates as a key factor to
forecast our sales and earnings for future periods, and if our customers postpone, reduce, or discontinue purchases
from us, we could fail to meet our forecasted results. These risks have been exacerbated as key customers operate
within a retail industry that continues to undergo significant structural changes fueled by technology, changes in
consumer purchasing behavior, a shrinking retail footprint and recent changes in economic conditions, such as an
anticipated economic downturn and bank failures. These trends have been further intensified by the pandemic. We
may lose key customers if they fail to manage the effect of this rapidly changing retail environment. Any loss of one
of these key customers, or a significant reduction in purchases from one of these customers, could result in a
significant decline in sales, write-downs of excess inventory, or increased discounts to our customers, any of which
could have a material adverse effect on our financial condition or results of operations. Further, a key customer may
dispose of their excess inventories to consumers or unauthorized sellers at significantly reduced prices, which may
put pressure on us to reduce our prices to compete, or cause consumers to shift their purchasing decisions away
from our authorized sellers entirely.
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We depend on qualified personnel and, if we are unable to retain or hire executive officers, key
employees, and skilled personnel, we may not be able to achieve our strategic objectives and our results of
operations may suffer.
To execute our growth plan, we must continue to attract and retain highly qualified personnel, including
executive officers and key employees. Further, to continue to develop new products and successfully operate and
grow our key business processes, it is important for us to continue hiring and retaining personnel in highly skilled
footwear, apparel and accessories design, marketing, merchandising, sourcing, technology, operations, including
our DCs and retail stores, and support functions. Competition for executive officers, key employees, and skilled
personnel is intense within our industry and there continues to be upward pressure on the compensation paid to
these professionals. Changes to our current and future office environments, adoption of new work models, and our
business requirements or expectations about when or how often employees work either on-site or remotely may not
meet the expectations of our employees. As certain jobs and employers increasingly operate remotely, traditional
geographic competition for talent may change in ways that cannot be fully predicted at this time. If our employment
proposition is not perceived as favorable compared to other companies’ policies, it could negatively affect our ability
to attract, hire and retain our employees. We are committed to offering competitive compensation and benefits to
employees across our business to positively affect attrition, which affects our selling, general, and administrative
(SG&A) expenses. Many of the companies with which we compete for experienced personnel have greater name
recognition and financial resources than we have. Further, our domestic headquarters are located in Goleta,
California, which is not generally recognized as a prominent commercial center, and it is difficult to attract qualified
professionals due to our location. If we hire employees from competitors or other companies, their former employers
may assert that we or these employees have breached legal obligations, resulting in a diversion of our time and
resources. In addition, prospective and existing employees often consider the value of the stock-based
compensation they receive in connection with their employment when deciding whether to take a job. If the
perceived value of our stock-based compensation declines, or if the price of our stock experiences significant
volatility, it may adversely affect our ability to recruit, retain and motivate qualified personnel and we may be unable
to execute our growth plan or achieve our long-term strategic objectives, our results of operations may suffer, and it
may damage our reputation as a preferred employer, which would challenge our ability to effectively compete
across the global labor market.
We believe that our culture has been and will continue to be a key contributor to our success. If we do not
maintain our culture and core values over time, we may be unable to foster the passion, creativity, teamwork, focus,
and innovation that we believe have contributed to the growth and success of our business. Any failure to preserve
our culture could negatively affect our ability to recruit and retain personnel and to effectively focus on and pursue
our strategic objectives.
The continued service of our executive officers and key employees is particularly important, and the hiring or
departure of such personnel may disrupt our business or result in the depletion of significant institutional knowledge.
Our executive officers and key employees are generally employed on an at-will basis, which means that they can
terminate their employment with us at any time. The loss of one or more of our executive officers or other key
employees or significant turnover in our senior management, and the often-extensive process of identifying and
hiring other personnel to fill those key positions, could have a material adverse effect on our business.
We use sheepskin to manufacture a significant portion of our products, and if we are unable to obtain
a sufficient quantity of sheepskin at acceptable prices that meets our quality expectations, or if there are
legal or social impediments to our ability to use sheepskin, it could have a material adverse effect on our
business.
We purchase certain raw materials that are affected by commodity prices, the most significant of which is
sheepskin. The supply of sheepskin, which is used to manufacture a significant portion of our UGG brand products,
is in high demand and there are limited suppliers that are able to provide the quantity and quality of sheepskin that
we require. In addition, our unique product design and animal welfare standards require sheepskin that may be
found only in certain geographies. We presently rely on only two tanneries in China to provide the majority of our
sheepskin. If the sheepskin provided by these tanneries and the resulting products we produce do not conform to
our quality or sustainability specifications or fail to meet consumer expectations, we could experience reduced
demand for our products, a higher rate of customer returns and negative effects on the image of our brands, any of
which could have a material adverse effect on our business. Similarly, if these tanneries are not able to deliver
sheepskin in the quantities required, or were to cease operations, we may not be able to timely obtain suitable
substitute materials, which would limit our ability to meet demand for our products, lead to inventory shortages,
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result in a loss of sales, strain our customer relationships, and harm our reputation. In addition, any factors that
negatively affect the business of these tanneries, or the businesses of the suppliers that warehouse their
inventories, such as loss of customers, financial instability, loss or destruction of property, work stoppages, political
instability, or acts of terrorism or catastrophic events, could result in shortages in our supply of sheepskin.
While we have experienced fairly stable pricing in recent years, fluctuations in the price of sheepskin could
occur as a result of weather patterns, supply conditions, transportation costs, energy prices, work stoppages,
government regulation, sanctions and policy, economic climates, market speculation, compliance with our working
condition, environmental protection and other standards, harvesting decisions, incidence of disease, the price of
other commodities, such as wool and leather, the demand for our products and the products of our competitors, and
global economic conditions. Any and all of these factors may be exacerbated by global climate change. Any factors
that increase the demand for, or decrease the supply of, sheepskin could cause significant increases in the price of
sheepskin, which would increase our manufacturing costs and reduce our gross margin. While we use purchasing
contracts and other pricing arrangements to reduce the effect of sheepskin price fluctuations on our results of
operations, these strategies may not be sufficient to offset the negative effect of a prolonged increase in such prices
on our results of operations. In that event, it is unlikely we would be able to adjust our product prices sufficiently to
eliminate the effect on our gross margin and our financial results may suffer.
In addition, our industry is characterized by rapidly changing fashion trends and consumer preferences, and
we believe there is a growing trend to eliminate the use of certain animal products, most notably fur, in footwear,
apparel, and accessories. For example, the sale of fur is banned in certain US cities, and similar legislation is being
considered in other geographies. While the use of leather and sheepskin has typically not been subject to these
restrictions, it is possible that future legislation could restrict our ability to use sheepskin in the products we sell in
certain geographies. In addition, notwithstanding whether specific legislation is passed, it is possible that consumer
preferences may change based on evolving ethical or social standards, such that our products may potentially
become less desirable to certain consumers. Because sheepskin is used to manufacture a significant portion of our
UGG brand products, any legal or social impediments to the sale of sheepskin products, especially within our large
target markets, could have a material adverse effect on our business, financial condition, and results of operations.
We rely on technical innovation, as well as increased use of environmentally preferred materials, to
compete in the market for our products.
Our success relies in part on our continued innovation in both the materials we use and the design of our
footwear. We continue to invest in research and development to drive our efforts to increasingly incorporate
environmentally preferred materials in our products. For example, we continue to leverage our proprietary UGGpure
and UGGplush materials, which incorporate repurposed wool to reduce our use of virgin wool. We also increasingly
use preferred synthetics, such as recycled polyester, recycled nylon, recycled polyethylene, and bio-based ethylene,
preferred regenerated or synthetic cellulosic fibers, such as TENCEL™ Lyocell and TENCEL™ Modal, and
preferred plant fibers, such as cotton sourced through responsible cotton schemes, hemp, linen, ramie, and jute, as
well as preferred wool, including UGGpure repurposed wool, and the responsible-down certified standard. Although
we continue to invest in research and development to refine our materials and develop new properties for specific
applications, if we fail to introduce technical innovation in our products or experience issues with the quality of our
products or materials, consumer demand for our products could decline and we may experience reputational
damage. Further, as our brands transition to suppliers with preferred materials, we may be subject to increased
costs or supply constraints, which could reduce our sales and profitability and have a material adverse effect on our
financial condition and results of operations.
We may not succeed in implementing our growth strategies, including through identifying new retail
store locations that meet our requirements, in which case we may not be able to take advantage of certain
market opportunities and may become less competitive.
As part of our overall growth strategy, we are continually seeking out opportunities to enhance the positioning
of our brands, diversify our product offerings, extend our brands into complementary product categories and
markets, expand geographically, optimize our retail presence both in stores and online, and improve our financial
performance and operational efficiency. Our future growth depends in part on our expansion efforts outside of North
America (international growth strategy). For example, we have opened and continue to explore future retail
opportunities for the HOKA brand, including through third-party partners in international markets. However, if we are
unable to identify new retail locations with consumer traffic sufficient to support a profitable sales level, our retail
growth may be limited. Global store openings involve substantial investments, including those relating to leasehold
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improvements, furniture and fixtures, equipment, information systems, inventory, and personnel. Successful
operation of a retail store depends, in part, on the overall ability of the retail location to attract a consumer base
sufficient to generate profitable store sales volumes, and if we have insufficient sales at a new store location, we
may be unable to avoid losses or negative cash flows. Furthermore, we license the right to operate our brand retail
stores to third parties through our partner retail program. We currently plan for most of the partner retail stores to be
operated in international markets, with the largest number anticipated to be in China. We provide training to support
these stores and set and monitor operational standards. However, the quality of these store operations may decline
due to the failure of these third parties to operate the stores in a manner consistent with our standards or our failure
to adequately monitor these third parties, which could result in reduced sales and cause our brand image to suffer.
Additionally, we expanded our 3PL presence in Asia during fiscal year 2023. As part of our international growth
strategy, we may transition certain brands in certain geographies from a third-party distribution model to a direct
distribution model or vice versa. Failure to effectively implement our growth strategies and develop our business in
new international markets, or disappointing growth outside of existing markets, could negatively affect our revenues
and rate of growth and result in our business becoming less competitive. In addition, taking steps to implement our
growth strategies could have a number of negative effects, including increasing our working capital needs, causing
us to incur costs without any corresponding benefits, and diverting management time and resources away from our
existing business.
Natural disasters, the effects of climate change, health epidemics, including the pandemic, and other
events beyond our control, as well as related regulations, have adversely affected, and could in the future
adversely affect, our business.
from extreme weather events, power shortages, pandemics,
Natural disasters or other catastrophic events, including the pandemic and the effects of climate change, may
damage or disrupt our operations, international markets, and the global economy. Our operations are subject to
interruption
instability,
telecommunications failure, cyber-attacks, war, and other events beyond our control. Although we maintain disaster
recovery plans, such events could disrupt our operations or those of our independent manufacturers, suppliers and
customers, including through the inability of personnel to work, destruction of facilities, loss of life, and adverse
effects on supply chains, power, infrastructure and the integrity of information technology (IT) systems, all of which
could materially increase our costs and expenses, delay or decrease sales and disrupt our ability to maintain
business continuity. We could incur significant costs to improve the climate-related resiliency of our infrastructure
and otherwise prepare for, respond to, and mitigate the effects of climate change. We could also experience
increased costs for energy, production, transportation, and raw and other materials, which could adversely affect our
operations. Our insurance may not be sufficient to cover losses that we may sustain. A significant natural disaster or
other event that disrupts our operations or those of our partners or customers could have a material adverse effect
on our business, results of operations and financial condition.
terrorism, political
These events could also adversely affect the supply of raw materials, including sheepskin and leather, which
are key resources in the production of our products, disrupt the operation of our supply chain and the productivity of
our contract manufacturers, increase our production costs, impose capacity restraints, and affect the types of
products that consumers purchase. It is possible consumers increasingly adopt plant-based diets to minimize their
carbon footprint, which could reduce the supply of sheep for the meat industry, and in turn, hinder our ability to
source sufficient sheepskin for our products. Further, health epidemics, including the pandemic, may reduce
demand for certain products, deteriorate our ability, or the ability of our customers, to operate in affected regions,
and result in the failure of key business partners to provide services for our efficient operations, including the
inability of our manufacturers or third-party distributors to timely fulfill their obligations to us, any of which would
adversely affect our business, results of operations and financial condition.
Increasing expectations from investors and other key stakeholders with respect to our ESG practices
may impose additional costs on us or expose us to new or additional risks.
Investor advocacy groups, certain institutional investors, investment funds, stockholders, customers, and
consumers are increasingly focused on corporate responsibility, specifically on the ESG practices of companies and
the implications of the social and environmental costs of their investments. From time to time we communicate
certain ESG initiatives and goals to market participants and our customers and business partners, including through
our annual Creating Change Report. Any ESG disclosure we make may include our policies, practices, initiatives,
and goals on a variety of human rights, corporate governance, environmental compliance, sustainability, employee
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health and safety practices, human capital management, product quality, supply chain management, and workforce
inclusion and diversity. Although we have undertaken expansive efforts to improve and implement our ESG
initiatives, it is possible that stakeholders may not be satisfied with such disclosures, our ESG practices or the
speed of their adoption. Moreover, the preparation of sustainability metrics requires management to establish
criteria, make determinations as to the relevancy of information to be included, and make assumptions that affect
reported information. The selection by management of different but acceptable measurement techniques could
result in materially different amounts or metrics being reported. If our ESG practices do not meet investor or other
stakeholder expectations and standards, which continue to evolve, or if we are perceived to have not appropriately
responded to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, it
may negatively affect our employee retention and recruitment, or we may suffer from reputational damage and our
business and financial condition could be materially and adversely affected. We may also incur additional costs or
require additional resources to monitor such stakeholder expectations and standards and to meet our targets and
commitments. Further, we could fail, or be perceived to fail, to achieve our ESG initiatives or goals, or we could fail
to report our progress fully and accurately on such initiatives and goals, which could negatively affect our reputation,
employee retention and recruitment, and the willingness of our customers and suppliers to do business with us.
Increasing focus on ESG matters has resulted in, and is expected to continue to result in, the adoption of legal
and regulatory requirements designed to mitigate the effects of climate change on the environment, as well as legal
and regulatory requirements requiring climate-related disclosures. If new laws or regulations are more stringent than
current legal or regulatory requirements, we may experience increased compliance burdens and costs to meet such
obligations. Our processes and controls for reporting ESG matters across our operations and supply chain are
evolving along with multiple disparate standards for identifying, measuring, and reporting ESG metrics, including
ESG-related disclosures that may be required by the SEC, European, and other regulators, and such standards
may change over time, which could result in significant revisions to our current goals, reported progress in achieving
such goals, or ability to achieve such goals in the future.
We face risks associated with pursuing strategic acquisitions, and our failure to successfully integrate
any acquired business or product could have a material adverse effect on our results of operations and
financial position.
As part of our overall strategy, we may periodically consider strategic acquisitions to expand our brands into
complementary product categories and markets, or to acquire new brands, technologies, intellectual property, or
other assets. Our ability to do so depends on our ability to identify and successfully pursue suitable acquisition
opportunities. Such acquisitions involve numerous risks, challenges, and uncertainties, including the potential to:
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expose us to risks inherent in entering into a new market or geographic region;
lose significant customers or key personnel of the acquired business;
encounter difficulties managing and implementing acquired assets;
encounter difficulties marketing to new consumers or managing geographically remote operations;
divert management’s time and attention away from other aspects of our business operations; and
incur costs relating to a potential acquisition that we fail to consummate, which we may not recover.
Additionally, we may not be able to successfully integrate the assets or operations of any acquired businesses
into our operations, or to achieve the expected benefits of any acquisitions. Following an acquisition, we may also
face cannibalization of existing product sales by our newly acquired products, unless we adequately integrate new
products with our existing products, aggressively target different consumers for our newly acquired products and
increase our overall market share. The failure to successfully integrate any acquired business or products in the
future could have a material adverse effect on our results of operations and financial position.
Further, we may be required to issue equity securities to finance an acquisition, which would be dilutive to our
stockholders, and the equity securities may have rights or preferences senior to those of our existing stockholders.
If we incur indebtedness to finance an acquisition, it will result in debt service costs, and we may be subject to
covenants restricting our operations or liens encumbering our assets.
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Risks Related to Our Global Business Strategy, Operations, and International Commerce
Supply chain disruptions could interrupt product manufacturing and global logistics and increase
product costs.
Our business depends on our ability to source and distribute products in a timely manner. The pandemic and
related governmental and port facility actions in recent years have caused delays in product shipments. For
example, port congestion, temporary closures, and worker shortages, have disrupted the operations of our
independent manufacturers and 3PLs, as well as the DCs where we manage our inventory, have experienced
disruptions that have increased the global lead-time for our products. Due to the pandemic, reductions in the
number of ocean carrier voyages and capacity have delayed the arrival of imports and increased ocean transport
costs globally and the conflict between Russia and Ukraine continues to result in higher energy and transportation
costs. Ongoing ocean carrier consolidation, reduced capacity, congestion at major international gateways and other
economic factors are challenging ocean transportation, and labor disputes at US shipping ports have historically
affected the delivery of our products. In addition, trucking costs in the US have risen dramatically due to driver
shortages, increased labor costs, and safety, environmental, and labor regulations. In addition, global inflation has
contributed to already higher incremental freight costs, and such inflation may continue to fuel these costs.
Elevated inventory levels, combined with the uneven flow of receipts and shipments, could cause further
capacity pressures within our US DCs and 3PLs, resulting in higher costs and limiting our ability to efficiently fulfill
orders for our wholesale partners and consumers. These pressures may be exacerbated by labor disputes that
affect the operations of our partners, which creates significant risk for our business, particularly if these disputes
result in work slowdowns, strikes, or similar disruptions. As supply chain disruptions continue and we manage
product availability, the timing of sales to our wholesale partners and consumers may continue to be affected, and
we face increased risk of order cancellations. We continue to actively manage our inventory positions, including by
investing in supply chain and related tools, and transit lead times and related freight costs during fiscal year 2023
have improved compared to fiscal year 2022. However, these disruptions remain elevated compared to pre-
pandemic levels and we expect supply chain constraints to continue into our next fiscal year. Our short-term priority
remains meeting customer demand and expectations on service levels, which may result in inventory levels
outpacing sales growth in the near term.
In addition to logistical supply chain pressures, our network of strategic sourcing partners, which includes
material vendors and manufacturers, has navigated delays and disruptions due to the lingering impacts of the
pandemic. We have mitigated the effects of production disruptions through expanding and reallocating production
capacity with our existing sourcing partners and onboarding new long-term partners to diversify our country-level
manufacturing and sourcing lines. We plan to continue growing our distribution network to support our long-term
strategic objectives but have experienced and expect to continue to experience headwinds in connection with these
efforts, including new sourcing partner capacity constraints and long production lead times to ensure the rigorous
quality standards of our brands are met.
Further, we have historically used more expensive air freight to ship our products to meet demand, as needed.
While we experienced significant increases in ocean shipping rates resulting in reductions to our gross margin
during fiscal year 2022, we began to see improvement during fiscal year 2023 and reduced our use of air freight.
However, if we experience such fluctuations in costs in future periods, we may be required to leverage air freight in
future periods to maintain service levels. Failure to adequately produce and timely ship our products to customers
could lead to lost potential revenue, failure to meet consumer demand, strained relationships with customers and
diminished brand loyalty.
Most of our independent manufacturers are located outside of the US and subject us to various risks
associated with international regulations, trade agreements, and geopolitical relations.
Most of our independent manufacturers are located in Asia, and products manufactured overseas and
imported into the US and other countries are subject to numerous risks and uncertainties. For example, while we
require our independent manufacturers and suppliers to adhere to environmental, labor, ethical, health, safety, and
other business practices and laws, and while we periodically visit and audit their operations, we do not control their
business practices. If non-compliant manufacturers or suppliers cannot or will not become compliant, we will cease
conducting business with them, which could increase our costs and interrupt our supply chain. Our manufacturers’
violations of laws and business standards could also result in negative publicity, which could damage our reputation
and brand value. Further, if our manufacturers or suppliers violate US or foreign trade laws or regulations, we may
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be subject to extra duties, significant monetary penalties, the seizure and forfeiture of products we are attempting to
import, or the loss of our import privileges, which could have a negative effect on our results of operations.
Our international manufacturing operations are subject to numerous other risks and uncertainties, including the
following:
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•
tariffs, import and export controls, and other non-tariff barriers;
poor infrastructure and equipment shortages, which can disrupt transportation and utilities;
restrictions on the transfer of funds from foreign jurisdictions;
changes in governmental regulations, including with respect to intellectual property, labor, safety,
and the environment;
refusal to adopt or comply with our manufacturing policies;
customary business traditions in certain countries such as local holidays, which are traditionally
accompanied by high levels of turnover in the factories;
decreased scrutiny by custom officials for counterfeit products;
practices involving corruption, extortion, bribery, pay-offs, theft, and other fraudulent activity;
use of unauthorized or prohibited materials or reclassification of materials;
health-related concerns that could result in a reduced workforce or scarcity of raw and other
materials; and
adverse changes in consumer perception of goods sourced from certain countries.
While we have implemented measures to comply with applicable customs regulations and to properly calculate
import duties, customs authorities may disagree with our claimed tariff treatment for certain products, resulting in
unexpected costs that may not have been factored into the sales price of such products and our forecasted gross
margin. In addition, we cannot predict whether future laws, regulations, trade remedy actions, or international
agreements may impose additional duties or other restrictions on our ability to manufacture sufficient inventory or
import products from one or more of our sourcing venues. Trade relations between our sourcing venues, particularly
those in China, and the US have created uncertainty and there exists the potential for import duties or other
restrictions on exports from China, which could increase our sourcing costs. We have transitioned most of our
footwear sourcing from China to Vietnam as part of our supplier optimization strategy, but if we are unable to source
our products from the countries where we wish to purchase them, or if the cost of doing so increases, it could have
a material adverse effect on our business, financial condition, and results of operations. Further, because most of
our products are manufactured in China and Vietnam, the possibility of adverse changes in trade or political
relations with China or Vietnam, or other pressures in the region, including political instability, increased labor costs,
adverse weather conditions, a natural disaster or incidence of disease could severely interfere with the
manufacturing or shipment of our products and would have a material adverse effect on our operations.
Moreover, international trade policy is undergoing revision, introducing significant uncertainty with respect to
future trade regulations and existing trade agreements. The continued negotiation of free trade agreements with
countries other than our principal sourcing venues may stimulate competition for manufacturers, which may seek to
export footwear, apparel, and accessories to our target markets at preferred rates of duty which may negatively
affect our results of operations.
Transportation and distribution costs may be adversely affected by new regulations, increased demand,
increased fuel and labor costs, inflation, and political and economic instability. For example, the Russian invasion of
Ukraine during fiscal year 2022 and the resulting financial and economic sanctions imposed by various countries
and organizations has affected transportation and energy costs. Further disruption in this region, or additional
sanctions imposed in response to the conflict, could increase distribution costs in Europe and adversely affect our
results of operations. Additionally, the increased threat of terrorist activity, and law enforcement responses to this
threat, have required greater levels of inspection of imported goods and caused delays in bringing imported goods
to market. Any tightening of security procedures could worsen these delays and increase our costs.
Our sales in international markets are subject to a variety of legal, regulatory, political, cultural, and
economic risks that may adversely affect our results of operations in certain regions.
Our ability to capitalize on growth in new international markets and to maintain the current level of operation in
our existing international markets is subject to risks associated with international operations that could adversely
affect our sales and results of operations. These risks include:
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foreign currency exchange rates fluctuations, which affect the prices at which products are sold to
international consumers;
limitations on our ability to move currency out of international markets;
burdens of complying with a variety of foreign laws and regulations, which may change
unexpectedly, and the interpretation and application of such laws and regulations;
legal costs related to defending allegations of non-compliance with foreign laws;
inability to import products into a foreign country;
difficulties associated with promoting and marketing products in unfamiliar cultures;
political or economic uncertainty or instability, including the war in Ukraine, which has disrupted
European businesses and has the potential to reduce levels of consumer spending, which could
have a material adverse effect on our business, particularly our UGG and HOKA brands’ net sales;
changes in unemployment rates and consumer spending;
anti-American sentiment in international markets in which we operate;
changes in diplomatic and trade relationships between the US and other countries; and
general economic fluctuations in specific countries or markets.
We conduct business outside the US, which exposes us to foreign currency exchange rate risk, and
could have a negative effect on our financial results.
We operate on a global basis, with 32.4% of our net sales for the year ended March 31, 2023, from operations
outside the US. As we continue to increase our international operations, our sales and expenditures in foreign
currencies are expected to become more material and subject to foreign currency exchange rate fluctuations. A
significant portion of our international operating expenses are paid in local currencies and our foreign distributors
typically sell our products in local currency, which affects the price to foreign consumers. Many of our subsidiaries
operate with their local currency as their functional currency. Future foreign currency exchange rate fluctuations and
global credit markets may cause changes in the US dollar value of our purchases or sales and materially affect our
sales, gross margin, and results of operations, when converted to US dollars. Changes in the value of the US dollar
relative to other currencies could result in material foreign currency exchange rate fluctuations and, as a result, our
net earnings could be materially adversely affected. When the US dollar strengthens relative to foreign currencies,
the Company's revenues and profits denominated in foreign currencies are reduced when converted into US.
dollars and the Company's margins may be negatively affected. We routinely utilize foreign currency exchange rate
forward contracts or other derivative instruments for the amounts we expect to purchase and sell in foreign
currencies to mitigate exposure to foreign currency exchange rate fluctuations. As we continue to expand
international operations and increase purchases and sales in foreign currencies, we may utilize additional derivative
instruments to hedge our foreign currency exchange rate risk. Our hedging strategies depend on our forecasts of
sales, expenses, and cash flows, which are inherently subject to inaccuracies. Foreign currency exchange rate
hedges, transactions, remeasurements, or translations could materially affect our consolidated financial statements.
For example, during fiscal year 2023, unfavorable changes in foreign currency exchange rates against the US dollar
negatively affected our gross margin.
Risks Related to Technology, Data Security and Privacy
A security breach or other disruption to our IT systems could result in the loss, theft, misuse,
unauthorized disclosure, or unauthorized access of customer, supplier, or sensitive Company information
or could disrupt our operations, which could damage our relationships with customers, suppliers or
employees, expose us to litigation or regulatory proceedings, or harm our reputation, any of which could
materially adversely affect our business, financial condition, or results of operations.
Our business involves the storage and transmission of a significant amount of personal, confidential, or
sensitive information, including the personal information of our customers and employees, credit card information,
and our proprietary financial, operational, and strategic information. The protection of this information is vitally
important to us as the loss, theft, misuse, unauthorized disclosure, or unauthorized access of such information could
lead to significant reputation or competitive harm, result in litigation involving us or our business partners, expose us
to regulatory proceedings, and cause us to incur substantial losses. As a result, we believe our future success and
growth depends, in part, on the ability of our key business processes and systems, to prevent the theft, loss,
misuse, unauthorized disclosure, or unauthorized access of this information, and to respond quickly and effectively
if data security incidents occur. We are subject to numerous data privacy and security risks, which may prevent us
from maintaining the privacy of this information, result in the disruption of our business, and require us to expend
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significant resources attempting to secure and protect such information and respond to incidents, any of which could
materially adversely affect our business, financial condition, or results of operations.
Our success also depends in part on the continued operation of our key business processes, including our IT
and global communications systems. We rely on third-party IT service providers worldwide for many of our IT
functions, including network, hardware, and software configuration. Additionally, we rely on internal networks and
information systems and other technologies, including the internet and third-party hosted services, to support a
variety of business processes and activities. Any disruption to these systems or networks could result in product
fulfillment delays, key personnel being unable to perform duties or communicate throughout the organization, loss of
sales, significant costs for data restoration, the inability to interpret data timely to enhance operations, and other
adverse effects on our business and reputation. Further, if key operational systems and processes are not properly
supporting our business, it could result in information silos and inefficiencies across our organization. If we are
unable to modify our systems and processes to respond to changes in our business needs, or if we or our third-
party providers experience a failure or interruption in these systems, our ability to accurately forecast sales, report
our financial position and results of operations, or otherwise manage and operate our business could be adversely
affected.
The frequency, intensity, and sophistication of cyber-attacks, ransom-ware attacks, and other data security
incidents have significantly increased in recent years. Like other businesses, we have experienced, and are
continually at risk of, attacks and incidents. Additionally, external events, such as the Russia-Ukraine conflict, can
increase the likelihood of such incidents, and our risk and exposure to these matters remains heightened because
of, among other things, the evolving nature of these threats, the current global economic and political environment,
our prominent size and scale, and the interconnectivity and interdependence of third parties to our systems. We
expend significant resources on IT and data security tools, measures, and processes designed to protect our IT
systems, as well as the personal, confidential, or sensitive information stored on or transmitted through those
systems, and to ensure an effective response to any attack or incident. Whether these measures are ultimately
successful, these expenditures could have an adverse effect on our financial condition and results of operations and
divert management’s attention from pursuing our strategic objectives.
Although we take the security of our IT systems seriously, there can be no assurance that the measures we
employ will prevent unauthorized persons from obtaining access to our systems and information, as well as those
held by our third-party IT service providers. Despite our implementation of reasonable security measures, our
systems and information may be susceptible to cyber-attacks or data security incidents. These risks may be
exacerbated in a remote work environment. Because the techniques used to obtain unauthorized access to IT
systems are constantly evolving, we may be unable to anticipate these techniques or implement adequate
protective measures in response. Cyber-attacks or data incidents could remain undetected for some period, which
could result in significant harm to our systems, as well as unauthorized access to the information stored on and
transmitted by our systems. Further, despite our security efforts and training, our employees may purposefully or
inadvertently cause security breaches. A cyber-attack or other data security incident could result in significant
disruption of our business such that:
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critical business systems become inoperable or require significant time or cost to restore;
personnel are unable to perform their duties or communicate with third-party partners;
it results in the loss, theft, misuse, or unauthorized disclosure of confidential information;
we are prevented from accessing information necessary to conduct our business;
we are required to make unanticipated investments in equipment, technology, or security measures;
customers cannot place or receive orders, and we are unable to timely ship orders or at all; or
we become subject to other unanticipated liabilities, costs, or claims.
If any of these events were to occur, it could have a material adverse effect on our financial condition and
results of operations and result in harm to our reputation. In addition, if a cyber-attack or other data incident results
in the loss, theft, misuse, unauthorized disclosure, or unauthorized access of personal, confidential, or sensitive
information belonging to our customers, suppliers, or employees, it could put us at a competitive disadvantage,
result in the deterioration of our customers’ confidence in our brands, cause our suppliers to reconsider their
relationship with us or impose onerous contractual provisions, and subject us to litigation, liability, fines, and
penalties. We could be subject to regulatory or other actions pursuant to domestic and international privacy laws,
which could result in costly investigations and litigation, civil or criminal penalties, operational changes, and negative
publicity that could adversely affect our reputation, as well as our results of operations and financial condition.
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If we are found to have violated laws concerning the privacy and security of consumers’ or other
individuals’ personal information, we could be subject to civil or criminal penalties, which could increase
our liabilities and harm our reputation or our business.
There are a number of domestic and international laws protecting the privacy and security of personal
information. These laws include US state laws such as the California Consumer Privacy Act and the California
Privacy Rights Act, as well as the General Data Protection Regulation in the EU, EU member state directives, the
Personal Information Protection and Electronic Documents Acts in Canada, the Personal Information Protection Law
in China, or similar applicable laws. These laws place limits on how we may collect, use, share and store personal
information, and they impose obligations to protect that information. Further, we may be subject to new data privacy
and security laws and regulations. If we, or any of our service providers who have access to the personal data for
which we are responsible, are found to be in violation of the privacy or security requirements of applicable data
protection laws, we could be subject to civil or criminal penalties, which could increase our liabilities, harm our
reputation, and have a material adverse effect on our business, financial condition, and results of operations.
Although we utilize a variety of measures to secure the data that we control, even compliant entities can experience
security breaches or have inadvertent failures despite employing reasonable practices and safeguards.
If the technology-based systems that give our customers the ability to shop or interact with us online
do not function effectively, our results of operations, as well as our ability to grow our e-commerce
business globally or to retain our customer base, could be materially adversely affected.
Many of our consumers shop with us through our e-commerce platforms or through third party digital
marketplaces on which we operate. Consumer expectations and related competitive pressures have increased and
are expected to continue to increase relative to various aspects of our e-commerce business, including speed of
product delivery, shipping charges, return privileges, and other evolving expectations. Increasingly, consumers are
using mobile-based devices and applications to shop online with us and with our competitors, and to do comparison
shopping, as well as to engage with us and our competitors through digital services and experiences that are
offered on mobile platforms. We are increasingly using social media to interact with our consumers and as a means
to enhance their shopping experience. Any failure on our part to provide attractive, effective, reliable, secure, user-
friendly e-commerce platforms that offer a wide assortment of merchandise with rapid delivery options and that
continually meet the changing expectations of online shoppers or any failure to provide attractive digital experiences
to our customers could place us at a competitive disadvantage, result in the loss of e-commerce and other sales,
harm our reputation with consumers, have an adverse effect on the growth of our e-commerce business globally
and have an adverse effect on our business and results of operations. In addition, as use of our digital platforms
continues to grow, we will need an increasing amount of technical infrastructure to continue to satisfy our
consumers' needs. If we fail to continue to effectively scale and adapt our digital platforms to accommodate
increased consumer demand, our business may be subject to interruptions, delays or failures and consumer
demand for our products and digital experiences could decline. Risks specific to our e-commerce business also
include diversion of sales from our and our retailers' brick and mortar stores, difficulty in recreating the in-store
experience through direct channels and liability for online content. Our failure to successfully respond to these risks
could adversely affect sales in our e-commerce business, as well as damage our reputation and brands.
If we are unsuccessful at improving our operational and IT systems and our efforts do not result in the
anticipated benefits to us or result in unanticipated disruption to our business, our financial condition and
results of operations could be adversely affected, and our business may become less competitive.
We continually strive to improve, automate, and streamline our operational and IT systems, processes, and
infrastructure as part of our ongoing effort to improve the overall efficiency and competitiveness of our business.
Transitioning to these new or upgraded processes and systems requires significant capital investments and
personnel resources. Implementation is also highly dependent on the coordination of numerous employees,
contractors and software and system providers. While these efforts have resulted in improvements to our
operational systems, we expect to continue to incur expenses to implement additional improvements and upgrades
to our systems. Many of these expenditures have been and may continue to be incurred in advance of the
realization of any direct benefits to our business. We cannot guarantee that we will be successful at improving our
operational systems, or that our efforts will result in the anticipated benefits to us. We may also experience
difficulties in implementing or operating our new or upgraded operational or IT systems, including, but not limited to,
ineffective or inefficient operations, significant system failures, system outages, delayed implementation and loss of
system availability, which could lead to increased implementation and/or operational costs, loss or corruption of
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data, delayed shipments, excess inventory and interruptions of operations resulting in lost sales and/or profits. If our
operational or IT system upgrades, improvements and associated change management efforts are not successful,
our financial condition and results of operations could be adversely affected, and our business may become less
competitive.
Risks Related to Our Legal, Compliance, and Regulatory Environment
Failure to adequately protect our intellectual property rights to prevent counterfeiting of our products,
or to defend claims against us related to our intellectual property rights, could reduce sales, and adversely
affect the value of our brands.
Our business could be significantly harmed if we are not able to protect our intellectual property rights. We
believe our competitive position is largely attributable to the value of our trademarks, patents, trade dress, trade
names, trade secrets, copyrights, and other intellectual property rights. An unfortunate reaction to the success of our
brands is that we have become a target of counterfeiting and product imitation strategies. Although we are
aggressive in legal and other actions in pursuing those who infringe on our intellectual property rights, we cannot
guarantee that the actions we have taken will be adequate to protect our brands in the future, especially because
some countries’ laws do not protect these rights to the same extent as US laws. If we fail to adequately protect our
intellectual property rights, it will allow our competitors to sell products that are similar to and directly competitive
with our products, or we could otherwise lose opportunities to sell our products to consumers who may instead
purchase a counterfeit or imitation product, which could reduce sales of our products and adversely affect the value
of our brands. In addition, any intellectual property lawsuits in which we are involved could cost a significant amount
of time and money and distract management’s attention from operating our business, which may negatively affect
our business and results of operations. In addition to fighting intellectual property infringement, we may need to
defend claims against us related to our intellectual property rights. For example, we have faced claims that the word
“ugg” is a generic term. Such a claim was successful in Australia, but similar claims have been rejected by courts in
the US, China, Turkey, and the Netherlands. Any court decision or settlement that invalidates or limits trademark
protection of our brands, which allows a third-party to continue to sell products similar to our products, or that allows
a manufacturer or distributor to continue to sell counterfeit products, could lead to intensified competition and a
material reduction in our sales, and could have a material adverse effect on the value of our brands.
Our revolving credit facility agreements expose us to certain risks.
From time to time, we have financed our liquidity needs in part from borrowings made under our revolving
credit facilities. Our ability to borrow under our revolving credit facilities may be limited if the lenders believe there
has been a material adverse change to our business. In addition, our revolving credit facility agreements contain a
number of customary financial covenants and restrictions, which may limit our ability to engage in transactions that
would otherwise be in our best interests, or otherwise respond to changing business and economic conditions, and
may therefore have a material effect on our business. Failure to comply with any of the covenants could result in a
default, allowing our lenders to accelerate the timing of payments, which could have a material adverse effect on
our business, operations, financial condition, and liquidity. In addition, in some cases, a default under one revolving
credit facility could result in a cross-default under other revolving credit facilities. Certain of our revolving credit
facility agreements bear interest at a rate that varies by currency. Any increases in interest rates applicable to
borrowings under our credit facilities would increase our cost of borrowing, which would result in a decline in our net
income and liquidity.
The tax laws applicable to our business are very complex and changes in tax laws could increase our
worldwide tax rate, or audits by various taxing authorities may subject us to additional tax liabilities, and
materially affect our financial position and results of operations.
We are subject to changes in tax laws, regulations, and treaties in and between the jurisdictions in which we
operate. These tax laws are highly complex, and significant judgment and specialized expertise is required in
evaluating and estimating our worldwide provision for income taxes. Our tax expense is based on our interpretation
of the tax laws in effect in various countries at the time that the expense was incurred. Future changes in these tax
laws, or in their interpretation, could result in a materially higher tax expense or a higher effective tax rate on our
worldwide earnings. For example, global tax authorities may take differing positions in interpreting the Organization
for Economic Co-operation and Development’s guidance, including with respect to base erosion and profit shifting,
which could modify existing tax principles. These changes and potential other tax law changes could increase our
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income tax liability or adversely affect our long-term effective tax rates and net income.
Many countries in the EU and around the globe have adopted or proposed changes to current tax laws.
Certain provisions of the recently enacted Inflation Reduction Act, including a 15% corporate alternative minimum
tax, as well as the similar 15% global minimum tax under the Organization for Economic Cooperation and
Development's Pillar Two Global Anti-Base Erosion Rules, may affect our income tax expense, profitability, and
capital allocation decisions. We are subject to tax audits in each of the various jurisdictions where we conduct
business, and any of these jurisdictions may assess additional taxes against us as a result of these audits. Although
we believe our tax estimates are reasonable, and we undertake to prepare our tax filings in accordance with all
applicable tax laws, the final determination with respect to any tax audits, and any related litigation, could be
materially different from our estimates or from our historical tax provisions and accruals. The results of a tax audit or
other tax proceeding could have a material adverse effect on our results of operations or cash flows in the periods
for which that determination is made and may require a restatement of prior financial reports.
Risks Related to Our Common Stock
Our common stock price has been volatile, which could result in substantial losses for stockholders.
The trading price of our common stock has been and may continue to be volatile. The trading price of our
common stock could be affected by a number of factors, including, but not limited to the following:
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changes in expectations of our future financial performance and results of operations;
changes in estimates of our performance by securities analysts and other market participants, or
our failure to meet such estimates;
changes in our stockholder base or public actions taken by investors;
market research and opinions published by securities analysts and other market participants, and
the response to such publications;
quarterly fluctuations in our sales, margins, expenses, financial position, and results of operations;
the financial stability of our customers, manufacturers, and suppliers;
legal proceedings, regulatory actions, and legislative changes;
our stock repurchase activity or announcements regarding the same;
the declaration of stock or cash dividends;
consumer confidence and discretionary spending levels;
broad market fluctuations in volume and price;
general market, political, and economic conditions, including recessionary conditions; and
a variety of risk factors, including the ones described herein and in our other SEC filings.
In addition, the stock market in general has experienced extreme price and volume fluctuations that have often
been unrelated or disproportionate to the operating performance of individual companies. Accordingly, the price of
our common stock is volatile and any investment in our stock is subject to risk of loss. These broad market and
industry factors and other general macroeconomic conditions unrelated to our financial performance may also affect
our common stock price.
Anti-takeover provisions contained in our Amended and Restated Certificate of Incorporation
(Certificate) and Amended and Restated Bylaws (Bylaws), as well as provisions of Delaware law, could
impair a takeover attempt.
Our Certificate and Bylaws contain provisions that could have the effect of rendering more difficult hostile
takeovers, change-in-control transactions, or changes in our Board of Directors or management.
As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the
Delaware General Corporation Law, which may delay, deter, or prevent a change-in-control transaction. Any
provision of Delaware law, our Certificate, or our Bylaws, which has the effect of rendering more difficult, delaying,
deterring, or preventing a change-in-control transaction could limit the opportunity for stockholders to receive a
premium for their shares of our common stock, and could affect the price that investors are willing to pay for our
common stock.
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Item 2. Properties
We have owned our 14-acre corporate headquarters located in Goleta, California since 2014.
We have a warehouse and DC located in Moreno Valley, California, which began operations during the fourth
quarter of fiscal year 2015 and have since continued optimizing and expanding our operations at this location. In
October 2021, we began operations in a second US warehouse and DC located in Mooresville, Indiana. In February
2023, we took possession of a third US warehouse and DC in Mooresville, Indiana with up to approximately
1,015,902 square feet over the lease term, which we expect to be operational during our next fiscal year.
We also have offices in Belgium, Canada, China, France, Germany, Hong Kong, Indonesia, Italy, Japan, the
Netherlands, Switzerland, the UK, and Vietnam, to perform a variety of functions, which include overseeing the
quality and manufacturing standards of our products, coordinating regional sales, operations, marketing, and
administration; as well as offices in Macau and Hong Kong to coordinate logistics.
As of March 31, 2023, we have 52 retail stores in the US ranging from approximately 1,000 to 13,000 square
feet. Internationally, we have 112 retail stores in Austria, Belgium, Canada, China, France, Germany, Japan, the
Netherlands, Switzerland, and the UK.
Other than our corporate headquarters, we lease our facilities, retail stores and other office spaces from
unrelated parties. With the exception of our DTC business facilities, our facilities are attributable to multiple
reportable operating segments and are not allocated to our reportable operating segments.
We believe our space is adequate for our current needs and that suitable additional or substitute space will be
available to accommodate the foreseeable expansion of our business and operations.
The following table provides details regarding our significant physical properties that are operational as of
March 31, 2023:
Facility Location
Moreno Valley, California
Mooresville, Indiana (1st location)
Goleta, California
Description
Warehouse and Distribution Center
Warehouse and Distribution Center
Corporate Headquarters
Lease or Own
Lease
Lease
Own
Facility Size
(Square Footage)
1,530,944
507,600
185,094
Item 3. Legal Proceedings
As part of our global policing program to protect our intellectual property rights, from time to time, we file
lawsuits in various jurisdictions asserting claims for alleged acts of trademark counterfeiting, trademark
infringement, patent infringement, trade dress infringement, and trademark dilution. We generally have multiple
actions such as these pending at any given point in time. These actions may result in seizure of counterfeit
merchandise, out of court settlements with defendants, or other outcomes. In addition, from time to time, we are
subject to claims in which opposing parties will raise, either as affirmative defenses or as counterclaims, the
invalidity or unenforceability of certain of our intellectual property rights, including allegations that the UGG brand
trademark registrations and design patents are invalid or unenforceable. Furthermore, we are aware of many
instances throughout the world in which a third-party is using our UGG brand and HOKA brand trademarks within its
internet domain name, and we have discovered and are investigating several manufacturers and distributors of
counterfeit UGG brand products, and we are also investigating various markets for indications of counterfeit HOKA
brand manufacturing.
From time to time, we are involved in various legal proceedings, disputes, and other claims arising in the
ordinary course of business, including employment, intellectual property, and product liability claims. Although the
results of these ordinary course matters cannot be predicted with certainty, we currently believe that the final
outcome of these ordinary course matters will not, individually or in the aggregate, have a material adverse effect on
our business, results of operations, financial condition, or cash flows. However, regardless of the merit of the claims
raised or the outcome, these ordinary course matters can have an adverse impact on us as a result of legal costs,
diversion of management's time and resources, and other factors.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our common stock has traded under the symbol DECK on the New York Stock Exchange (NYSE) since May
2014 and was previously traded on the Nasdaq Global Select Market.
As of May 11, 2023, we had 37 stockholders of record based on the records of our transfer agent, which does
not include beneficial owners of our common stock whose shares are held in the names of various securities
brokers, dealers, and registered clearing agencies.
We did not sell any equity securities during the year ended March 31, 2023, that were not registered under the
Securities Act.
Stock Performance Graph
Below is a graph comparing the percentage change in the cumulative total return on our common stock against
the cumulative total return of the S&P 500 Apparel, Accessories & Luxury Goods Index, and the NYSE Composite
Index for the five fiscal-year periods commencing March 31, 2018, and ended March 31, 2023. Total return assumes
reinvestment of dividends, though we have not declared or paid any cash dividends on our common stock since our
inception. The data represented in the graph below assumes one hundred dollars invested in our common stock,
the S&P 500 Apparel, Accessories & Luxury Goods Index, and the NYSE Composite Index on March 31, 2018.
30
Period EndingIndex ValueCOMPARISON OF CUMULATIVE TOTAL RETURNDeckers Outdoor CorporationS&P 500 Apparel, Accessories & Luxury Goods IndexNYSE Composite Index3/183/193/203/213/223/230200400600
Table of Contents
Deckers Outdoor Corporation
S&P 500 Apparel, Accessories &
Luxury Goods Index
The NYSE Composite Index
2018
2019
2020
2021
2022
2023
$
100.0 $
163.3 $
148.8 $
367.0 $
304.1 $
499.3
Years Ended March 31,
100.0
100.0
96.9
104.8
48.2
87.4
98.3
135.5
77.7
147.9
53.9
139.8
The stock performance graph and related information shall not be deemed incorporated by reference by any
general statement incorporating by reference into this Annual Report any filing under the Securities Act, or under the
Exchange Act, except to the extent that we specifically incorporate this information by reference and shall not
otherwise be deemed filed under the Securities Act or the Exchange Act.
Dividend Policy
We have not declared or paid any cash dividends on our common stock since our inception. Our current
revolving credit agreements allow us to declare and pay cash dividends, as long as we do not exceed certain
leverage ratios and no event of default has occurred. However, we currently do not anticipate declaring or paying
any cash dividends.
Stock Repurchase Programs
Our Board of Directors has approved various authorizations under our stock repurchase program to
repurchase shares of our common stock in the open market or in privately negotiated transactions, subject to
market conditions, applicable legal requirements, and other factors. Our Board of Directors approved an additional
authorization of $1,200,000 on July 27, 2022, to repurchase our common stock under the same conditions as the
prior stock repurchase programs (collectively, the stock repurchase program).
Our stock repurchase program does not obligate us to acquire any amount of common stock and may be
suspended at any time at our discretion. Our current revolving credit agreements allow us to make stock
repurchases under this program, so long as we do not exceed certain leverage ratios. As of March 31, 2023, no
defaults have occurred under our credit agreements.
Below is a summary of stock repurchasing activity under our stock repurchase program during the fourth fiscal
quarter ended March 31, 2023:
Total number of
shares
repurchased (3)
Weighted average
price paid per
share
Dollar value of
shares
repurchased (1) (2)
Dollar value of
shares remaining
for repurchase (3)
(2)
January 1 - January 31, 2023
February 1 - February 28, 2023
March 1 - March 31, 2023
— $
— $
— $
1,459,145
101,722
141,465
412.86
427.76
41,997
60,513
1,417,148
1,356,635
(1) The dollar value of shares repurchased excludes the cost of broker commissions, excise taxes, and other costs
associated with our program.
(2) May not calculate on rounded dollars.
(3) All share repurchases were made pursuant to our publicly announced stock repurchase program in open-market
transactions.
Refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of
Operations,” under the heading “Liquidity” and Note 10, "Stockholders' Equity," of our consolidated financial
statements and accompanying notes thereto (referred to herein as the consolidated financial statements) in Part IV
within this Annual Report for further information on repurchases of our common stock.
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read together with our
consolidated financial statements in Part IV within this Annual Report. This discussion includes an analysis of our
financial condition and results of operations for the years ended March 31, 2023, and 2022 and year-over-year
comparisons between those periods. For year-over-year comparisons between the years ended March 31, 2022,
and 2021, refer to Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of
Operations,” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2022, filed with the SEC on
May 27, 2022.
Certain statements made in this section constitute “forward-looking statements,” which are subject to
numerous risks and uncertainties including those described in this section. Refer to the section entitled “Cautionary
Note Regarding Forward-Looking Statements” and Part I, Item 1A, "Risk Factors," within this Annual Report for
additional information.
Unless otherwise specifically indicated, all figures included within this Annual Report are expressed in
thousands, except for per share or share data.
Overview
We are a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories
developed for both everyday casual lifestyle use and high-performance activities. We market our products primarily
under five proprietary brands: UGG, HOKA, Teva, Sanuk, and Koolaburra. We believe our products are distinctive
and appeal to a broad demographic. We sell our products through quality domestic and international retailers,
international distributors, and directly to our global consumers through our DTC business, which is comprised of our
e-commerce websites and retail stores. We seek to differentiate our brands and products by offering diverse lines
that emphasize authenticity, functionality, quality, and comfort, and products tailored to a variety of activities,
seasons, and demographic groups. All of our products are manufactured by independent manufacturers.
Financial Highlights
Consolidated financial performance highlights for fiscal year 2023 compared to fiscal year 2022, are as follows:
•
•
•
•
Net sales increased 15.1% to $3,627,286.
◦
◦
Channel
▪
▪
Wholesale channel net sales increased 11.6% to $2,160,675.
DTC channel net sales increased 20.8% to $1,466,611.
Geography
▪
▪
Domestic net sales increased 13.1% to $2,451,497.
International net sales increased 19.7% to $1,175,789.
Gross margin decreased 70 basis points to 50.3%.
Income from operations increased 15.6% to $652,751.
Diluted earnings per share increased 19.1% to $19.37 per share.
Trends and Uncertainties Impacting Our Business and Industry
We expect our business and industry will continue to be impacted by several important trends and
uncertainties, including the following:
Supply Chain
•
Similar to other companies in our industry, we continue to monitor pressures on the global supply
chain, which have shifted the timing of shipments across our brands compared to the prior period,
resulting in inventory levels outpacing sales growth. However, we have seen improvements in
transit lead times and related freight costs compared to the prior period, which has had a positive
impact on results of operations through fiscal year 2023.
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•
We continue to be flexible in adapting to the fluid logistics environment by implementing additional
measures to mitigate the effects of supply chain disruptions, which has resulted in and may
continue to result in higher costs. Our efforts include expanding our global warehouses and DCs, as
well as our 3PL arrangements, and diversifying and increasing the number of our third-party
manufacturers.
Brand and Omni-Channel Strategy
•
•
•
•
We remain focused on increasing consumer adoption of the HOKA brand with all geographic
regions and distribution channels experiencing significant year-round growth, which has positively
impacted our financial results and seasonality trends. Our efforts to drive HOKA brand performance
are primarily focused on distribution management, launching innovative product offerings and global
marketing campaigns to drive brand awareness, and further expanding the HOKA brand presence
through our DTC channel.
Our marketplace strategies in Europe and Asia (international reset strategies) have continued to
drive UGG brand awareness and consumer acquisition by building brand acceptance through
localized marketing investments. However, unfavorable foreign currency exchange rates have
partially offset international growth of the UGG brand during fiscal year 2023.
Our long-term growth strategy remains focused on building our DTC channel to represent an
increased portion of our total net sales, and prioritizing consumer acquisition and experience to
sustain strong demand and market positions for our brands.
We continue to adopt selective price increases as appropriate by brand and product, which we
believe can help mitigate increased costs.
Reportable Operating Segment Overview
Our six reportable operating segments include the worldwide wholesale operations of the UGG brand, HOKA
brand, Teva brand, Sanuk brand, and Other brands as well as DTC. Information reported to the Chief Operating
Decision Maker (CODM), who is our Chief Executive Officer (CEO), President, and Principal Executive Officer
(PEO), is organized into these reportable operating segments and is consistent with how the CODM evaluates our
performance and allocates resources.
UGG Brand. The UGG brand is one of the most iconic and recognized brands in our industry, which highlights
our successful track record of building niche brands into lifestyle and fashion market leaders. With loyal consumers
around the world, the UGG brand has proven to be a highly resilient line of premium footwear, apparel, and
accessories with expanded product offerings and a growing global audience that appeals to a broad demographic.
We believe demand for UGG brand products will continue to be driven by the following:
•
•
•
•
Successful acquisition of a diverse consumer base that resonates globally and with key markets,
including for a younger, fashionable consumer, through strategic marketing activations and
collaborations.
High consumer brand loyalty due to consistent delivery of crafted; purposefully built and luxuriously
comfortable footwear, apparel, and accessories.
Diversification of our footwear product offerings, such as our spring and summer lines, as well as
expanded category offerings for Men's products, and more iconic fashion product for our Classics
line.
Thoughtful expansion of our apparel and accessories businesses.
HOKA Brand. The HOKA brand is an authentic premium line of year-round performance footwear that offers
enhanced cushioning and inherent stability with minimal weight, apparel, and accessories. Originally designed for
ultra-runners, the brand now appeals to world champions, taste makers, and everyday athletes. Strong marketing
has fueled both domestic and international sales growth of the HOKA brand, which has quickly become a leading
brand within run and outdoor specialty wholesale accounts and is growing within selective key accounts. As a result,
the HOKA brand is bolstering its net sales, which continue to increase as a percentage of our aggregate net sales.
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We believe demand for HOKA brand products will continue to be driven by the following:
•
•
•
•
Leading performance product innovation, category extensions, and key franchise management,
including higher frequency product drop rates and improving accessibility to all athletes.
Increased global brand awareness and new consumer adoption through enhanced global marketing
activations and online consumer acquisition, including building a more diverse outdoor community
through digital and in-person event sponsorship.
Thoughtful and strategic wholesale distribution choices, allowing the HOKA brand access and
introduction to a broader, more diverse, consumer base.
Category extensions in authentic performance footwear offerings such as lifestyle, trail, and hiking
categories.
Teva Brand. The Teva brand created the very first sport sandal when it was founded in the Grand Canyon in
1984. Since then, the Teva brand has grown into a multi-category modern outdoor lifestyle brand offering a range of
performance, casual, and trail lifestyle products, and has emerged as a leader in footwear sustainability observed
through recent growth fueled by young and diverse consumers passionate for the outdoors and the planet.
We believe demand for Teva brand products will continue to be driven by the following:
•
•
•
Authentic outdoor heritage and a reputation for quality, comfort, sustainability, and performance in
any terrain.
Increasing brand awareness in key major global markets due to outdoor lifestyle participation among
younger consumers.
Category extensions in performance hike footwear, including key franchises, as well as year-round
product.
Sanuk Brand. The Sanuk brand originated in Southern California surf culture and has emerged into a lifestyle
brand with a presence in the relaxed casual shoe and sandal categories with a focus on innovation in comfort and
sustainability. The Sanuk brand’s use of unexpected materials and unconventional constructions, combined with its
fun and playful branding, are key elements of the brand's identity.
We believe demand for Sanuk brand products will continue to be driven by the following:
•
Introducing a broader and more premium range of comfortable and easy slip-on product, including
through category extensions in comfort casual footwear for the younger consumer and establishing a
year-round product offering, from sandals to slippers to winterized casual comfort.
Other Brands. Other brands consist primarily of the Koolaburra brand. The Koolaburra brand is a casual
footwear fashion line using plush materials and is intended to target the value-oriented consumer in order to
complement the UGG brand offering.
We believe demand for Koolaburra brand products will continue to be driven by the following:
•
•
Increasing brand awareness with fashion focused consumers.
Evolution of key franchises and purpose-built expansion in fashion casual boots, slippers, and
sandals.
Direct-to-Consumer. Our DTC business encompasses all our brands and is comprised of our e-commerce
business and retail stores that are intertwined and interdependent in an omni-channel marketplace. We believe
many of our consumers interact with both our retail stores and websites before making purchasing decisions in
store and online.
E-Commerce Business. Our global e-commerce business provides us with an opportunity to directly engage
with and communicate a consistent brand message to consumers that is in line with our brands’ promises, promotes
awareness of key brand initiatives, offers targeted information to specific consumer demographics, and drives
consumers to our retail stores. As of March 31, 2023, we operate our e-commerce business through Company-
owned websites and mobile platforms in 57 different countries.
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Retail Business. Our global Company-owned mono branded retail stores are predominantly UGG brand
concept stores and UGG brand outlet stores, as well as new openings of HOKA brand stores. Through our outlet
stores, we sell some of our discontinued styles from prior seasons, full price in-line products, as well as products
made specifically for the outlet stores. We continue to open outlet stores in key markets to further grow our brand
presence and appeal to a broader consumer base.
As of March 31, 2023, we have a total of 164 global retail stores (including 18 HOKA brand stores), which
includes 81 concept stores and 83 outlet stores. While we generally open retail store locations during our second or
third fiscal quarters and consider closures of retail stores during our fourth fiscal quarter, the timing of such openings
and closures may vary. We will continue to evaluate our retail store fleet strategy in response to brand strategy
changes in consumer demand and retail store traffic patterns.
Flagship Stores. Included in the total count of global concept stores are seven flagship stores, which are
primarily located in major tourist locations. These are premium mono branded stores in key markets designed to
showcase UGG and HOKA brand products. Flagship stores provide broader product offerings and generate greater
traffic that enhance our interaction with consumers and increase brand loyalty. We anticipate opening four additional
flagship stores in Europe and Asia during our next fiscal year.
Shop-in-Shop Stores. Included in the total count of global concept stores are 29 shop-in-shop (SIS) stores, for
which we own the inventory and that are operated by us or non-employees within a department store, which we
lease from the store owner by paying a percentage of SIS store sales.
Partner Retail Stores. Represent UGG and HOKA mono branded stores which are wholly owned and operated
by third parties and not included in the total count of our global Company-owned retail stores.
Our net sales related to the e-commerce business and retail stores discussed above are recorded in our DTC
reportable operating segment, except for net sales generated by partner retail stores, which are recorded in each
respective brand's wholesale reportable operating segment, as applicable.
Use of Non-GAAP Financial Measures
Throughout this Annual Report we provide certain financial information on a constant currency basis, excluding
the effect of foreign currency exchange rate fluctuations, which we disclose in addition to certain financial measures
calculated and presented in accordance with generally accepted accounting principles in the United States (US
GAAP). We provide these non-GAAP financial measures to provide information that may assist investors in
understanding our results of operations and assessing our prospects for future performance. However, the
information presented on a constant currency basis, as we present such information, may not necessarily be
comparable to similarly titled information presented by other companies, and may not be appropriate measures for
comparing our performance relative to other companies. For example, in order to calculate our constant currency
information, we calculate the current period financial information using the foreign currency exchange rates that
were in effect during the previous comparable period, excluding the effects of foreign currency exchange rate
hedges and remeasurements in the consolidated financial statements. Further, we report comparable DTC sales on
a constant currency basis for DTC operations that were open throughout the current and prior reporting periods, and
we may adjust prior reporting periods to conform to current year accounting policies.
These non-GAAP financial measures are not intended to represent and should not be considered to be more
meaningful measures than, or alternatives to, measures of financial or operating performance as determined in
accordance with US GAAP. Constant currency measures should not be considered in isolation as an alternative to
US dollar measures that reflect current period foreign currency exchange rates or to other financial or operating
measures presented in accordance with US GAAP. We believe evaluating certain financial and operating measures
on a constant currency basis is important as it excludes the impact of foreign currency exchange rate fluctuations
that are not indicative of our core results of operations and are largely outside of our control.
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Seasonality
Our business is seasonal, with the highest percentage of UGG and Koolaburra brand net sales occurring in the
quarters ending September 30th and December 31st and the highest percentage of Teva and Sanuk brand net
sales occurring in the quarters ending March 31st and June 30th. Net sales for the HOKA brand occur more evenly
throughout the year, reflecting the brand's year-round performance product offerings. Due to the magnitude of the
UGG brand relative to our other brands, our aggregate net sales in the quarters ending September 30th and
December 31st have historically significantly exceeded our aggregate net sales in the quarters ending March 31st
and June 30th. However, as we continue to take steps to diversify and expand our product offerings by creating
more year-round styles, and as net sales of the HOKA brand continue to increase as a percentage of our aggregate
net sales, we have seen and expect to continue to see the impact from seasonality decrease over time. However,
our seasonality has been impacted by supply chain challenges and it is unclear whether these impacts will be
minimized or exaggerated in future periods as a result of these disruptions. Refer to Note 14, "Quarterly Summary
of Information (Unaudited)," of our consolidated financial statements in Part IV within this Annual Report for further
information on our results of operations by quarterly period.
Result of Operations
Year Ended March 31, 2023, Compared to Year Ended March 31, 2022. Results of operations were as
follows:
Years Ended March 31,
2023
2022
Change
Amount
%
Amount
%
Amount
%
$ 3,627,286
100.0 % $ 3,150,339
100.0 % $ 476,947
15.1 %
1,801,916
1,825,370
1,172,619
652,751
49.7
50.3
32.3
18.0
666,082
149,260
516,822
18.4
4.1
14.3
1,542,788
1,607,551
1,042,844
564,707
69
564,638
112,689
451,949
49.0
51.0
33.1
17.9
—
17.9
3.6
14.3
(259,128)
217,819
(129,775)
88,044
(16.8)
13.5
(12.4)
15.6
13,400
19,420.3
101,444
(36,571)
64,873
18.0
(32.5)
14.4
Net sales
Cost of sales
Gross profit
Selling, general, and
administrative expenses
Income from operations
Income before income taxes
Income tax expense
Net income
Total other comprehensive loss,
net of tax
Total other (income) expense, net
(13,331)
(0.4)
(14,080)
(0.4)
(8,212)
(0.2)
(5,868)
(71.5)
Comprehensive income
$ 502,742
13.9 % $ 443,737
14.1 % $
59,005
13.3 %
Net income per share
Basic
Diluted
$
$
19.50
19.37
$
$
16.43
16.26
$
$
3.07
3.11
18.7 %
19.1 %
Net Sales. Net sales by geographic location, and by brand and distribution channel were as follows:
Net sales by location
Domestic
International
Total
Years Ended March 31,
2023
Amount
2022
Amount
Change
Amount
%
$ 2,451,497 $ 2,167,793 $
1,175,789
982,546
283,704
193,243
$ 3,627,286 $ 3,150,339 $
476,947
13.1 %
19.7
15.1 %
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Net sales by brand and channel
UGG brand
Wholesale
Direct-to-Consumer
Total
HOKA brand
Wholesale
Direct-to-Consumer
Total
Teva brand
Wholesale
Direct-to-Consumer
Total
Sanuk brand
Wholesale
Direct-to-Consumer
Total
Other brands
Wholesale
Direct-to-Consumer
Total
Total
Total Wholesale
Total Direct-to-Consumer
Total
Years Ended March 31,
2023
Amount
2022
Amount
Change
Amount
%
$ 1,004,356 $ 1,088,082 $
(83,726)
924,855
893,887
1,929,211
1,981,969
30,968
(52,758)
(7.7) %
3.5
(2.7)
925,877
487,039
1,412,916
149,111
33,950
183,061
27,678
10,288
37,966
53,653
10,479
64,132
628,674
262,920
891,594
129,094
33,643
162,737
30,316
12,779
43,095
60,573
10,371
70,944
297,203
224,119
521,322
20,017
307
20,324
(2,638)
(2,491)
(5,129)
(6,920)
108
(6,812)
$ 3,627,286 $ 3,150,339 $
476,947
$ 2,160,675 $ 1,936,739 $
223,936
1,466,611
1,213,600
253,011
$ 3,627,286 $ 3,150,339 $
476,947
47.3
85.2
58.5
15.5
0.9
12.5
(8.7)
(19.5)
(11.9)
(11.4)
1.0
(9.6)
15.1 %
11.6 %
20.8
15.1 %
Total net sales increased primarily due to higher DTC channel net sales for the HOKA and UGG brands, as
well as higher wholesale channel net sales for the HOKA and Teva brands, partially offset by lower UGG brand
domestic wholesale net sales. Further, we experienced an increase of 15.4% in the total volume of pairs sold to
59,100 from 51,200 compared to the prior period. These results include unfavorable impacts from the strengthening
of the US dollar on foreign sales. On a constant currency basis, net sales increased by 18.4% compared to the prior
period. Drivers of significant changes in net sales, compared to the prior period, were as follows:
•
•
•
DTC net sales increased primarily due to higher global net sales for the HOKA and UGG brands,
primarily driven by consumer acquisition and retention online through higher demand across an
assortment of franchise road running updates as well as trail, hiking, and fitness categories for the
HOKA brand, and across our Classics franchise derivatives and multi-use hybrid products for the
UGG brand. Comparable DTC net sales for the 52 weeks ended April 2, 2023, increased by 23.1%
compared to the prior year period.
Wholesale net sales of the HOKA brand increased globally from gaining market share with existing
customer accounts along with increasing volume shipped for select incremental door expansion
within strategic accounts, driven by higher demand across an assortment of franchise road running
updates, as well as trail and hiking categories.
Wholesale net sales of the UGG brand decreased due to lower domestic net sales, primarily driven
by lapping the benefit of managing and refilling existing marketplace inventory levels caused by
supply chain and pandemic related disruptions in the prior period. These results include unfavorable
impacts from the strengthening of the US dollar on foreign sales.
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•
•
Wholesale net sales of the Teva brand increased globally primarily driven by higher international
distributor shipments, as well as higher domestic demand for the sport sandal category. These
results include lapping benefits from supply chain disruptions in the prior period.
International net sales, which are included in the reportable operating segment net sales presented
above, increased by 19.7% and represented 32.4% and 31.2% of total net sales for the years ended
March 31, 2023, and 2022, respectively. These changes were primarily driven by higher net sales for
the HOKA and UGG brands, across international regions and channels, and higher net sales for the
Teva brand in the wholesale channel. These results include unfavorable impacts from the
strengthening of the US dollar on foreign sales, primarily for the UGG HOKA, and Teva brands.
Gross Profit. Gross margin decreased to 50.3% from 51.0%, compared to the prior period, primarily due to
unfavorable changes in foreign currency exchange rates, domestic promotional and closeout activity, and higher
ocean freight rates embedded in inventory sold. These unfavorable margin pressures were partially offset by a
decrease in air freight usage relative to the prior period, favorable HOKA brand mix shift that reflects domestic price
increases, and favorable channel mix shift to DTC.
Selling, General, and Administrative Expenses. While we had lower SG&A expenses as a percentage of net
sales, the net dollar increase in SG&A expenses, compared to the prior period, was primarily the result of the
following:
•
•
•
•
•
•
Increased payroll and related costs of approximately $52,000, including for outside services, partially
offset by lower performance-based compensation.
Increased other variable net selling expenses of approximately $38,100, primarily due to higher rent
and occupancy expenses, materials and supplies costs, credit card fees, sales commissions, and
warehousing fees.
Increased other operating expenses of approximately $20,100, primarily due to higher travel
expenses, IT expenses for programming and software costs, depreciation expenses, and sample
expenses, partially offset by lower legal fees and net insurance premiums.
Increased variable advertising and promotion expenses of approximately $15,700, primarily due to
higher marketing expenses for the HOKA brand to drive global brand awareness and market share
gains, highlight new product categories, and provide localized marketing, partially offset by lower
advertising and promotion expenses for the UGG brand.
Increased allowances for trade accounts receivable of approximately $2,800, primarily due to an
increase in bad debt expense to account for higher open accounts receivable balances.
Increased net foreign currency-related losses of $1,400, primarily driven by remeasurements with
unfavorable changes in Canadian and Asian exchange rates against the US dollar.
Income from Operations. Income (loss) from operations by reportable operating segment was as follows:
Income (loss) from operations
UGG brand wholesale
HOKA brand wholesale
Teva brand wholesale
Sanuk brand wholesale
Other brands wholesale
Direct-to-Consumer
Years Ended March 31,
2023
Amount
2022
Amount
Change
Amount
%
$
267,013 $
285,257
315,240 $
155,344
32,595
2,891
(1,678)
33,294
6,463
14,028
508,948
435,414
(48,227)
129,913
(699)
(3,572)
(15,706)
73,534
(15.3) %
83.6
(2.1)
(55.3)
(112.0)
16.9
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Years Ended March 31,
2023
Amount
2022
Amount
Change
Amount
%
Unallocated overhead costs
(442,275)
(395,076)
(47,199)
Total
$
652,751 $
564,707 $
88,044
(11.9)
15.6 %
The increase in total income from operations, compared to the prior period, was primarily due to higher net
sales and lower SG&A expenses as a percentage of net sales, partially offset by lower gross margins. Drivers of
significant net changes in total income from operations, compared to the prior period, were as follows:
•
•
•
•
•
The increase in income from operations of HOKA brand wholesale was due to higher global net
sales at higher gross margins, combined with lower SG&A expenses as a percentage of net sales.
The increase in income from operations of the DTC channel was due to higher global net sales,
primarily for the HOKA and UGG brands, at lower gross margins, as well as lower DTC SG&A
expenses as a percentage of net sales.
The decrease in income from operations of UGG brand wholesale was due to lower domestic and
European net sales at lower gross margins, combined with higher SG&A expenses as a percentage
of net sales.
The decrease in income from operations of Other brands wholesale was due to lower Koolaburra
brand domestic net sales at lower gross margins, combined with higher SG&A expenses as a
percentage of net sales. These effects were further impacted by a write-off of inventory for other
brands.
The increase in unallocated overhead costs was due to higher payroll costs, higher other variable
net selling expenses, including materials and supplies costs and warehousing fees, and higher other
operating expenses, including depreciation, IT, and travel expenses.
Total Other (Income) Expense, Net. Total other income, net, compared to the prior period, increased due to
higher interest income on invested cash balances driven by higher average interest rates.
Income Tax Expense. Income tax expense and our effective income tax rate were as follows:
Income tax expense
Effective income tax rate
Years Ended March 31,
2023
2022
$
149,260 $
112,689
22.4 %
20.0 %
The net increase in our effective income tax rate compared to the prior period was primarily driven by higher
income from operations, including changes in jurisdictional mix of worldwide income before income taxes, as well as
higher reserves for uncertain tax positions for foreign audits, partially offset by higher net discrete tax benefits.
Foreign income before income taxes was $198,851 and $168,270 and worldwide income before income taxes
was $666,082 and $564,638 during the years ended March 31, 2023, and 2022, respectively. The slight net
increase in foreign income before income taxes as a percentage of worldwide income before income taxes,
compared to the prior period, was primarily due to lower foreign operating expenses as a percentage of worldwide
sales, partially offset by lower foreign gross profit as a percentage of foreign net sales.
For the years ended March 31, 2023, and 2022, we did not generate significant pre-tax earnings from any
countries which do not impose a corporate income tax. A small portion of our unremitted accumulated earnings of
non-US subsidiaries, for which no US federal or state income tax have been provided, are currently expected to be
reinvested outside of the US indefinitely. Such earnings would become taxable upon the sale or liquidation of these
subsidiaries. Refer to the section titled “Liquidity” below for further information.
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Net Income. The increase in net income, compared to the prior period, was primarily due to higher net sales
and lower SG&A expense as a percentage of net sales, partially offset by lower gross margins. Net income per
share increased, compared to the prior period, due to higher net income and lower weighted-average common
shares outstanding driven by stock repurchases.
Total Other Comprehensive Loss, Net of Tax. The increase in total other comprehensive loss, net of tax,
compared to the prior period, was primarily due to higher foreign currency translation losses relating to changes to
our net asset position for unfavorable Asian foreign currency exchange rates, partially offset by favorable European
foreign currency exchange rates.
Liquidity
We finance our working capital and operating requirements using a combination of cash and cash equivalents
balances, cash provided from ongoing operating activities and, to a lesser extent, available borrowings under our
revolving credit facilities. Our working capital requirements begin when we purchase raw and other materials and
inventories and continue until we ultimately collect the resulting trade accounts receivable. Given the historical
seasonality of our business, our working capital requirements fluctuate significantly throughout the fiscal year, and
we utilize available cash to build inventory levels during certain quarters in our fiscal year to support higher selling
seasons. While the impact of seasonality has been mitigated to some extent, we expect our working capital
requirements will continue to fluctuate from period to period.
As of March 31, 2023, our cash and cash equivalents are $981,795. We believe our cash and cash equivalents
balances, cash provided from ongoing operating activities, and available borrowings under our revolving credit
facilities, will provide sufficient liquidity to enable us to meet our working capital requirements and contractual
obligations for at least the next 12 months.
Our liquidity may be impacted by a number of factors, including our results of operations, the strength of our
brands and market acceptance of our products, impacts of seasonality and weather conditions, our ability to
respond to changes in consumer preferences and tastes, the timing of capital expenditures and lease payments,
our ability to collect our trade accounts receivables in a timely manner and effectively manage our inventories, our
ability to manage supply chain constraints, our ability to respond to the impacts and disruptions caused by the
pandemic, and our ability to respond to macroeconomic, political and legislative developments. We may require
additional cash resources due to changes in business conditions, strategic initiatives, or stock repurchase strategy,
a national or global economic recession, or other future developments, including any investments or acquisitions we
may decide to pursue, although we do not have any present commitments with respect to any such investments or
acquisitions.
If there are unexpected material impacts on our business in future periods and we need to raise or conserve
additional cash to fund our operations, we may seek to borrow under our revolving credit facilities, seek new or
modified borrowing arrangements, or sell additional debt or equity securities. The sale of convertible debt or equity
securities could result in additional dilution to our stockholders, and equity securities may have rights or preferences
that are superior to those of our existing stockholders. The incurrence of additional indebtedness would result in
additional debt service obligations, as well as covenants that would restrict our operations and further encumber our
assets. In addition, there can be no assurance that any additional financing will be available on acceptable terms, if
at all. Although we believe we have adequate sources of liquidity over the long term, factors such as a prolonged or
severe economic recession, inflationary pressure, or significant supply chain disruptions could adversely affect our
business and liquidity.
Repatriation of Cash. Our cash repatriation strategy, and by extension, our liquidity, may be impacted by
several additional considerations, which include future changes to or interpretations of global tax law and
regulations, and our actual earnings in future periods. During the year ended March 31, 2023, no cash and cash
equivalents were repatriated, however, during the year ended March 31, 2022, $120,000 of cash was repatriated.
As of March 31, 2023, and 2022, we have $299,114 and $133,053, respectively, of cash and cash equivalents held
by foreign subsidiaries, a portion of which may be subject to additional foreign withholding taxes if it were to be
repatriated. We continue to evaluate our cash repatriation strategy and we currently anticipate repatriating current
and future unremitted earnings of non-US subsidiaries only to the extent they have already been subject to US tax,
if such cash is not required to fund ongoing foreign operations. Refer to Note 5, "Income Taxes," of our consolidated
financial statements in Part IV within this Annual Report for further information.
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Stock Repurchase Program. We continue to evaluate our capital allocation strategy, and to consider further
opportunities to utilize our global cash resources in a way that will profitably grow our business, meet our strategic
objectives, and drive stockholder value, including by potentially repurchasing additional shares of our common
stock. On July 27, 2022, our Board of Directors approved an increase of $1,200,000 to our stock repurchase
authorization. As of March 31, 2023, the aggregate remaining approved amount under our stock repurchase
program is $1,356,635. The stock repurchase program does not obligate us to acquire any amount of common
stock and may be suspended at any time at our discretion. Refer to Note 10, "Stockholders' Equity," of our
consolidated financial statements in Part IV within this Annual Report for further information.
Capital Resources
Primary Credit Facility. We maintain bank credit facilities for working capital and general corporate purposes.
In December 2022, we refinanced in full and terminated our prior credit agreement originally entered into in
September 2018. The refinanced revolving credit facility agreement is with Citibank, N.A. (Citibank), as
administrative agent, Comerica Bank, as sole syndication agent, and the lenders party thereto (Credit
Agreement).The Credit Agreement provides for a five-year, $400,000 unsecured revolving credit facility (Primary
Credit Facility), contains a $25,000 sublimit for the issuance of letters of credit, and matures on December 19, 2027,
subject to extension on early termination as described in the Credit Agreement. As of March 31, 2023, we have no
outstanding balance, outstanding letters of credit of $958, and available borrowings of $399,042 under our Primary
Credit Facility.
China Credit Facility. Our revolving credit facility in China (China Credit Facility) is an uncommitted revolving
line of credit of up to CNY300,000, or $43,672. As of March 31, 2023, we have no outstanding balance, outstanding
bank guarantees of $29, and available borrowings of $43,643 under our China Credit Facility.
Japan Credit Facility. Our revolving credit facility in Japan (Japan Credit Facility) expired on January 31,
2023, and we cancelled the parent guarantee. If borrowing needs arise, Deckers Japan is able to borrow from one
or more of our subsidiaries through intercompany loans as permitted under the Primary Credit Facility.
Debt Covenants. As of March 31, 2023, we are in compliance with all financial covenants under our Primary
Credit Facility and China Credit Facility.
Refer to Note 6, "Revolving Credit Facilities," of our consolidated financial statements in Part IV within this
Annual Report for further information on our capital resources.
Cash Flows
The following table summarizes the major components our consolidated statements of cash flows for the
periods presented:
Net cash provided by operating activities
$
537,422 $
172,353 $
365,069
211.8 %
Years Ended March 31,
2023
Amount
2022
Amount
Change
Amount
%
Net cash used in investing activities
(81,013)
(51,009)
(30,004)
(309,031)
(367,482)
58,451
(58.8)
15.9
Net cash used in financing activities
Effect of foreign currency exchange rates on
cash and cash equivalents
(9,110)
304
(9,414)
(3,096.7)
Net change in cash and cash equivalents
$
138,268 $
(245,834) $
384,102
156.2 %
Operating Activities. Our primary source of liquidity is net cash provided by operating activities, which is
primarily driven by our net income after non-cash adjustments and changes in working capital. The increase in net
cash provided by operating activities during the year ended March 31, 2023, compared to the prior period, was
primarily due to $271,694 of favorable changes in operating assets and liabilities as well as $93,375 of favorable net
income after non-cash adjustments, including from favorable changes in deferred tax expense, and depreciation,
amortization, and accretion. The favorable changes in operating assets and liabilities were primarily due to net
favorable changes in inventories, trade accounts receivable, net, other accrued expenses, income tax payable, and
income tax receivable, partially offset by net unfavorable changes in trade accounts payable and other assets.
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Significant impacts to working capital compared to the prior period were primarily due to changes in the
following:
(1) timing of purchases of inventories to support higher demand for the HOKA brand and maintain global
service levels to mitigate the impacts of supply chain disruption;
(2) a higher rate of collections for trade accounts receivable, net, on higher net sales, partially offset by higher
trade accounts receivable allowances; and
(3) lower net trade accounts payable due to timing of payments and lower freight costs.
Investing Activities. The increase in net cash used in investing activities during the year ended March 31,
2023, compared to the prior period, was primarily due to higher leasehold improvements for our warehouses and
DCs, capital expenditures for IT infrastructure and other technology costs, and refreshes of existing and new retail
stores.
Financing Activities. The decrease in net cash used in financing activities during the year ended March 31,
2023, compared to the prior period, was primarily due to lower stock repurchases at a lower price per share.
Contractual Obligations
The following table summarizes our significant contractual obligations as of March 31, 2023, and the effects of
such obligations in future periods:
Payments Due by Period
Total
Less than
1 Year
1-3 Years
3-5 Years
More than
5 Years
Operating lease obligations (1)
$ 277,175 $
54,948 $
87,251 $
72,617 $
62,359
Purchase obligations for product (2)
Purchase obligations for commodities (3)
Other purchase obligations (4)
Net unrecognized tax benefits (5)
668,388
175,099
234,837
24,663
668,388
80,462
83,760
1,829
—
94,637
140,426
22,834
—
—
10,651
—
—
—
—
—
Total
$ 1,380,162 $ 889,387 $ 345,148 $
83,268 $
62,359
(1) Our operating lease commitments consist primarily of building leases for our retail locations, warehouse and
DCs, and regional offices, and include the undiscounted cash lease payments owed under the terms of our
operating lease agreements. In addition to the above operating lease commitments outstanding, there is
$19,506 of legally binding minimum lease payments due pursuant to various retail store leases signed but not
yet commenced which are not recorded in our consolidated financial statements as of March 31, 2023.
(2) Our purchase obligations for product consist mostly of open purchase orders issued that we expect to fulfill in
the ordinary course of business. Outstanding purchase orders are primarily issued to our third-party
manufacturers and are expected to be paid in less than a year. We can cancel a significant portion of the
purchase obligations under certain circumstances; however, the occurrence of such circumstances is
generally limited. As a result, the amount does not necessarily reflect the dollar amount of our binding
commitments or minimum purchase obligations, and instead reflects an estimate of our future payment
commitments based on information currently available. During fiscal year 2023, we experienced lower
logistics lead times and transit times from origin to destination for our inventory, which resulted in reduced
reliance on advance purchase commitments for product, compared to the prior period.
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(3) Our purchase obligations for commodities include sheepskin, wool (primarily for UGGpure), leather, and
sugarcane derived resin or EVA, and represent remaining commitments under existing supply agreements,
which are subject to minimum volume commitments (collectively, commodity contracts). We expect purchases
under commodity contracts in the ordinary course of business will eventually exceed the minimum
commitment levels. There are $16,243 of deposits included in the amount above that have not been fully
consumed as of March 31, 2023, which are recorded in other assets in the consolidated balance sheets. This
amount reflects remaining minimum commitments we expect will be consumed in future periods in the
ordinary course of business, and that any remaining deposits are expected to become fully refundable or will
be reflected as a credit against purchases.
(4) Our other purchase obligations consist of non-cancellable minimum commitments for 3PL provider
arrangements, e-commerce supply chain services, IT services, promotional expenses, sales management
services, and other commitments under service contracts, which are required to be paid during our fiscal
years ending March 31, 2024, through 2028. Amounts excluded from these other purchase obligations include
any capital expenditures that will be made before the end of our next fiscal year, which we estimate will range
from approximately $110,000 to $120,000. We anticipate these expenditures will primarily relate to the build-
out of a third US DC as well as upgrades to our existing warehouse and DCs, expanding our global retail
store fleet (including for the HOKA brand), IT infrastructure and system upgrades, and upgrades to our
existing global office facilities. However, the actual amount of our future capital expenditures may differ
significantly from this estimate depending on numerous factors, including the timing of facility openings, as
well as unforeseen needs to replace or refresh existing assets.
(5) Net unrecognized tax benefits are gross unrecognized tax benefits, less federal benefit for state income taxes,
related to uncertain tax positions taken in our income tax return that would impact our effective tax rate, if
recognized. As of March 31, 2023, the timing of future cash outflows is highly uncertain related to expirations
of statute of limitations of $18,856 and, since we are unable to make a reasonable estimate of the period of
cash settlement, it is excluded from the table above. Refer to Note 5, "Income Taxes," of our consolidated
financial statements in Part IV within this Annual Report for further information on our uncertain tax positions.
Refer to Note 7, "Commitments and Contingencies," of our consolidated financial statements in Part IV within
this Annual Report for further information on our operating leases, purchase obligations, capital expenditures, and
other contractual obligations and commitments.
Critical Accounting Policies and Estimates
Management must make certain estimates and assumptions that affect the amounts reported in the
consolidated financial statements, based on historical experience, existing and known circumstances, authoritative
accounting pronouncements, and other factors that we believe to be reasonable, but actual results could differ
materially from these estimates. The full impact of macroeconomic factors on our business and operations,
including inflationary pressures, foreign currency exchange rate volatility, changes in interest rates, changes in
commodity pricing, and recessionary concerns, is unknown and cannot be reasonably estimated. However,
management believes it has made appropriate accounting estimates in accordance with US GAAP based on the
facts and circumstances available as of the reporting date, and actual results could differ materially from these
estimates and assumptions, which may result in material effects on our financial condition, results of operations and
liquidity.
Refer to Note 1, "General," of our consolidated financial statements in Part IV within this Annual Report for a
discussion of our significant accounting policies and use of estimates, as well as the impact of recent accounting
pronouncements.
Revenue Recognition. Revenue is recognized when a performance obligation is completed at a point in time
and when the customer has obtained control. Control passes to the customer when they have the ability to direct
the use of, and obtain substantially all the remaining benefits from, the goods transferred. The amount of revenue
recognized is based on the transaction price, which represents the invoiced amount less known actual amounts or
estimates of variable consideration. We recognize revenue and measure the transaction price net of taxes, including
sales taxes, use taxes, value-added taxes, and some types of excise taxes, collected from customers and remitted
to governmental authorities. We present revenue gross of fees and sales commissions. Sales commissions are
expensed as incurred and are recorded in SG&A expenses in the consolidated statements of comprehensive
income.
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Wholesale and international distributor revenue are each recognized either when products are shipped or
when delivered, depending on the applicable contract terms. Retail store and e-commerce revenue are recognized
at the point of sale and upon shipment, respectively. Shipping and handling costs paid to third-party shipping
companies are recorded as cost of sales in the consolidated statements of comprehensive income. Shipping and
handling costs are a fulfillment service, and, for certain wholesale and all e-commerce transactions, revenue is
recognized when the customer is deemed to obtain control upon the date of shipment.
Accounts Receivable Allowances. The following table summarizes critical accounting estimates for accounts
receivable allowances and reserves:
As of March 31,
2023
2022
Amount
% of Gross
Trade Accounts
Receivable
Amount
% of Gross
Trade Accounts
Receivable
Gross trade accounts receivable
$
334,015
100.0 % $
333,279
100.0 %
Allowance for doubtful accounts
Allowance for sales discounts
Allowance for chargebacks
Trade accounts receivable, net
$
(10,576)
(5,656)
(16,272)
301,511
(3.2)
(1.7)
(4.8)
90.3 % $
(9,044)
(2,831)
(18,716)
302,688
(2.7)
(0.9)
(5.6)
90.8 %
Allowance for Doubtful Accounts. We provide an allowance against trade accounts receivable for estimated
losses that may result from customers’ inability to pay. We determine the amount of the allowance by analyzing
known uncollectible accounts, aged trade accounts receivable, economic conditions and forecasts, historical
experience, and the customers’ creditworthiness. Trade accounts receivable that are subsequently determined to be
uncollectible are charged or written off against this allowance. The allowance includes specific allowances for trade
accounts, of which all or a portion are identified as potentially uncollectible based on known or anticipated losses.
Additions to the allowance represent bad debt expense estimates which are recorded in SG&A expenses in the
consolidated statements of comprehensive income.
Allowance for Sales Discounts. We provide a trade accounts receivable allowance for sales discounts for
wholesale channel sales, which reflects a discount that customers may take, generally based on meeting certain
order, shipment or prompt payment terms. We use the amount of the discounts that are available to be taken
against the period end trade accounts receivable to estimate and record a corresponding reserve for sales
discounts. Additions to the allowance are recorded against gross sales in the consolidated statements of
comprehensive income.
Allowance for Chargebacks. We provide a trade accounts receivable allowance for chargebacks and
markdowns for wholesale channel sales. When customers pay their invoices, they may take deductions against
their invoices that can include chargebacks for price differences, markdowns, short shipments, and other reasons.
Therefore, we record an allowance primarily for known circumstances as well as unknown circumstances based on
historical trends related to the timing and amount of chargebacks taken against customer invoices. Additions to the
allowance are recorded against gross sales or SG&A expenses in the consolidated statements of comprehensive
income.
Refer to Note 2, "Revenue Recognition," of our consolidated financial statements in Part IV within this Annual
Report for further information regarding the components of variable consideration, including allowances for doubtful
accounts, sales discounts, and chargebacks.
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Sales Return Liability. The following tables summarize estimates for our sales return liability as a percentage
of the most recent quarterly net sales by channel:
Net Sales
Wholesale
Direct-to-Consumer
Total
Sales Return Liability
Wholesale
Direct-to-Consumer
Total
Three Months Ended March 31,
2023
2022
Amount
% of Net Sales
Amount
% of Net Sales
448,425
343,146
791,571
56.7 % $
448,848
43.3
287,159
100.0 % $
736,007
61.0 %
39.0
100.0 %
As of March 31,
2023
2022
Amount
% of Net Sales
Amount
% of Net Sales
(33,764)
(11,558)
(45,322)
(7.5) % $
(3.4)
(5.7) % $
(31,082)
(8,785)
(39,867)
(6.9) %
(3.1)
(5.4) %
$
$
$
$
Reserves are recorded for anticipated future returns of goods shipped prior to the end of the reporting period.
In general, we accept returns for damaged or defective products for up to one year. We also have a policy whereby
returns are generally accepted from customers and end consumers between 30 to 90 days from the point of sale for
cash or credit. Sales returns are a refund asset for the right to recover the inventory and a refund liability for the
stand-ready right of return. Changes to the refund asset for the right to recover the inventory are recorded against
cost of sales and changes to the refund liability are recorded against gross sales in the consolidated statements of
comprehensive income. The refund asset for the right to recover the inventory is recorded in other current assets
and the related refund liability is recorded in other accrued expenses in the consolidated balance sheets.
The amounts of these reserves are determined based on several factors, including known and actual returns,
historical returns, and any recent events that could result in a change from historical return rates. For our wholesale
channel, we base our estimate of sales returns on any approved customer requests for returns, historical returns
experience, and any recent events that could result in a change from historical returns rates, among other factors.
For our DTC channel and reportable operating segment, we estimate sales returns using a lag compared to the
same prior period and consider historical returns experience and any recent events that could result in a change
from historical returns, among other factors.
Inventories. The following tables summarize estimates for our inventories:
Gross Inventories
Write-down of inventories
Inventories
As of March 31,
2023
2022
Amount
$
$
566,778
(33,926)
532,852
% of Gross
Inventory
Amount
% of Gross
Inventory
100.0 % $
527,531
(6.0)
(20,735)
94.0 % $
506,796
100.0 %
(3.9)
96.1 %
Inventories, which are principally comprised of finished goods on hand and in transit, are stated at the lower of
cost (weighted average) or net realizable value at each financial statement date. Cost includes sourcing as well as
inventory procurement costs, including freight, duty, and handling fees which are subsequently expensed to cost of
sales. We review inventory on a regular basis for excess, obsolete, and impaired inventory to evaluate write-downs
to the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course
of business, less reasonably predictable costs to sell.
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Operating Lease Assets and Lease Liabilities. We recognize operating lease assets and lease liabilities in
the consolidated balance sheets on the lease commencement date, based on the present value of the outstanding
lease payments over the reasonably certain lease term. The lease term includes the non-cancelable period at the
lease commencement date, plus any additional periods covered by an option to extend (or not to terminate) the
lease that is reasonably certain to be exercised, or an option to extend (or not to terminate) a lease that is controlled
by the lessor.
We discount unpaid lease payments using the interest rate implicit in the lease or, if the rate cannot be readily
determined, our incremental borrowing rate (IBR). We cannot determine the interest rate implicit in the lease
because we do not have access to the lessor's estimated residual value or the amount of the lessor's deferred initial
direct costs. Therefore, we derive a discount rate at the lease commencement date by utilizing our IBR, which is
based on what we would have to pay on a collateralized basis to borrow an amount equal to our lease payments
under similar terms. Because we do not currently borrow on a collateralized basis under our revolving credit
facilities, we use the interest rate we pay on our non-collateralized borrowings under our Primary Credit Facility as
an input for deriving an appropriate IBR, adjusted for the amount of the lease payments, the lease term, and the
effect on that rate of designating specific collateral with a value equal to the unpaid lease payments for that lease.
Refer to Note 7, "Commitments and Contingencies," of our consolidated financial statements in Part IV within
this Annual Report for further information, including more details of our accounting policy elections and disclosures.
Definite-Lived Intangible and Other Long-Lived Assets. Definite-lived intangible and other long-lived
assets, including definite-lived trademarks, machinery and equipment, internal-use software, operating lease assets
and related leasehold improvements, are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset or asset group may not be recoverable. At least quarterly, we evaluate
factors that would necessitate an impairment assessment, which include a significant adverse change in the extent
or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could
affect the value of the asset, or a significant decline in the observable market value of an asset, among others.
When an impairment-triggering event has occurred, we test for recoverability of the asset group’s carrying
value using estimates of undiscounted future cash flows based on the existing service potential of the applicable
asset group. In determining the service potential of a long-lived asset group, we consider the remaining useful life,
cash-flow generating capacity, and physical output capacity. These estimates include the undiscounted future cash
flows associated with future expenditures necessary to maintain the existing service potential. These assets are
grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent
of the cash flows of other assets and liabilities. If impaired, the asset or asset group is written down to fair value
based on either discounted future cash flows or appraised values. An impairment loss, if any, would only reduce the
carrying amount of long-lived assets in the group based on the fair value of the asset group.
We did not identify any definite-lived intangible asset triggering events during the years ended March 31, 2023,
and 2022.
During the years ended March 31, 2023, and 2022, we recorded impairment charges of $2,817 and $3,186,
respectively, within our DTC reportable operating segment in SG&A expenses in the consolidated statements of
comprehensive income for retail store-related operating lease and other long-lived assets. These impairment
charges were due to the underperformance of certain retail stores that resulted in the carrying value exceeding the
estimated fair value, which is determined based on an estimate of future discounted cash flows.
Refer to Note 1, "General," and Note 3, "Goodwill and Other Intangible Assets," of our consolidated financial
statements in Part IV within this Annual Report for further information on our definite-lived intangible and other long-
lived assets.
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Income Taxes. Income taxes are accounted for using the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to temporary differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates that will be in effect for the years in which those tax assets and
liabilities are expected to be realized or settled. We record a valuation allowance to reduce deferred tax assets to
the amount that is believed more likely than not to be realized. We believe it is more likely than not that forecasted
income, together with future reversals of existing taxable temporary differences, will be sufficient to recover our
deferred tax assets. In the event that we determine all, or part of our net deferred tax assets are not realizable in the
future, we will record an adjustment to the valuation allowance and a corresponding charge to earnings in the period
such determination is made.
The calculation of tax liabilities involves significant judgment in estimating the impact of uncertainties in the
application of US GAAP and complex tax laws. Resolution of these uncertainties in a manner inconsistent with our
expectations could have a material impact on our financial condition and results of operations. We recognize tax
benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained on
examination by the taxing authorities, based on the technical merits of the position. The tax benefits recorded in the
consolidated financial statements from such positions are then measured based on the largest benefit that has a
greater than 50% likelihood of being realized upon ultimate settlement.
We determine on a regular basis the amount of undistributed earnings that will be indefinitely reinvested in our
non-US operations. This assessment is based on the cash flow projections and operational and fiscal objectives of
each of our US and foreign subsidiaries. We have not changed our indefinite reinvestment assertion of foreign
earnings other than previously taxed earnings and profits.
Refer to Note 5, "Income Taxes," of our consolidated financial statements in Part IV within this Annual Report
for further information on our income taxes and tax strategy.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Commodity Price Risk
For the manufacturing of our products, we purchase from suppliers certain raw materials that are affected by
commodity prices, which include sheepskin, wool (primarily for UGGpure), leather, and sugarcane derived resin or
EVA.
The supply of sheepskin, which is used to manufacture a significant portion of the UGG brand products, is in
high demand and there are a limited number of suppliers that can meet our expectations for the quantity and quality
of sheepskin that we require. Most of our sheepskin is purchased from two tanneries in China, which is sourced
primarily from Australia and the UK. While we have experienced fairly stable pricing in recent years, historically
there have been significant fluctuations in the price of sheepskin as the demand for this commodity from our
consumers and our competitors has changed. We believe significant factors affecting the price of sheepskin include
weather patterns, harvesting decisions, incidence of disease, the price of other commodities such as wool and
leather, the demand for our products and the products of our competitors, use of substitute products or components,
and global economic conditions. Any factors that increase the demand for, or decrease the supply of, sheepskin
could cause significant increases in the price of sheepskin.
We typically fix prices for all of our raw and other materials with firm pricing agreements on a seasonal basis.
For sheepskin, leather, and repurposed wool (or UGGpure), we use purchasing contracts (and refundable deposits
for certain sheepskin supply agreements) to attempt to manage price volatility as an alternative to hedging
commodity prices. Recently, we have begun to enter into purchasing contracts for sugarcane derived resin or EVA,
which is used to manufacture a significant portion of UGG brand products. While EVA purchasing contracts do not
typically require deposits when minimum volumes are not fully consumed; they are typically non-cancellable and
subject to fees. The purchasing contracts and other pricing arrangements we use for our commodities typically
result in purchase obligations which are not recorded in our consolidated balance sheets. In the event of significant
price increases for these commodities, we will likely not be able to adjust our selling prices sufficiently to eliminate
the impact of such increases on our profitability. We continue to evaluate our pricing agreement strategy for our
commodities, including alternative bio-based materials.
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Refer to the section titled “Contractual Obligations” above within Part II, Item 7, “Management's Discussion and
Analysis of Financial Condition and Results of Operations,” and Note 7, "Commitments and Contingencies," of our
consolidated financial statements in Part IV within this Annual Report for further information on our minimum
purchase obligations for commodities.
Foreign Currency Exchange Rate Risk
Fluctuations in currency exchange rates, primarily between the US dollar and the currencies of Europe, Asia,
Canada, and Latin America, may affect our results of operations, financial position, and cash flows. We face market
risk to the extent foreign currency exchange rate fluctuations affect our foreign assets, liabilities, revenues, and
expenses. Although most of our sales and inventory purchases are denominated in US dollars, these sales and
inventory purchases may be impacted by fluctuations in the exchange rates between the US dollar and local
currencies in the international markets where our products are sold and manufactured. We are exposed to financial
statement transaction gains and losses as a result of remeasuring our monetary assets and liabilities that are
denominated in currencies other than our subsidiaries’ functional currencies. We translate all assets and liabilities
denominated in foreign currencies into US dollars using the exchange rate as of the end of the reporting period.
Gains and losses resulting from translating assets and liabilities from our subsidiaries' functional currencies to US
dollars are recorded in other comprehensive income.
Foreign currency exchange rate fluctuations affect our results of operations and can make comparisons from
year to year more difficult. Foreign currency exchange rate fluctuations had an incremental negative impact on our
results of operations for the year ended March 31, 2023, when compared to the year ended March 31, 2022.
We hedge certain foreign currency exchange rate risks from existing assets and liabilities, as well as
forecasted sales. As our international operations grow and we increase purchases and sales in foreign currencies,
we will continue to evaluate our hedging strategy and may utilize additional derivative instruments to hedge our
foreign currency exchange rate risk. We do not use foreign currency exchange rate forward contracts for trading
purposes.
As of March 31, 2023, a hypothetical 10.0% foreign currency exchange rate fluctuation would have resulted in
an immaterial aggregate change to our consolidated statements of comprehensive income during the year ended
March 31, 2023, due to no outstanding balances for derivative instruments. As of March 31, 2023, there are no
known factors that we would expect to result in a material change in the general nature of our foreign currency
exchange rate risk exposure.
Refer to Note 9, "Derivative Instruments," of our consolidated financial statements in Part IV within this Annual
Report for further information on our use of derivative contracts.
Interest Rate Risk
Our market risk exposure with respect to our revolving credit facilities is tied to changes in applicable interest
rates, including the adjusted Alternate Base Rate, the Secured Overnight Financing Rate, the adjusted Euro
InterBank Offered Rate, the Sterling Overnight Index Average, and the Canadian Dollar Offered Rate for our
Primary Credit Facility, and the People’s Bank of China market rate for our China Credit Facility.
A hypothetical 1.0% increase in interest rates for borrowings made under our revolving credit facilities would
have resulted in an immaterial aggregate change to interest expense recorded in our consolidated statements of
comprehensive income during the year ended March 31, 2023, due to no outstanding balances under our revolving
credit facilities.
Refer to Note 6, "Revolving Credit Facilities," of our consolidated financial statements in Part IV within this
Annual Report for further information on our revolving credit facilities.
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements, the Financial Statement Schedule, and the Reports of Independent
Registered Public Accounting Firm, are filed in a separate section following Part IV, as shown on the index under
Item 15, “Exhibits and Financial Statement Schedule,” within this Annual Report.
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Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures, as defined in Rule 13a-15(e) under the
Exchange Act, which are designed to provide reasonable assurance that information required to be disclosed in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the
time periods specified in the SEC’s rules and forms. In designing and evaluating our disclosure controls and
procedures, our management recognized that any system of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours is
designed to do, and management necessarily is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures. In addition, the design of any system of controls is also based in
part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions, or the degree of compliance with policies or procedures may
deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.
Under the supervision and with the participation of management, we conducted an evaluation of the
effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2023. Based on
that evaluation, our Principal Executive Officer (PEO) and Principal Financial and Accounting Officer (PFAO)
concluded that our disclosure controls and procedures are effective at a reasonable assurance level as of March 31,
2023.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is a process
designed under the supervision of our PEO and PFAO to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of our financial statements for external reporting purposes in accordance with
US GAAP. Because of inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
As of March 31, 2023, our management, including our PEO and PFAO, assessed the effectiveness of our
internal control over financial reporting using the criteria set forth in Internal Control — Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (commonly referred to as
COSO). Based on this assessment, our management concluded that our internal control over financial reporting
was effective based on those criteria. The registered public accounting firm that audited our consolidated financial
statements in Part IV within this Annual Report has issued an attestation report on our internal control over financial
reporting. Refer to Part IV, “Report of Independent Registered Public Accounting Firm - Internal Control Over
Financial Reporting,” on page F-4 within this Annual Report.
Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the year ended March 31, 2023,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Although we have modified our workplace practices globally due to the pandemic, resulting in most of our
employees working remotely, this has not materially affected our internal control over financial reporting. We are
continually monitoring and assessing the impacts and disruptions caused by the pandemic to ensure there are no
material effects on the design and operating effectiveness of our internal control over financial reporting.
Principal Executive Officer and Principal Financial and Accounting Officer Certifications
The certifications of our PEO and PFAO required by Rule 13a-14(a) of the Exchange Act are filed as Exhibit
31.1 and Exhibit 31.2, and furnished as Exhibit 32, to this Annual Report. This Part II, Item 9A, should be read in
conjunction with such certifications for a more complete understanding of the topics presented.
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Item 10. Directors, Executive Officers, and Corporate Governance
PART III
The information required by this item will be disclosed in our definitive proxy statement on Schedule 14A
(Proxy Statement) for our 2023 annual meeting of stockholders and is incorporated herein by reference. Our Proxy
Statement will be filed with the SEC within 120 days after the end of the year ended March 31, 2023, pursuant to
Regulation 14A under the Exchange Act.
Item 11. Executive Compensation
The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by
reference.
Item 14. Principal Accounting Fees and Services
The information required by this item will be disclosed in the Proxy Statement and is incorporated herein by
reference.
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Item 15. Exhibits and Financial Statement Schedule
PART IV
Refer to Part IV, “Index to Consolidated Financial Statements and Financial Statement Schedule,” on page F-1
within this Annual Report for our Consolidated Financial Statements and the Reports of Independent Registered
Public Accounting Firm.
Exhibit
Number
EXHIBIT INDEX
Description of Exhibit
3.1 Amended and Restated Certificate of Incorporation of Deckers Outdoor Corporation, as amended
through May 27, 2010 (Exhibit 3.1 to the Registrant's Form 10-Q filed on August 9, 2010, and
incorporated by reference herein)
3.2 Amended and Restated Bylaws of Deckers Outdoor Corporation, as amended through June 5, 2018
(Exhibit 3.1 to the Registrant’s Form 8-K filed on June 5, 2018, and incorporated by reference
herein)
4.1 Description of the Capital Stock of Deckers Outdoor Corporation (Exhibit 4.1 to the Registrant’s
Form 10-K filed on May 27, 2022, and incorporated by reference herein)
10.1 Credit Agreement, dated December 19, 2022, by and among Deckers Outdoor Corporation,
Deckers Europe Limited, Deckers UK Ltd., Deckers Benelux B.V., Deckers Outdoor Canada ULC,
Deckers Outdoor International Limited, Deckers Coromar, LLC, DBrands SGP Pte. Ltd., Citibank,
N.A., as administrative agent, joint lead arranger and joint bookrunner, Comerica Bank, as sole
syndication agent, joint lead arranger and joint bookrunner, HSBC Bank USA, National Association,
as joint lead arranger and joint bookrunner, and the lenders party thereto (Exhibit 10.1 to the
Registrant’s Form 8-K filed on December 21, 2022, and incorporated by reference herein)
†10.2 First Amendment to Standard Industrial Lease (Net), dated June 6, 2017, by and between Moreno
Knox, LLC, and Deckers Outdoor Corporation for distribution center at 17791 Perris Blvd., Moreno
Valley, CA 92551 (Exhibit 10.6 to the Registrant’s Form 10-K filed on May 30, 2018, and
incorporated by reference herein)
10.3 Second Amendment to Standard Industrial Lease (Net), dated July 17, 2017, by and between
Moreno Knox, LLC, and Deckers Outdoor Corporation for distribution center at 17791 Perris Blvd.,
Moreno Valley, CA 92551 (Exhibit 10.7 to the Registrant’s Form 10-K filed on May 30, 2018, and
incorporated by reference herein)
†10.4 Standard Industrial Lease (Net), dated February 10, 2021, by and between Westpoint Building II,
LLC and Deckers Outdoor Corporation for distribution center at 2633 Westpoint Blvd., Mooresville,
IN 46158 (Exhibit 10.4 to the Registrant’s Form 10-K filed on May 28, 2021, and incorporated by
reference herein)
†10.5 Standard Industrial Lease (Net), dated April 20, 2022, by and between Westpoint Building V, LLC,
and Deckers Outdoor Corporation for distribution center at 2723 Westpoint Blvd., Mooresville, IN
46158 (Exhibit 10.5 to the Registrant’s Form 10-K filed on May 27, 2022, and incorporated by
reference herein)
†10.6 Standard Industrial Lease (Net), dated December 5, 2013, by and between Moreno Knox, LLC, and
Deckers Outdoor Corporation for distribution center at 17791 Perris Blvd., Moreno Valley, CA 92551
(Exhibit 10.6 to the Registrant’s Form 10-K filed on March 3, 2014, and incorporated by reference
herein)
#10.7 Form of Indemnification Agreement (Exhibit 10.1 to the Registrant’s Form 8-K filed on June 2, 2008,
and incorporated by reference herein)
#10.8 Form of Change in Control and Severance Agreement (Exhibit 10.2 to the Registrant’s Form 10-Q
filed on August 6, 2020, and incorporated by reference herein)
#10.9 Deckers Outdoor Corporation 2006 Equity Incentive Plan (Appendix A to the Registrant's Definitive
Proxy Statement filed on April 21, 2006, and incorporated by reference herein)
#10.10 First Amendment to Deckers Outdoor Corporation 2006 Equity Incentive Plan, as amended through
May 9, 2007 (Appendix A to the Registrant's Definitive Proxy Statement filed on April 9, 2007, and
incorporated by reference herein)
#10.11 Deckers Outdoor Corporation Second Amended and Restated Deferred Stock Unit Compensation
Plan, effective December 16, 2015 (Exhibit 10.1 to the Registrant's Form 10-Q filed on November
9, 2017, and incorporated by reference herein)
#10.12 Deckers Outdoor Corporation Amended and Restated Deferred Compensation Plan, effective July
1, 2016 (Exhibit 10.2 to the Registrant’s Form 10-Q filed on November 9, 2017, and incorporated by
reference herein)
51
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Exhibit
Number
Description of Exhibit
#10.13 Deckers Outdoor Corporation 2015 Employee Stock Purchase Plan (Appendix A to the Registrant's
Definitive Proxy Statement filed on July 29, 2015, and incorporated by reference herein)
#10.14 Deckers Outdoor Corporation 2015 Stock Incentive Plan (Appendix B to the Registrant's Definitive
Proxy Statement filed on July 29, 2015, and incorporated by reference herein)
#10.15 Deckers Outdoor Corporation Management Incentive Plan (Exhibit 10.1 to the Registrant’s Form
10-Q filed on August 10, 2015, and incorporated by reference herein)
#10.16 Form of Performance Stock Option Agreement under 2015 Stock Incentive Plan (Exhibit 10.1 to the
Registrant’s Form 8-K filed on November 28, 2016, and incorporated by reference herein)
†#10.17 Form of Performance Stock Option Agreement under Deckers Outdoor Corporation 2015 Stock
Incentive Plan (Exhibit 10.3 to the Registrant’s Form 10-Q filed on August 9, 2017, and incorporated
by reference herein)
#10.18 Form of Stock Unit Award Agreement (2020 Time-Based RSU) under Deckers Outdoor Corporation
2015 Stock Incentive Plan (Exhibit 10.1 to the Registrant’s Form 10-Q filed on August 8, 2019, and
incorporated by referenced herein)
†#10.19 Form of Stock Unit Award Agreement (2020 Performance-Based PSU) under Deckers Outdoor
Corporation 2015 Stock Incentive Plan (Exhibit 10.2 to the Registrant’s Form 10-Q filed on August 8,
2019, and incorporated by reference herein)
†#10.20 Form of Restricted Stock Unit Award Agreement under Deckers Outdoor Corporation 2015 Stock
Incentive Plan FY 2020 LTIP Financial Performance Award (Exhibit 10.1 to the Registrant’s Form 8-
K filed on September 25, 2019, and incorporated by reference herein)
#10.21 Form of Stock Unit Award Agreement (2021 Time-Based RSU) under Deckers Outdoor Corporation
2015 Stock Incentive Plan (Exhibit 10.1 to the Registrant’s Form 10-Q filed on August 6, 2020, and
incorporated by reference herein)
†#10.22 Form of Restricted Stock Unit Award Agreement under Deckers Outdoor Corporation 2015 Stock
Incentive Plan FY 2021 LTIP Financial Performance Award (Exhibit 10.26 to the Registrant’s Form
10-K filed on May 28, 2021, and incorporated by reference herein)
†#10.23 Form of Restricted Stock Unit Award Agreement under Deckers Outdoor Corporation 2015 Stock
Incentive Plan FY 2021 LTIP Financial Performance Award, 2-year term (Exhibit 10.29 to the
Registrant’s Form 10-K filed on May 27, 2022, and incorporated by reference herein)
#10.24 Form of Stock Unit Award Agreement (2022 Time-Based RSU) under Deckers Outdoor Corporation
2015 Stock Incentive Plan (Exhibit 10.27 to the Registrant’s Form 10-K filed on May 27, 2022, and
incorporated by reference herein)
†#10.25 Form of Restricted Stock Unit Award Agreement under Deckers Outdoor Corporation 2015 Stock
Incentive Plan FY 2022 LTIP Financial Performance Award (Exhibit 10.28 to the Registrant’s Form
10-K filed on May 27, 2022, and incorporated by reference herein)
*#10.26 Form of Stock Unit Award Agreement (2023 Time-Based RSU) under Deckers Outdoor Corporation
2015 Stock Incentive Plan
†*#10.27 Form of Restricted Stock Unit Award Agreement under Deckers Outdoor Corporation 2015 Stock
Incentive Plan FY 2023 LTIP Financial Performance Award
†*#10.28 Form of Restricted Stock Unit Award Agreement under Deckers Outdoor Corporation 2015 Stock
Incentive Plan FY 2023 LTIP Financial Performance Award, 2-year term
*21.1 Subsidiaries of Registrant
*23.1 Consent of Independent Registered Public Accounting Firm
*31.1 Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act,
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
*31.2 Certification of the Principal Financial and Accounting Officer pursuant to Rule 13a-14(a) under the
Exchange Act, adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended
**32.1 Certification pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, as amended
52
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Exhibit
Number
Description of Exhibit
*101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File
because its XBRL tags are embedded within the Inline XBRL document)
*101.SCH Inline XBRL Taxonomy Extension Schema Document
*101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
*101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
*104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
* Filed herewith.
** Furnished herewith.
# Management contract or compensatory plan or arrangement.
† Certain of the exhibits and schedules to this Exhibit Index have been omitted in accordance with Item
601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the Securities and
Exchange Commission upon request.
53
Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DECKERS OUTDOOR CORPORATION
(Registrant)
/s/ STEVEN J. FASCHING
Steven J. Fasching
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 26, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ DAVE POWERS
Dave Powers
/s/ STEVEN J. FASCHING
Steven J. Fasching
/s/ MICHAEL F. DEVINE, III
Michael F. Devine, III
/s/ DAVID A. BURWICK
David A. Burwick
/s/ NELSON C. CHAN
Nelson C. Chan
Chief Executive Officer, President, and
Director
(Principal Executive Officer)
May 26, 2023
Chief Financial Officer
(Principal Financial and Accounting Officer)
May 26, 2023
Chairman of the Board
May 26, 2023
Director
Director
May 26, 2023
May 26, 2023
/s/ CYNTHIA (CINDY) L. DAVIS
Director
May 26, 2023
Cynthia (Cindy) L. Davis
/s/ JUAN R. FIGUEREO
Juan R. Figuereo
/s/ MAHA S. IBRAHIM
Maha S. Ibrahim
/s/ VICTOR LUIS
Victor Luis
/s/ LAURI M. SHANAHAN
Lauri M. Shanahan
/s/ BONITA C. STEWART
Bonita C. Stewart
May 26, 2023
May 26, 2023
May 26, 2023
May 26, 2023
May 26, 2023
Director
Director
Director
Director
Director
54
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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm - Consolidated Financial Statements
(KPMG LLP, Los Angeles, CA, Auditor Firm ID: 185)
Report of Independent Registered Public Accounting Firm - Internal Control Over Financial Reporting
(KPMG LLP, Los Angeles, CA, Auditor Firm ID: 185)
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Consolidated Financial Statement Schedule:
Schedule II - Total Valuation and Qualifying Accounts
Page
F-2
F-4
F-5
F-6
F-7
F-8
F-10
F-43
All other schedules are omitted because they are not applicable, or the required information is shown in the
consolidated financial statements or accompanying notes thereto.
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Deckers Outdoor Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Deckers Outdoor Corporation and subsidiaries
(the Company) as of March 31, 2023, and 2022, the related consolidated statements of comprehensive income,
stockholders’ equity, and cash flows for each of the years in the three-year period ended March 31, 2023, and the
related notes and financial statement schedule (collectively, the consolidated financial statements). In our opinion,
the consolidated financial statements present fairly, in all material respects, the financial position of the Company as
of March 31, 2023, and 2022, and the results of its operations and its cash flows for each of the years in the three-
year period ended March 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company’s internal control over financial reporting as of March 31, 2023, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission, and our report dated May 26, 2023 expressed an unqualified opinion
on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audits. We are a public accounting
firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free
of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the
risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating
the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated
financial statements that was communicated or required to be communicated to the audit and risk management
committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements
and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit
matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on
the accounts or disclosures to which it relates.
Wholesale sales return liability
As discussed in Note 1 and Note 2 to the consolidated financial statements, the Company has recorded a
sales return liability as of March 31, 2023, of $45,322, of which $33,764 is related to the wholesale channel.
The Company records an allowance for anticipated future returns of goods shipped prior to the end of the
reporting period. Amounts of these reserves are based on known and actual returns, historical returns, and
any recent events that could result in a change from historical return rates.
We identified the evaluation of the wholesale sales return liability as a critical audit matter. There was a high
degree of auditor judgment required to evaluate recent events that could result in a change from historical
return rates used to estimate the wholesale sales return liability.
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
The following are the primary procedures we performed to address this critical audit matter. We evaluated
the design and tested the operating effectiveness of certain internal controls related to the Company’s
process for estimating the wholesale sales return liability, including controls related to the development of
estimated return rates. We evaluated the wholesale sales return liability using a combination of Company
internal data, known recent trends, and actual and historical known information. We analyzed the
Company’s internal data and external correspondence to assess adjustments made by management, if any,
to historical return rates based on consideration of recent events. We assessed the Company’s ability to
accurately estimate the wholesale sales return liability by comparing the historically recorded sales return
liability to actual subsequent product returns. We also analyzed actual product returns received after year-
end but prior to the issuance of the consolidated financial statements.
/s/ KPMG LLP
We have served as the Company’s auditor since 1992.
Los Angeles, California
May 26, 2023
F-3
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Deckers Outdoor Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Deckers Outdoor Corporation and subsidiaries’ (the Company) internal control over financial reporting as
of March 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of March 31, 2023, based on criteria established in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of March 31, 2023 and 2022, the related
consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-
year period ended March 31, 2023, and the related notes and financial statement schedule (collectively, the consolidated
financial statements), and our report dated May 26, 2023 expressed an unqualified opinion on those consolidated financial
statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s
Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ KPMG LLP
Los Angeles, California
May 26, 2023
F-4
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar and share data amounts in thousands, except par value)
ASSETS
Cash and cash equivalents
Trade accounts receivable, net of allowances ($32,504 and $30,591 as of
March 31, 2023, and March 31, 2022, respectively) (Note 2 and Schedule II)
Inventories
Prepaid expenses
Other current assets
Income tax receivable
Total current assets
Property and equipment, net of accumulated depreciation ($317,508 and
$282,571 as of March 31, 2023, and March 31, 2022, respectively) (Note 1 and
Note 13)
Operating lease assets
Goodwill (Note 3)
Other intangible assets, net of accumulated amortization ($81,033 and $79,061
as of March 31, 2023, and March 31, 2022, respectively) (Note 3)
Deferred tax assets, net (Note 5)
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Trade accounts payable
Accrued payroll
Operating lease liabilities (Note 7)
Other accrued expenses
Income tax payable
Value added tax payable
Total current liabilities
Long-term operating lease liabilities (Note 7)
Income tax liability
Other long-term liabilities
Total long-term liabilities
Commitments and contingencies (Note 7)
Stockholders' equity
Common stock ($0.01 par value; 125,000 shares authorized; shares issued and
outstanding of 26,176 and 26,982 as of March 31, 2023, and March 31, 2022,
respectively)
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss (Note 10)
Total stockholders' equity
Total liabilities and stockholders' equity
As of March 31,
2023
2022
$
981,795 $
843,527
301,511
532,852
33,788
55,523
4,784
302,688
506,796
25,610
55,264
18,243
1,910,253
1,752,128
266,679
213,302
13,990
37,457
72,592
41,930
222,449
182,459
13,990
39,688
64,217
57,319
$ 2,556,203 $ 2,332,250
$
265,605 $
327,487
63,781
50,765
86,753
17,322
13,154
497,380
195,723
62,032
35,335
293,090
67,553
50,098
81,400
12,426
2,720
541,684
171,972
54,259
25,510
251,741
262
270
232,932
210,825
1,571,574
1,352,685
(39,035)
1,765,733
(24,955)
1,538,825
$ 2,556,203 $ 2,332,250
See accompanying notes to the consolidated financial statements.
F-5
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollar and share data amounts in thousands, except per share data)
Years Ended March 31,
2023
2022
2021
Net sales (Note 12 and Note 13)
$ 3,627,286 $ 3,150,339 $ 2,545,641
Cost of sales
Gross profit
Selling, general, and administrative expenses
Income from operations (Note 12)
Interest income
Interest expense
Other income, net
Total other (income) expense, net
Income before income taxes
Income tax expense (Note 5)
Net income
Foreign currency translation (loss) gain
Total other comprehensive (loss) income, net of tax
Comprehensive income
Net income per share
Basic
Diluted
Weighted-average common shares outstanding (Note 11)
Basic
Diluted
1,801,916
1,825,370
1,172,619
652,751
1,542,788
1,607,551
1,042,844
564,707
(15,563)
(1,901)
3,442
(1,210)
(13,331)
666,082
149,260
516,822
(14,080)
(14,080)
2,083
(113)
69
564,638
112,689
451,949
(8,212)
(8,212)
1,171,551
1,374,090
869,885
504,205
(2,637)
6,028
(700)
2,691
501,514
118,939
382,575
8,816
8,816
502,742 $
443,737 $
391,391
19.50 $
19.37 $
16.43 $
16.26 $
13.64
13.47
26,504
26,686
27,508
27,789
28,055
28,406
$
$
$
See accompanying notes to the consolidated financial statements.
F-6
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(amounts in thousands)
Balance, March 31, 2020
27,999 $ 280 $ 191,451 $ 973,948 $
(25,559) $ 1,140,120
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders'
Equity
Stock-based compensation
Shares issued upon vesting
Exercise of stock options
Shares withheld for taxes
Repurchases of common stock
(Note 10)
Net income
Total other comprehensive income
4
107
107
—
—
1
1
—
22,695
1,501
6,774
(19,111)
—
—
—
—
(307)
(3)
—
—
—
—
—
—
—
(99,144)
382,575
—
8,816
Balance, March 31, 2021
27,910
279
203,310
1,257,379
(16,743)
1,444,225
(1,044)
(10)
—
—
—
—
—
—
—
(356,643)
451,949
—
(8,212)
(8,212)
Balance, March 31, 2022
26,982
270
210,825
1,352,685
(24,955)
1,538,825
Stock-based compensation
Shares issued upon vesting
Exercise of stock options
Shares withheld for taxes
Repurchases of common stock
(Note 10)
Net income
Total other comprehensive loss
Stock-based compensation
Shares issued upon vesting
Exercise of stock options
Shares withheld for taxes
Repurchases of common stock
(Note 10)
Excise taxes related to
repurchases of common stock
Net income
Total other comprehensive loss
4
83
29
—
—
1
—
—
26,780
1,990
1,204
(22,459)
—
—
—
—
5
53
64
—
—
—
—
—
26,858
2,170
4,396
(11,317)
—
—
—
—
(928)
(8)
—
—
—
—
—
—
—
—
—
—
(297,364)
(569)
516,822
—
(14,080)
(14,080)
Balance, March 31, 2023
26,176 $ 262 $ 232,932 $ 1,571,574 $
(39,035) $ 1,765,733
See accompanying notes to the consolidated financial statements.
F-7
—
—
—
—
—
—
22,695
1,502
6,775
(19,111)
(99,147)
382,575
8,816
—
—
—
—
—
—
26,780
1,991
1,204
(22,459)
(356,653)
451,949
—
—
—
—
—
—
—
26,858
2,170
4,396
(11,317)
(297,372)
(569)
516,822
Table of Contents
OPERATING ACTIVITIES
Net income
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
Years Ended March 31,
2023
2022
2021
$
516,822 $
451,949 $
382,575
Reconciliation of net income to net cash provided by (used in) operating activities:
Depreciation, amortization, and accretion
Amortization on cloud computing arrangements
Loss on extinguishment of debt
Bad debt expense (benefit)
Deferred tax benefit
Stock-based compensation
Loss on disposal of long-lived assets
Impairment of intangible assets
Impairment of operating lease and other long-lived assets
Gain on settlement of asset retirement obligations
Changes in operating assets and liabilities:
Trade accounts receivable, net
Inventories
Prepaid expenses and other current assets
Income tax receivable
Net operating lease assets and lease liabilities
Other assets
Trade accounts payable
Other accrued expenses
Income tax payable
Other long-term liabilities
47,858
2,149
226
1,983
42,878
1,552
—
(342)
(9,719)
(27,796)
26,897
2,691
—
2,817
—
26,816
107
—
3,186
—
40,530
737
—
3,053
(8,171)
22,701
1,019
3,522
14,084
(207)
(806)
(86,627)
(33,173)
(26,056)
(228,554)
33,378
(5,609)
(19,095)
(22,128)
13,459
(11,933)
(8,308)
3,189
1,842
250
13,240
(28,296)
(3,103)
(74,247)
89,184
11,528
4,897
17,600
(20,370)
(24,494)
999
79,176
53,785
25,817
530
Net cash provided by operating activities
537,422
172,353
596,217
INVESTING ACTIVITIES
Purchases of property and equipment
Proceeds from sales of property and equipment
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from short-term borrowings
Repayments of short-term borrowings
Loan origination costs on revolving credit facilities
Proceeds from issuance of stock
Proceeds from exercise of stock options
Repurchases of common stock
Cash paid for shares withheld for taxes
Repayments of mortgage principal
Net cash used in financing activities
Effect of foreign currency exchange rates on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
(81,025)
(51,017)
(32,218)
12
8
49
(81,013)
(51,009)
(32,169)
—
—
(1,537)
2,170
4,396
—
—
—
1,991
1,204
9,100
(9,478)
—
1,502
6,775
(297,372)
(356,653)
(99,147)
(16,688)
(14,024)
—
—
(309,031)
(9,110)
138,268
843,527
(367,482)
304
(245,834)
1,089,361
(7,432)
(30,901)
(129,581)
5,458
439,925
649,436
Cash and cash equivalents at end of period
$
981,795 $
843,527 $
1,089,361
F-8
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(continued)
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid during the period
Income taxes, net of refunds of $1,421, $77, and $1,564, as of March 31,
2023, 2022, and 2021, respectively
Interest
Operating leases
Non-cash investing activities
Years Ended March 31,
2023
2022
2021
$ 134,565 $ 192,013 $ 104,068
1,880
60,353
1,842
55,588
2,931
57,376
Change in accounts payable and other accrued expenses for purchases of
property and equipment
5,325
2,797
2,721
Accrued for asset retirement obligation assets related to leasehold
improvements
Leasehold improvements acquired through tenant allowances
Non-cash financing activities
Accrued for shares withheld for taxes
Accrued excise taxes related to repurchases of common stock
8,203
—
5,371
569
3,900
4,061
8,435
—
1,842
—
11,679
—
See accompanying notes to the consolidated financial statements.
F-9
Table of Contents
Note 1. General
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
The Company. Deckers Outdoor Corporation and its wholly owned subsidiaries (collectively, the Company) is
a global leader in designing, marketing, and distributing innovative footwear, apparel, and accessories developed for
both everyday casual lifestyles use and high-performance activities. As part of its omni-channel platform, the
Company’s proprietary brands are aligned across its fashion lifestyle groups, including the UGG® (UGG) and
Koolaburra by UGG® brand (Koolaburra) brands, and performance lifestyle group, including the HOKA® (HOKA),
Teva® (Teva), and Sanuk® (Sanuk) brands.
The Company sells its products through domestic and international retailers, international distributors, and
directly to its global consumers through its Direct-to-Consumer (DTC) business, which is comprised of its retail
stores and e-commerce websites. Independent third-party contractors manufacture all of the Company’s products. A
significant part of the UGG brand’s business has historically been seasonal, requiring the Company to build
inventory levels during certain quarters in its fiscal year to support higher selling seasons, which has contributed to
the variation in its results from quarter to quarter. However, as the Company continues to take steps to diversify and
expand its product offerings by creating more year-round styles, and as net sales of the HOKA brand continue to
increase as a percentage of the Company’s aggregate net sales, the Company expects the impact from seasonality
to continue to decrease over time.
Basis of Presentation. The consolidated financial statements and accompanying notes thereto (referred to
herein as consolidated financial statements) as of March 31, 2023, and 2022 and for the years ended March 31,
2023, 2022, and 2021 (referred to herein as “year ended” or “years ended”, or as “fiscal year 2023,” “fiscal year
2022,” and “fiscal year 2021,” respectively) are prepared in accordance with generally accepted accounting
principles in the United States (US GAAP).
Consolidation. The consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates. The preparation of the Company’s consolidated financial statements in accordance with US
GAAP requires management to make estimates and assumptions that affect the amounts reported. Management
bases these estimates and assumptions upon historical experience, existing and known circumstances,
authoritative accounting pronouncements and other factors that management believes to be reasonable. In addition,
the Company has considered macroeconomic factors, including inflation, foreign currency exchange rate volatility,
changes in interest rates, changes in commodity pricing, and recessionary concerns, on its business and
operations. Although the full impact of these factors are unknown and cannot be reasonably estimated, the
Company believes it has made appropriate accounting estimates and assumptions based on the facts and
circumstances available as of the reporting date. However, actual results could differ materially from these
estimates and assumptions, which may result in material effects on the Company's financial condition, results of
operations, and liquidity. To the extent there are differences between these estimates and actual results, the
Company’s consolidated financial statements may be materially affected.
Significant areas requiring the use of management estimates and assumptions relate to inventory write-downs;
trade accounts receivable allowances, including variable consideration for net sales provided to customers,
including the sales return asset and liability; contract assets and liabilities; stock-based compensation; impairment
assessments, including goodwill, other intangible assets, and long-lived assets; depreciation and amortization;
income tax receivables and liabilities; uncertain tax positions; the fair value of financial instruments; the reasonably
certain lease term; lease classification; and the Company's incremental borrowing rate (IBR) utilized to measure its
operating lease assets and lease liabilities.
Foreign Currency Translation. The Company considers the United States (US) dollar as its functional currency.
The Company’s wholly owned foreign subsidiaries have various assets and liabilities, primarily cash, receivables,
and payables, which are denominated in currencies other than their functional currency. The Company remeasures
these monetary assets and liabilities using the exchange rate at the end of the reporting period, which results in
F-10
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
gains and losses that are recorded in selling, general, and administrative (SG&A) expenses in the consolidated
statements of comprehensive income as incurred. In addition, the Company translates assets and liabilities of
subsidiaries with reporting currencies other than US dollars into US dollars using the exchange rates at the end of
the reporting period, which results in financial statement translation gains and losses recorded in other
comprehensive income or loss (OCI).
Reportable Operating Segments. The Company’s six reportable operating segments include the worldwide
wholesale operations of the UGG brand, HOKA brand, Teva brand, Sanuk brand, and Other brands, as well as DTC
(collectively, the Company’s reportable operating segments). Refer to Note 12, "Reportable Operating Segments,"
for further information on the Company’s reportable operating segments.
Recent Accounting Pronouncements. The Financial Accounting Standards Board has issued Accounting
Standards Updates (ASU) that have been adopted and not yet adopted by the Company for its annual and interim
reporting periods as stated below.
Recently Adopted. The following is a summary of an ASU adopted by and its impact on the Company:
Standard
ASU No. 2020-04,
Reference Rate Reform:
Facilitation of the Effects
of Reference Rate
Reform on
Financial Reporting
(as amended by ASUs
2021-01 and 2022-06)
Description
London Interbank Offered Rate (LIBOR) is a
benchmark interest rate referenced in a variety
of agreements that are used by all types of
entities. At the end of calendar year 2021, banks
will no longer be required to report information
that is used to determine LIBOR. As a result,
LIBOR could be discontinued. Other interest
rates used globally could also be discontinued
for similar reasons.
Impact Upon Adoption
While the sunset date was deferred with a recent amendment to
this ASU, the Company elected to adopt this ASU as of January
1, 2023.
The Company has evaluated the impact of the adoption of this
ASU on its revolving credit facilities, lease agreements, cash
flow hedges and other relevant agreements; however, the
adoption did not have a material impact on its consolidated
financial statements.
rates
to ease
This ASU provides companies with optional
guidance
the potential accounting
burden associated with transitioning away from
reference
to be
discontinued. Guidance is limited for adoption
through December 31, 2022; however, this was
deferred to December 31, 2024, to provide relief
and allow flexibility until the cessation of USD
LIBOR.
that are expected
During December 2022, the Company entered into a new credit
agreement with Secured Overnight Financing Rate (SOFR)
interest terms and the previous credit agreement with LIBOR
interest terms was terminated. Refer to Note 6, "Revolving
Credit Facilities," for further information on the Company's
Revolving Credit Facilities.
Not Yet Adopted. The following is a summary of each ASU that has been issued and is applicable to the
Company, but which has not yet been adopted, as well as the planned period of adoption, and the expected impact
on the Company upon its adoption:
Standard
ASU 2022-04 -
Supplier Finance
Program (SFP)
and
qualitative
Description
The ASU requires that a buyer in an SFP
disclose
quantitative
information about its program, including the
nature and potential magnitude. Interim
and
include
disclosure of outstanding amounts under
the SFP. Annual requirements include an
activity roll forward of outstanding amounts
under the SFP.
requirements
annual
for
This ASU is effective on a retrospective
basis
fiscal years beginning after
December 15, 2022, and interim periods
within those fiscal years, except for the
disclosure of roll forward information, which
is effective for fiscal years beginning after
December 15, 2023. Early adoption is
permitted, except for the disclosure of roll
forward information.
Expected Impact on Adoption
The Company currently has an SFP program with a third-
party financial institution that allows certain participating
suppliers to finance payment obligations of the Company,
prior to their scheduled due dates, at a discounted price to
the third-party financial institution. The Company evaluated
this ASU and its implications on the presentation of its SFP
program on its consolidated balance sheets and determined
no reclassification on adoption in Q1 FY 2024 is required
from trade accounts payable to short-term debt as the
payment terms under the SFP program are less than 90
days.
The Company is continuing to evaluate the impact of this
ASU for the new disclosure requirements.
Planned
Period of
Adoption
Q1 FY 2024
and
Q1 FY 2025
F-11
Table of Contents
Standard
ASU 2023-01 -
Common Control
Arrangements
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Planned
Period of
Adoption
Q1 FY 2025
Expected Impact on Adoption
The Company is currently evaluating the impact of this ASU
on the Company.
Description
A lessee is generally required to amortize
leasehold improvements over the shorter of
the useful life or the lease term. The ASU
for
amends
leasehold
common
control lease arrangements to the useful
life of the common control group, as long
as the lessee continues to control the use
of the underlying asset throughout the
lease term.
the amortization period
improvements
in
This ASU is effective on a retrospective
basis for the fiscal years beginning after
December 15, 2023, and interim periods
within those fiscal years. Early adoption is
permitted.
Summary of Significant Accounting Policies. The following is a summary of the Company’s significant
accounting policies applied to its consolidated financial statements:
Cash and Cash Equivalents. Cash and cash equivalents include cash on hand, demand deposits, and all
highly liquid investments, such as money-market funds, with an original maturity of three months or less. The
carrying value of money-market funds approximates the fair value as it is considered a highly liquid investment
when purchased. Money-market funds are recorded in cash and cash equivalents in the consolidated balance
sheets. Refer to Note 4, "Fair Value Measurements," for further information on the fair value of money-market funds.
Refer to Note 13, "Concentration of Business," for further information on credit risks in cash.
Allowances for Doubtful Accounts. The Company provides an allowance against trade accounts receivable for
estimated losses that may result from customers’ inability to pay. The Company determines the amount of the
allowance by analyzing known uncollectible accounts, aged trade accounts receivable, economic conditions and
forecasts, historical experience, and the customers’ creditworthiness. Trade accounts receivable that are
subsequently determined to be uncollectible are charged or written off against this allowance. The allowance
includes specific allowances for trade accounts, for which all or a portion are identified as potentially uncollectible
based on known or anticipated losses. Additions to the allowance represent bad debt expense estimates which are
recorded in SG&A expenses in the consolidated statements of comprehensive income.
Inventories. Inventories, which are principally comprised of finished goods on hand and in transit, are stated at
the lower of cost (weighted average) or net realizable value at each financial statement date. Cost includes sourcing
as well as inventory procurement costs, including freight, duty, and handling fees which are subsequently expensed
to cost of sales. Net realizable value is the estimated selling price in the ordinary course of business, less
reasonably predictable costs to sell. The Company regularly reviews inventory for excess, obsolete, and impaired
inventory to evaluate write-downs to the lower of cost or realizable value.
Cloud Computing Arrangements. The Company enters into various cloud computing arrangements (CCAs) that
are governed by service contracts (hosting arrangements) to support operations. Application development stage
implementation costs (implementation costs) of a hosting arrangement are deferred and recorded to prepaid
expenses and other assets in the consolidated balance sheets. Implementation costs are expensed on a straight-
line basis and recorded in SG&A expenses in the consolidated statements of comprehensive income over the term
of the hosting arrangement, including reasonably certain renewals, which are generally one to three years.
As of March 31, 2023, net capitalized costs for CCAs are $5,161, with $1,880 recorded in prepaid expenses
and $3,281 recorded in other assets in the consolidated balance sheets. As of March 31, 2022, net capitalized costs
for CCAs are $2,402, with $1,429 recorded in prepaid expenses and $973 recorded in other assets in the
consolidated balance sheets. The increase in net capitalized costs for CCAs during the year ended March 31, 2023,
are primarily due to gross additions of $4,909.
F-12
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Property and Equipment, Depreciation and Amortization. Property and equipment are stated at cost less
accumulated depreciation and amortization, and generally have a useful life of at least one year. Property and
equipment include tangible, non-consumable items owned by the Company. Software implementation costs are
capitalized if they are incurred during the application development stage and relate to costs to obtain computer
software from third parties, including related consulting expenses, or costs incurred to modify existing software that
results in additional upgrades or enhancements that provide additional functionality.
Depreciation of property and equipment is calculated using the straight-line method based on the estimated
useful life. Leasehold improvements are amortized to their residual value, if any, on the straight-line basis over their
estimated economic useful lives or the lease term, whichever is shorter. Changes in the estimate of the useful life of
an asset may occur after an asset is placed in service. For example, this may occur as a result of the Company
incurring costs that prolong the useful life of an asset, which would be recorded as an adjustment to depreciation
over the revised remaining useful life. Depreciation and amortization are recorded in SG&A expenses in the
consolidated statements of comprehensive income.
Property and equipment, net, are summarized as follows:
Land
Building
Machinery and equipment
Furniture and fixtures
Computer software
Leasehold improvements
Construction in progress
Gross property and equipment
Less accumulated depreciation and amortization
Total
Useful life (years)
2023
2022
As of March 31,
Indefinite
$
32,864 $
39.5
1-10
3-7
3-10
1-11
36,191
187,754
39,538
115,349
118,351
54,140
584,187
32,864
36,112
177,397
35,600
104,114
108,526
10,407
505,020
(317,508)
(282,571)
$
266,679 $
222,449
Operating Lease Assets and Lease Liabilities. The Company determines if an arrangement contains a lease at
inception of a contract. The Company recognizes operating lease assets and lease liabilities in the consolidated
balance sheets on the lease commencement date, based on the present value of the outstanding lease payments
over the reasonably certain lease term. The lease term includes the non-cancelable period at the lease
commencement date, plus any additional period covered by the Company's option to extend (or not to terminate)
the lease that is reasonably certain to be exercised, or an option to extend (or not to terminate) a lease that is
controlled by the lessor.
Operating lease assets are initially measured at cost, which comprises the initial amount of the associated
lease liabilities, adjusted for lease payments made at or before the lease commencement date, plus any initial direct
costs incurred, less any lease incentives, such as tenant allowances. Operating lease assets are subsequently
measured throughout the lease term at the carrying amount of the associated lease liabilities, plus initial direct
costs, plus or minus any prepaid or accrued lease payments, less the unamortized balance of lease incentives
received. Operating lease assets and lease liabilities are presented separately in the consolidated balance sheets
on a discounted basis. The current portion of operating lease liabilities is presented within current liabilities, while
the long-term portion is presented separately as long-term operating lease liabilities. Refer to Note 7, "Commitments
and Contingencies," for further information on the discount rate methodology used to measure operating lease
assets and lease liabilities.
F-13
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Rent expense for operating lease payments is recognized on a straight-line basis over the lease term and
recorded in SG&A expenses in the consolidated statements of comprehensive income. Lease payments recorded in
the operating lease liabilities (1) are fixed payments, including in-substance fixed payments and fixed rate
increases, owed over the lease term and (2) exclude any lease prepayments as of the periods presented. Refer to
Note 7, "Commitments and Contingencies," for further information on the nature of variable lease payments and the
timing of recognition of rent expense.
The Company has elected not to recognize operating lease assets and lease liabilities for short-term leases,
which are defined as those operating leases with a term of 12 months or less. Instead, lease payments for short-
term leases are recognized on a straight-line basis over the lease term in rent expense and recorded as a
component of SG&A expenses in the consolidated statements of comprehensive income.
The Company monitors for events that require a change in estimates for its operating lease assets and lease
liabilities, such as modifications to the terms of the contract, including the lease term, economic events that may
trigger a contractual term contingency, such as minimum lease payments or termination rights, and related changes
in discount rates used to measure the operating lease assets and lease liabilities, as well as events or
circumstances that result in lease abandonment or operating lease asset impairments. When a change in estimates
results in the remeasurement of the operating lease liabilities, a corresponding adjustment is made to the carrying
amount of the operating lease assets. The operating lease assets are remeasured and amortized on a straight-line
basis over the remaining lease term, with no impact on the related operating lease liabilities. Refer to the paragraph
titled “Definite-Lived Intangible and Other Long-Lived Assets” below for further information on the Company’s
accounting policy for evaluating the carrying amount of its operating lease assets and related leasehold
improvements for indicators of impairment.
Asset Retirement Obligations. The Company is contractually obligated under certain of its lease agreements to
restore certain retail, office, and warehouse facilities back to their original conditions. At lease inception, the present
value of the estimated fair value of these liabilities is recorded along with the related asset. The liability is estimated
based on assumptions requiring management’s judgment, including facility closing costs and discount rates, and is
accreted to its projected future value over the life of the asset.
The Company’s asset retirement obligations (AROs) are recorded in other long-term liabilities in the
consolidated balance sheets and activity was as follows:
Balance, March 31, 2021
Additions and changes in estimate
Liabilities settled during the period
Accretion expenses
Foreign currency translation gains
Balance, March 31, 2022
Additions and changes in estimate
Liabilities settled during the period
Accretion expenses
Foreign currency translation gains
Balance, March 31, 2023
$
Amounts
12,983
4,622
(898)
327
(232)
16,802
9,724
(2,284)
513
(199)
$
24,556
Goodwill and Indefinite-Lived Intangible Assets. Goodwill is initially recorded as the excess of the purchase
price over the fair value of the net assets acquired in a business combination. Indefinite-lived intangible assets
consist primarily of trademarks, customer and distributor relationships, patents, lease rights and non-compete
agreements arising from the application of purchase accounting.
F-14
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Goodwill and indefinite-lived intangible assets are not amortized but are instead tested for impairment annually,
or when an event occurs or changes in circumstances indicate the carrying value may not be recoverable. The
Company evaluates the goodwill for impairment at the reporting unit level for the UGG and HOKA brands wholesale
reportable operating segments annually as of December 31st of each year and evaluates the Teva brand indefinite-
lived trademarks for impairment annually as of October 31st of each year.
The Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative
assessment of goodwill or indefinite-lived intangible assets. In general, conditions that may indicate impairment
include, but are not limited to the following: (1) a significant adverse change in customer demand or business
climate that could affect the value of an asset; (2) change in market share, budget-to-actual performance, and
consistency of operating margins and capital expenditures; (3) changes in management or key personnel; or (4)
changes in general economic conditions. The Company does not calculate the fair value of the assets unless the
Company determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than
its carrying amount. If the Company concludes that it is more likely than not that its fair value is less than its carrying
amount, then the Company prepares a quantitative assessment.
The quantitative assessment requires an analysis of several best estimates and assumptions, including future
sales and results of operations, discount rates, and other factors that could affect fair value or otherwise indicate
potential impairment. The goodwill impairment assessment involves valuing the Company’s various reporting units
that carry goodwill, which are currently the same as the Company’s reportable operating segments. This includes
considering the reporting units’ projected ability to generate income from operations and positive cash flow in future
periods, as well as perceived changes in customer demand and acceptance of products, or other factors impacting
the industry. Upon completion of the quantitative assessment, the Company compares the fair value of the asset to
its carrying amount, and if the fair value exceeds its carrying amount, no impairment charge is recognized. If the fair
value is less than its carrying amount, the Company will record an impairment charge to write down the asset to its
fair value. Refer to Note 3, "Goodwill and Other Intangible Assets," for further information on the Company’s
goodwill and indefinite-lived intangible assets and annual impairment assessment results.
Definite-Lived Intangible and Other Long-Lived Assets. Definite-lived intangible and other long-lived assets,
which include definite-lived trademarks, machinery and equipment, internal-use software, operating lease assets
and related leasehold improvements are amortized to their estimated residual values, if any, on a straight-line basis
over the estimated useful life and reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of the asset group may not be recoverable. Amortization or depreciation are recorded in
SG&A expenses in the consolidated statements of comprehensive income.
At least quarterly, the Company evaluates factors that would necessitate an impairment assessment, which
include a significant adverse change in the extent or manner in which an asset group is used, a significant adverse
change in legal factors or the business climate that could affect the value of the asset group or a significant decline
in the observable market value of the asset group, among others. When an impairment-triggering event has
occurred, the Company tests for recoverability of the asset group’s carrying value using estimates of undiscounted
future cash flows based on the existing service potential of the applicable asset group. In determining the service
potential of a long-lived asset group, the Company considers its remaining useful life, cash-flow generating capacity,
and physical output capacity. These estimates include the undiscounted future cash flows associated with future
expenditures necessary to maintain the existing service potential. These assets are grouped with other assets and
liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other
assets and liabilities.
F-15
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Recoverability of definite-lived intangible and other long-lived assets is measured by a comparison of the
carrying amount to estimated undiscounted future cash flows expected to be generated by the asset group. If the
carrying amount of the asset group exceeds the estimated undiscounted future cash flows, an impairment charge is
recognized for the amount by which the carrying amount exceeds the estimated fair value of the asset group, which
is based on either discounted future cash flows or appraised values. An impairment loss, if any, would only reduce
the carrying amount of the long-lived assets in the asset group based on its fair value limitation and is allocated to
individual assets in the asset group, unless doing so would reduce the carrying amount of a long-lived asset in the
asset group to an amount less than zero. Impairment charges are recorded in SG&A expenses in the consolidated
statements of comprehensive income.
During the years ended March 31, 2023, 2022, and 2021, the Company recorded impairment charges of
$2,817, $3,186, and $14,084, within its DTC reportable operating segment in SG&A expenses in the consolidated
statements of comprehensive income for retail store-related operating lease and other long-lived assets. These
impairment charges were due to the underperformance of certain retail stores that resulted in the carrying value
exceeding the estimated fair value, which is determined based on an estimate of the future discounted cash flows.
Refer to Note 3, "Goodwill and Other Intangible Assets," for further information on the Company’s definite-lived
intangible asset impairment assessment results.
Derivative Instruments and Hedging Activities. The Company may use derivative instruments to partially offset
its business exposure to foreign currency risk on expected cash flows and certain existing assets and liabilities,
primarily intercompany balances. To reduce the volatility in earnings from fluctuations in foreign currency exchange
rates, the Company may hedge a portion of forecasted sales denominated in foreign currencies. The Company
enters into foreign currency forward or option contracts (derivative contracts), generally with maturities of 15 months
or less, to manage this risk and certain of these derivative contracts are designated as cash flow hedges of
forecasted sales (Designated Derivative Contracts). The Company may also enter into derivative contracts that are
not designated as cash flow hedges (Non-Designated Derivative Contracts), to offset a portion of anticipated gains
and losses on certain intercompany balances until the expected time of repayment. The Company does not use
derivative contracts for trading purposes.
The notional amounts of outstanding Designated and Non-Designated Derivative Contracts are recorded at fair
value measured using Level 2 fair value inputs, consisting of forward spot rates at the end of the applicable periods
from counterparties, which are corroborated by market-based pricing, and are recorded in other current assets or
other accrued expenses in the consolidated balance sheets. The after-tax unrealized gains or losses from changes
in fair value of Designated Derivative Contracts are recorded as a component of accumulated other comprehensive
loss (AOCL) and are reclassified to net sales in the consolidated statements of comprehensive income in the same
period or periods as the related sales are recognized. When it is probable that a forecasted transaction will not
occur, the Company discontinues hedge accounting and the accumulated gains or losses in AOCL related to the
hedging relationship are immediately recorded in OCI in the consolidated statements of comprehensive income.
The Company includes all hedge components in its assessment of effectiveness for its derivative contracts.
Changes in the fair value of Non-Designated Derivative Contracts are recorded in SG&A expenses in the
consolidated statements of comprehensive income. The changes in fair value for these contracts are generally
offset by the remeasurement gains or losses associated with the underlying foreign currency-denominated
intercompany balances, which are recorded in SG&A expenses in the consolidated statements of comprehensive
income.
The Company generally enters
into over-the-counter derivative contracts with high-credit-quality
counterparties, and therefore, considers the risk that counterparties fail to perform according to the terms of the
contract as low. The Company factors the nonperformance risk of the counterparties into the fair value
measurements of its derivative contracts. Refer to Note 9, "Derivative Instruments," for further information on the
impact of derivative instruments and hedging activities.
F-16
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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Stock Repurchase Program. Repurchased shares of the Company’s common stock are retired. The par value
of repurchased shares is deducted from common stock and the excess repurchase price over par value as well as
the portion due for excise taxes, is allocated to retained earnings in the consolidated balance sheets. Refer to Note
10, "Stockholders' Equity," for further information on the Company’s stock repurchase program.
Revenue Recognition. Revenue is recognized when a performance obligation is completed at a point in time
and when the customer has obtained control. Control passes to the customer when they have the ability to direct
the use of and obtain substantially all the remaining benefits from the goods transferred. The amount of revenue
recognized is based on the transaction price, which represents the invoiced amount less known actual amounts or
estimates of variable consideration. The Company recognizes revenue and measures the transaction price net of
taxes, including sales taxes, use taxes, value-added taxes, and some types of excise taxes, collected from
customers and remitted to governmental authorities. The Company presents revenue gross of fees and sales
commissions. Sales commissions are expensed as incurred and are recorded in SG&A expenses in the
consolidated statements of comprehensive income. The Company's customer contracts do not have a significant
financing component due to their short durations, which are typically effective for one year or less and have
payment terms that are generally 30 to 60 days.
Wholesale and international distributor revenue are recognized either when products are shipped or when
delivered, depending on the applicable contract terms. Retail store and e-commerce revenue transactions are
recognized at the point of sale and upon shipment, respectively. Shipping and handling costs paid to third-party
shipping companies are recorded as cost of sales in the consolidated statements of comprehensive income.
Shipping and handling costs are a fulfillment service, and, for certain wholesale and all e-commerce transactions,
revenue is recognized when the customer is deemed to obtain control upon the date of shipment. Refer to Note 2,
"Revenue Recognition," for further information regarding the Company’s components of variable consideration.
Cost of Sales. Cost of sales for the Company’s goods are for finished goods, which includes purchase costs as
well as related overhead. Overhead includes certain costs for planning, purchasing, quality control, freight, and
duties. Purchase costs includes allocation of initial molds and tooling cost that are amortized based on minimum
contractual quantities of related product and recorded in cost of sales when the product is sold in the consolidated
statements of comprehensive income. Purchase costs exclude depreciation and amortization costs of leasehold
improvements, equipment and other assets in the Company’s retail locations, outlets, and distribution centers
(DCs), as well as warehousing and distribution and sourcing costs, as these are collectively expensed as incurred
and are recorded in SG&A expenses in the consolidated statements of comprehensive income.
Research and Development Costs. All research and development costs are expensed as incurred. Such costs
amounted to $38,657, $33,344, and $28,626 for the years ended March 31, 2023, 2022, and 2021, respectively,
and are recorded in SG&A expenses in the consolidated statements of comprehensive income.
Advertising, Marketing, and Promotion Expenses. Advertising, marketing, and promotion expenses include
media advertising (television, radio, print, social, digital), tactical advertising (signs, banners, point-of-sale materials)
and other promotional costs, and amounted to $271,140, $255,881, and $188,345 for the years ended March 31,
2023, 2022 and 2021, respectively, which are recorded in SG&A expenses in the consolidated statements of
comprehensive income. Advertising costs are expensed the first time the advertisement is run or communicated. All
other costs of advertising, marketing, and promotion are expensed as incurred. Included in prepaid expenses as of
March 31, 2023, and 2022 are $4,930 and $2,759, respectively, related to prepaid advertising, marketing, and
promotion expenses for programs expected to take place after such dates.
Stock-Based Compensation. All of the Company’s stock-based compensation is classified within stockholders’
equity. Stock-based compensation expense is measured at the grant date based on the fair value of the award and
is expensed ratably over the service period. The Company recognizes expense only for those awards for which
management deems achievement of the performance criteria and service conditions to be probable. Determining
the fair value and related expense of stock-based compensation requires judgment, including estimating the
percentage of awards that will be forfeited and probabilities of meeting the awards’ performance criteria, as well as
the Company’s reliance on the closing price of its stock on the New York Stock Exchange at or near the time of
F-17
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
grant. If actual forfeitures differ significantly from the estimates or if probabilities change during a period, stock-
based compensation expense and the Company’s results of operations could be materially impacted. Stock-based
compensation expense is recorded in SG&A expenses in the consolidated statements of comprehensive income.
Refer to Note 8, "Stock-Based Compensation," for further information on grant activity and additional disclosure
related to stock-based compensation.
Retirement Plan. The Company provides a 401(k) defined contribution plan that eligible US employees may
elect to participate in through tax-deferred contributions or other deferrals. The Company matches 50% of each
eligible participant’s deferrals on up to 6% of eligible compensation. Internationally, the Company has various
defined contribution plans. Certain international locations require mandatory contributions under social programs,
and the Company contributes at least the statutory minimums. US 401(k) matching contributions totaled $4,433,
$3,953, and $3,339 during the years ended March 31, 2023, 2022, and 2021, respectively, and were recorded in
SG&A expenses in the consolidated statements of comprehensive income. In addition, the Company may also
make discretionary profit-sharing contributions to the plan. However, there were no Company profit-sharing
contributions for the years ended March 31, 2023, 2022, and 2021.
Non-qualified Deferred Compensation. In 2010, the Company began sponsoring an unfunded, non-qualified
deferred compensation plan (NQDC Plan) that permits certain members of its management team the opportunity to
defer compensation into the NQDC Plan. The NQDC Plan year is from January 1st to December 31st. Participants
may defer up to 50% of their annual base salary and up to 85% of any cash incentive bonus under the NQDC Plan.
The Company holds all its non-qualified deferred compensation plan investments in mutual funds. In March 2015,
the Board of Directors approved a Company contribution feature to allow the option, but not the obligation, for the
Company to make discretionary or matching cash contributions to NQDC Plan participants.
As of March 31, 2023, and 2022, no material payments are made or pending under the plan. Deferred
compensation is recognized based on the fair value of the participants’ accounts. A rabbi trust was established as a
reserve for benefits payable under this plan, with the assets invested in Company-owned life insurance policies.
Refer to Note 4, "Fair Value Measurements," for further information on the fair value of deferred compensation
assets and liabilities.
Self-Insurance. The Company is self-insured for a significant portion of its employee medical, including
pharmacy, and dental liability exposures. Liabilities for self-insured exposures are accrued for the amounts expected
to be paid based on historical claims experience and actuarial data for forecasted settlements of claims filed and for
incurred but not yet reported claims. Accruals for self-insured exposures are included in current liabilities in the
consolidated balance sheets. Excess liability insurance has been purchased to limit the amount of self-insured risk
on claims.
Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to net operating loss carryforwards and
temporary differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to
taxable income during the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred taxes of a change in tax rates is recorded in the consolidated statements of comprehensive
income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions in the consolidated financial statements only if
those positions are more likely than not to be sustained upon examination. Recognized income tax positions are
measured at the largest amount of tax benefit that is more than 50% likely to be realized upon settlement. Changes
in recognition or measurement are recorded in the period in which the change in judgment occurs. The Company
records interest and penalties accrued for income tax contingencies as interest expense in the consolidated
statements of comprehensive income. Refer to Note 5, "Income Taxes," for further information on tax impacts and
components of tax balances in the consolidated financial statements.
F-18
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Comprehensive Income. Comprehensive income or loss is the total of net earnings and all other non-owner
changes in equity. Comprehensive income or loss includes net income or loss, foreign currency translation
adjustments, and unrealized gains and losses on cash flow hedges. Refer to Note 10, "Stockholders' Equity," for
further information on components of OCI.
Net Income per Share. Basic net income or loss per share represents net income or loss divided by the
weighted-average number of common shares outstanding for the period. Diluted net income or loss per share
represents net income or loss divided by the weighted-average number of shares outstanding, including the dilutive
impact of potential issuances of common stock. Refer to Note 11, "Basic and Diluted Shares," for a reconciliation of
basic to diluted weighted-average common shares outstanding.
Note 2. Revenue Recognition
Variable Consideration. Components of variable consideration include estimated allowance for sales
discounts, allowance for chargebacks, and sales return asset and liability. Estimates for variable consideration are
based on the amounts earned or estimates to be claimed as an adjustment to sales. Estimated variable
consideration is included in the transaction price to the extent it is probable that a significant reversal of the
cumulative revenue recognized will not occur in a future period.
Allowance for Sales Discounts. The Company provides a trade accounts receivable allowance for sales
discounts for wholesale channel sales, which reflects a discount that customers may take, generally based on
meeting certain order, shipment or prompt payment terms. The Company uses the amount of the discounts that are
available to be taken against the period end trade accounts receivable to estimate and record a corresponding
reserve for sales discounts. Additions to the allowance are recorded against gross sales in the consolidated
statements of comprehensive income.
Allowance for Chargebacks. The Company provides a trade accounts receivable allowance for chargebacks
for wholesale channel sales. When customers pay their invoices, they may take deductions against their invoices
that can include chargebacks for price differences, markdowns, short shipments, and other reasons. Therefore, the
Company records an allowance primarily for known circumstances as well as unknown circumstances based on
historical trends related to the timing and amount of chargebacks taken against customer invoices. Additions to the
allowance are recorded against gross sales or SG&A expenses in the consolidated statements of comprehensive
income.
Sales Return Asset and Liability. Reserves are recorded for anticipated future returns of goods shipped prior to
the end of the reporting period. In general, the Company accepts returns for damaged or defective products for up
to one year. The Company also has a policy whereby returns are generally accepted from customers and end
consumers between 30 to 90 days from the point of sale for cash or credit.
Sales returns are a refund asset for the right to recover the inventory and a refund liability for the stand-ready
right of return. Changes to the refund asset for the right to recover the inventory are recorded against cost of sales
and changes in the refund liability are recorded against gross sales in the consolidated statements of
comprehensive income. The refund asset for the right to recover the inventory is recorded in other current assets
and the related refund liability is recorded in other accrued expenses in the consolidated balance sheets. The
amounts of these reserves are determined based on several factors, including known and actual returns, historical
returns, and any recent events that could result in a change from historical return rates.
Activity during the years ended March 31, 2023, and 2022, related to estimated sales returns was as follows:
Balance, March 31, 2021
Net additions to sales return liability*
Actual returns
Recovery Asset
Refund Liability
$
10,704 $
(37,717)
43,555
(42,768)
(178,722)
176,572
F-19
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Balance, March 31, 2022
Net additions to sales return liability*
Actual returns
Balance, March 31, 2023
11,491
67,249
(39,867)
(229,864)
(63,055)
224,409
$
15,685 $
(45,322)
*Net additions to the sales return liability include a provision for anticipated sales returns, which consists of both contractual
return rights and discretionary authorized returns.
Contract Liabilities. Contract liabilities are performance obligations that the Company expects to satisfy or
relieve within the next 12 months, advance consideration obtained prior to satisfying a performance obligation, or
unconditional obligations to provide goods or services under non-cancelable contracts before the transfer of goods
or services to the customer has occurred. Contract liabilities are recorded in other accrued expenses in the
consolidated balance sheets and include loyalty programs and other deferred revenue.
Loyalty Programs. The Company has a loyalty program for the UGG brand in its DTC channel where
consumers can earn rewards from qualifying purchases or activities. The Company defers recognition of revenue
for unredeemed awards until one of the following occurs: (1) rewards are redeemed by the consumer, (2) points or
certificates expire, or (3) an estimate of the expected unused portion of points or certificates is applied, which is
based on historical redemption and expiration patterns. The Company’s contract liability for loyalty programs is
recorded in other accrued expenses in the consolidated balance sheets.
Activity during the years ended March 31, 2023, and 2022, related to loyalty programs were as follows:
Balance, March 31, 2021
Redemptions and expirations for loyalty certificates and points recognized in net sales
Deferred revenue for loyalty points and certificates issued
Balance, March 31, 2022
Redemptions and expirations for loyalty certificates and points recognized in net sales
Deferred revenue for loyalty points and certificates issued
Balance, March 31, 2023
Amounts
$
(12,231)
56,930
(55,582)
(10,883)
49,123
(51,384)
(13,144)
$
$
Deferred Revenue. Revenue is deferred for wholesale channel transactions when certain conditions outlined
within the contract terms, including the transfer of control or delivery of product, has not occurred, such as when a
wholesale channel customer prepays for ordered product. The contract liability for deferred revenue is recorded in
other accrued expenses in the consolidated balance sheets.
Activity during the years ended March 31, 2023, and 2022, related to deferred revenue were as follows:
Balance, March 31, 2021
Additions of customer cash payments
Revenue recognized
Balance, March 31, 2022
Additions of customer cash payments
Revenue recognized
Balance, March 31, 2023
$
$
Amounts
(5,425)
(51,770)
41,391
(15,804)
(53,797)
56,153
$
(13,448)
Refer to Note 12, "Reportable Operating Segments," for further information on the Company's disaggregation
of revenue by reportable operating segment.
F-20
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Note 3. Goodwill and Other Intangible Assets
The Company’s goodwill and other intangible assets are recorded in the consolidated balance sheets as
follows:
Goodwill
UGG brand
HOKA brand
Total goodwill
Other intangible assets
Indefinite-lived intangible assets
Trademarks
Definite-lived intangible assets
Trademarks
Other
Total gross carrying amount
Accumulated amortization
Net definite-lived intangible assets
Total other intangible assets, net
Total
As of March 31,
2023
2022
$
6,101 $
7,889
13,990
6,101
7,889
13,990
15,454
15,454
51,723
51,313
103,036
51,723
51,572
103,295
(81,033)
(79,061)
22,003
37,457
$
51,447 $
24,234
39,688
53,678
The weighted-average amortization period for definite-lived intangible assets was 15 years for the years ended
March 31, 2023, and 2022. Intangible assets consist primarily of indefinite-lived and definite-lived trademarks,
customer relationships, patents, lease rights, and non-compete agreements arising from the application of purchase
accounting. Goodwill is allocated to the wholesale reportable operating segments of the brands described above.
Annual Impairment Assessment. During the years ended March 31, 2023, 2022, and 2021, the Company
evaluated goodwill for impairment at the reporting unit level for the UGG and HOKA brands wholesale reportable
operating segment as of December 31st and evaluated the Teva indefinite-lived trademarks as of October 31st.
Based on the evaluation of qualitative and quantitative factors, including the asset carrying amounts recorded in the
consolidated balance sheets against each of the brands’ actual results of operations and long-term forecasts of net
sales and operating income, no impairment loss was recorded for goodwill and indefinite-lived intangible assets. As
of March 31, 2023, and 2022, the gross carrying amount of goodwill is $143,765 and the accumulated impairment
losses are $129,775.
The Company did not identify any definite-lived intangible asset triggering events during the years ended
March 31, 2023, and 2022. During the year ended March 31, 2021, the Company recorded an impairment loss of
$3,522 for the Sanuk brand definite-lived international trademark, driven by the strategic decision to focus primarily
on future domestic growth, within the Company’s Sanuk brand wholesale reportable operating segment in SG&A
expenses in the consolidated statements of comprehensive income.
Amortization Expense. A reconciliation of the changes in total other intangible assets, net, recorded in the
consolidated balance sheets are as follows:
Balance, March 31, 2020
Impairment charges
Amortization expense
F-21
Amounts
$
48,016
(3,522)
(2,565)
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Foreign currency translation net gain
Balance, March 31, 2021
Amortization expense
Foreign currency translation net loss
Balance, March 31, 2022
Amortization expense
Foreign currency translation net loss
Balance, March 31, 2023
Amounts
16
41,945
(2,248)
(9)
39,688
(2,228)
(3)
$
37,457
Expected amortization expense for amortizable intangible assets subsequent to March 31, 2023, is as follows:
Years Ending March 31,
2024
2025
2026
2027
2028
Thereafter
Total
Note 4. Fair Value Measurements
Amounts
2,198
2,053
1,551
1,519
1,519
13,163
22,003
$
$
The accounting standard for fair value measurements provides a framework for measuring fair value, which is
defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in
the principal or most advantageous market in an orderly transaction between market participants on the
measurement date. The fair value hierarchy under this accounting standard requires an entity to maximize the use
of observable inputs, where available.
The following summarizes the three levels of inputs required:
•
•
•
Level 1: Quoted prices in active markets for identical assets and liabilities.
Level 2: Observable inputs other than quoted prices in active markets for identical assets and
liabilities.
Level 3: Unobservable inputs in which little or no market activity exists, therefore requiring the
Company to develop its own assumptions.
The carrying amount of the Company’s financial instruments, which principally include cash and cash
equivalents, trade accounts receivable, net, trade accounts payable, accrued payroll, and other accrued expenses,
approximates fair value due to their short-term nature. When the Company makes short-term borrowings, the
carrying amounts, which are considered Level 2 liabilities, approximate fair value based upon current rates and
terms available to the Company for similar debt. The Company does not currently have any Level 3 assets or
liabilities.
F-22
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Assets and liabilities that are measured on a recurring basis at fair value in the consolidated balance sheets
are as follows:
As of
Measured Using
March 31, 2023
Level 1
Level 2
Level 3
Money-market funds
$
675,468 $
675,468 $
— $
Non-qualified deferred compensation asset
8,399
8,399
Non-qualified deferred compensation liability
(11,326)
(11,326)
—
—
Money-market funds
$
524,063 $
524,063 $
— $
Non-qualified deferred compensation asset
8,933
8,933
Non-qualified deferred compensation liability
(9,573)
(9,573)
—
—
As of
Measured Using
March 31, 2022
Level 1
Level 2
Level 3
—
—
—
—
—
—
As of March 31, 2023, the non-qualified deferred compensation asset of $8,399 is recorded in other assets in
the consolidated balance sheets. As of March 31, 2023, the non-qualified deferred compensation liability of $11,326
is recorded in the consolidated balance sheets, with $737 recorded in other accrued expenses and $10,589
recorded in other long-term liabilities. As of March 31, 2022, the non-qualified deferred compensation asset of
$8,933 is recorded in other assets in the consolidated balance sheets. As of March 31, 2022, the non-qualified
deferred compensation liability of $9,573 is recorded in the consolidated balance sheets, with $936 recorded in
other accrued expenses and $8,637 recorded in other long-term liabilities.
The Company's non-financial assets, such as other long-lived assets and definite-lived intangible assets, which
include operating lease assets, machinery and equipment, leasehold improvements, definite-lived trademarks; as
well as indefinite-lived intangible assets and goodwill, are not required to be carried at fair value on a recurring basis
and are reported at carrying value. Instead, these assets are tested for impairment annually, or when an event
occurs or changes in circumstances indicate the carrying value may not be recoverable. When determining fair
value, Level 3 measurements are used for the estimates and assumptions, including undiscounted future cash flows
expected to be generated by the asset groups based upon historical experience, expected market conditions, as
well and management's plans.
Note 5. Income Taxes
Income Before Income Taxes. Components of income before income taxes recorded in the consolidated
statements of comprehensive income were as follows:
Domestic*
Foreign
Total
Years Ended March 31,
2023
2022
2021
$
$
467,231 $
396,368 $
368,328
198,851
168,270
133,186
666,082 $
564,638 $
501,514
*Domestic income before income taxes for the years ended March 31, 2023, 2022, and 2021 is presented net of
intercompany dividends (or repatriated cash) of $0, $120,000, and $175,000, respectively.
F-23
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Income Tax Expense. Components of income tax expense (benefit) recorded in the consolidated statements
of comprehensive income were as follows:
Current
Federal
State
Foreign
Total
Deferred
Federal
State
Foreign
Total
Total
Years Ended March 31,
2023
2022
2021
$
115,708 $
95,012 $
18,418
24,853
158,979
22,544
22,929
140,485
4,830
382
(14,931)
(9,719)
(17,316)
(4,827)
(5,653)
(27,796)
93,562
15,595
17,953
127,110
(6,717)
(633)
(821)
(8,171)
$
149,260 $
112,689 $
118,939
Income Tax Expense Reconciliation. Income tax expense (benefit) differed from that obtained by applying
the statutory federal income tax rate to income before income taxes as follows:
Computed expected income taxes
$
139,882 $
118,574 $
105,318
State income taxes, net of federal income tax benefit (1)
15,881
16,896
16,479
Years Ended March 31,
2023
2022
2021
Foreign rate differential
Gross unrecognized tax benefits
Intercompany transfers of assets (1)
US tax on foreign earnings
Other (1)
Total
(21,420)
(22,188)
(15,507)
20,122
(13,072)
7,672
195
(491)
(219)
4,325
(4,208)
7,632
(27)
4,252
792
$
149,260 $
112,689 $
118,939
(1) Certain reclassifications have been made in the prior periods presented to conform with the current period presentation.
Deferred Taxes. The tax effects of temporary differences that give rise to significant portions of deferred tax
assets and deferred tax liabilities are as follows:
Deferred tax assets
Amortization of intangible assets
Operating lease liabilities
Uniform capitalization adjustment to inventory
Reserves and accruals (1)
Net operating loss carry-forwards
Deferred revenue
Other (1)
Gross deferred tax assets
F-24
As of March 31,
2023
2022
$
16,788 $
38,673
13,823
48,949
3,477
7,924
1,070
4,828
37,020
11,996
41,894
1,802
22,074
2,024
130,704
121,638
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Valuation allowances
Total
Deferred tax liabilities
Prepaid expenses
Operating lease assets
Depreciation of property and equipment
Total
Deferred tax assets, net
As of March 31,
2023
2022
(1,224)
(1,206)
129,480
120,432
(6,930)
(31,250)
(18,708)
(56,888)
(5,460)
(28,831)
(21,924)
(56,215)
$
72,592 $
64,217
(1) Certain reclassifications have been made in the prior periods presented to conform with the current period presentation.
The deferred tax assets are currently expected to be realized between fiscal years 2024 and 2031. Based on
the level of historical taxable income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes it is more likely than not that the results of future
operations will generate sufficient taxable income to realize the net deferred tax assets. The Company’s deferred
tax valuation allowances are primarily the result of foreign losses in jurisdictions with limited future profitability.
US Taxation of Foreign Earnings. The Company is subject to US taxation of its foreign subsidiary earnings,
which is considered global intangible low-taxed income, as well as limitations on the deductions of executive
compensation, which are included in income tax expense in the consolidated statements of comprehensive income
for the periods presented above.
As of March 31, 2023, the Company has $523,957 of undistributed earnings from its non-US subsidiaries, of
which $299,114 is held as cash and cash equivalents, a portion of which may be subject to additional foreign
withholding taxes if it were to be repatriated. As of March 31, 2023, the Company has $13,477 of accumulated
earnings from its non-US subsidiaries for which no US federal or state income taxes have been paid.
The Company currently anticipates repatriating current and future unremitted earnings of non-US subsidiaries,
to the extent they have been and will be subject to US income tax, as long as such cash is not required to fund
ongoing foreign operations. Due to the complexities in the laws of foreign jurisdictions, it is not practicable to
estimate the amount of foreign withholding taxes associated with such unremitted earnings. No intercompany
dividends were declared by the Company from a foreign subsidiary with related foreign withholding tax requirements
during the year ended March 31, 2023.
Unrecognized Tax Benefits. When tax returns are filed, some positions taken are subject to uncertainty about
the merits of the position taken or the amount that would be ultimately sustained upon examination. The benefit of a
tax position is recorded in the consolidated financial statements in the period during which the Company believes it
is more likely than not that the position will be sustained upon examination by taxing authorities. The recognition
threshold is measured as the largest amount of tax benefit that is more than 50% likely to be realized upon
settlement. The portion of the benefit that exceeds the amount measured, as described above, is recorded as a
liability for unrecognized tax benefits, along with any associated interest and penalties, in the consolidated balance
sheets.
F-25
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
A reconciliation of the beginning and ending amounts of total gross unrecognized tax benefits are as follows:
Balance, March 31, 2020
Gross increase related to current year tax positions
Gross increase related to prior year tax positions
Settlements
Lapse of statute of limitations
Balance, March 31, 2021
Gross increase related to current year tax positions
Gross increase related to prior year tax positions
Gross decrease related to prior year tax positions
Settlements
Lapse of statute of limitations
Balance, March 31, 2022
Gross increase related to current year tax positions
Gross increase related to prior year tax positions
Gross decrease related to prior year tax positions
Lapse of statute of limitations
Balance, March 31, 2023
$
17,638
2,242
8,566
(1,215)
(1,961)
25,270
2,520
2,750
(243)
(795)
(4,723)
24,779
6,865
16,243
(456)
(2,530)
44,901
$
Total gross unrecognized tax benefits recorded in the consolidated balance sheets are as follows:
Long-term asset
Deferred tax assets, net
Current liability
Income tax payable
Long-term liability
Income tax liability
Total
As of March 31,
2023
2022
$
3,145 $
1,829
39,927
$
44,901 $
—
—
24,779
24,779
As of March 31, 2023, and 2022, the Company has accrued $5,828 and $4,722 for the payment of interest and
penalties, respectively, in income tax liability in the consolidated balance sheets. During the years ended March 31,
2023, 2022, and 2021, the Company recorded $1,106, $(60), and $1,151, respectively, of interest and penalties as
an increase or (decrease) to interest expense in the consolidated statements of comprehensive income.
Net unrecognized tax benefits are defined as gross unrecognized tax benefits, less federal benefit for state
income taxes, related to uncertain tax positions taken in the Company’s income tax return that would impact the
Company’s effective tax rate, if recognized. Management believes it is reasonably possible that the amount of net
unrecognized tax benefits, as well as associated interest and penalties, may decrease during the next 12 months by
$7,917, which includes amounts relating to expirations of statute of limitations and settlements of various tax
matters. Of this amount, $6,929 would result in an income tax benefit for the Company and $988 would result in a
decrease to interest expense in the consolidated statements of comprehensive income.
F-26
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
The Company has on-going income tax examinations in various state and foreign tax jurisdictions and
regularly assesses tax positions taken in years open to examination. The Company files income tax returns in the
US federal jurisdiction and various state, local, and foreign jurisdictions. With few exceptions, the Company is no
longer subject to US federal, state, local, or foreign income tax examinations by tax authorities before fiscal year
2019.
Although the Company believes its tax estimates are reasonable and prepares its tax filings in accordance
with all applicable tax laws, the final determination with respect to any tax audits, and any related litigation, could be
materially different from the Company’s estimates or from its historical income tax provisions and accruals. The
results of an audit or litigation could have a material impact on results of operations or cash flows in the periods for
which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs,
settlements, penalties, or interest assessments. However, management does not currently expect these audits and
inquiries to have a material impact on the Company’s consolidated financial statements.
Note 6. Revolving Credit Facilities
Primary Credit Facility. In December 2022, the Company refinanced in full and terminated its prior credit
agreement originally entered into in September 2018 (Prior Credit Agreement). The refinanced revolving credit
facility agreement is with Citibank, N.A. (Citibank), as administrative agent, Comerica Bank, as sole syndication
agent, and the lenders party thereto (Credit Agreement). The Credit Agreement provides for a five-year, $400,000
unsecured revolving credit facility (Primary Credit Facility), contains a $25,000 sublimit for the issuance of letters of
credit, and matures on December 19, 2027, subject to extension on early termination as described in the Credit
Agreement.
In addition to allowing borrowings in US dollars, the Primary Credit Facility provides a $175,000 sublimit for
borrowings in Euros, Sterling, Canadian dollars, and any other foreign currency that is subsequently approved by
Citibank, each lender, and each bank issuing letters of credit. Subject to customary conditions, the Company has
the option to increase the maximum principal amount available up to an additional $300,000, resulting in a
maximum available principal amount of $700,000. However, none of the lenders have committed at this time to
provide any such increase in the commitment.
The obligations of the Company and each other borrower under the Primary Credit Facility are guaranteed by
the Company’s existing and future wholly owned domestic subsidiaries that meet certain materiality thresholds,
subject to limited exceptions. All obligations under the Primary Credit Facility and the foregoing guaranty are
unsecured, and amounts borrowed may be prepaid at any time without a premium or penalty, subject to limited
exceptions.
Certain of the Company’s foreign subsidiaries may also borrow under the Primary Credit Facility, which permits
the Company, subject to customary conditions, to designate one or more additional subsidiaries organized in foreign
jurisdictions to borrow. The Company is liable for the obligations of each foreign borrower, but the obligations of the
foreign borrowers are several (not joint) in nature.
Interest Rate Terms. At the Company’s election, revolving loans issued under the Primary Credit Facility will
bear interest at the adjusted term SOFR, the adjusted Euro InterBank Offered Rate (EURIBOR), the Sterling
Overnight Index Average (SONIA), the Canadian Dollar Offered Rate (CDOR), or the adjusted Alternate Base Rate
(ABR), in each case plus the applicable interest rate margin.
Interest for borrowings in US dollars will fluctuate between SOFR, plus 1.00% and 0.10% based on the
Company's total net leverage ratio, and ABR, plus 0% per annum. The applicable interest rate margin is based on a
pricing grid based on the Company’s total net leverage ratio and ranges from 1.00% to 1.625% per annum in the
case of loans based on the SOFR, EURIBOR, SONIA, or CDOR, and from 0.00% to 0.625% per annum in the case
of loans based on ABR. As of March 31, 2023, the effective interest rates for SOFR and ABR are 5.90% and 8.00%,
respectively.
F-27
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Commitment Fees. The Company is required to pay a fee rate that fluctuates between 0.125% and 0.20% per
annum on the daily unused amount of the Primary Credit Facility, with the exact commitment fee based on the
Company’s total net leverage ratio.
Borrowing Activity. During the year ended March 31, 2023, the Company made no borrowings or repayments
under the Primary Credit Facility. As of March 31, 2023, the Company has no outstanding balance, $958 of
outstanding letters of credit, and available borrowings of $399,042 under the Primary Credit Facility.
Deferred Financing Costs. The Company paid various commitment, arrangement, and other fees to certain
parties to the Credit Agreement, and reimbursed certain of the parties’ expenses, which totaled $1,537, with $313
recorded in other current assets and $1,224 recorded in other assets in the consolidated balance sheets. These
costs will be amortized on a straight-line basis over the term of the Credit Agreement. Deferred financing costs
associated with the Prior Credit Agreement had a remaining unamortized balance previously recorded in other
current assets in the consolidated balance sheets of $226, which was written off to interest expense during the
quarter ended December 31, 2022.
China Credit Facility. In October 2021, Deckers (Beijing) Trading Co., LTD (DBTC), a wholly owned
subsidiary of the Company, entered into a credit agreement in China (as amended, the China Credit Facility) that
provides for an uncommitted revolving line of credit of up to CNY300,000, or $43,672, with an overdraft facility
sublimit of CNY100,000, or $14,557. The China Credit Facility is payable on demand and subject to annual review
with a defined aggregate period of borrowing of up to 12 months. The obligations under the China Credit Facility are
guaranteed by the Company for 108.5% of the facility amount in US dollars. Interest is based on the People’s Bank
of China (PBOC) market rate multiplied by a variable liquidity factor. As of March 31, 2023, the effective interest rate
is 3.95%. During the year ended March 31, 2023, the Company made no borrowings or repayments under the
China Credit Facility. As of March 31, 2023, the Company has no outstanding balance, outstanding bank
guarantees of $29, and available borrowings of $43,643 under the China Credit Facility.
Japan Credit Facility. On January 31, 2023, Deckers Japan, G.K. (Deckers Japan), a wholly owned
subsidiary of the Company, allowed a credit agreement in Japan (Japan Credit Facility) to expire and the Company
cancelled the associated parent guarantee. If borrowing needs arise, Deckers Japan is able to borrow from one or
more of the Company's subsidiaries through intercompany loans as permitted under the Primary Credit Facility.
During year ended March 31, 2023, the Company made no borrowings or repayments and had no outstanding
balance prior to the expiration of the Japan Credit Facility.
Debt Covenants. Under the Credit Agreement, the Company is subject to usual and customary
representations and warranties, and contains usual and customary affirmative and negative covenants, which
include limitations on liens, additional indebtedness, investments, restricted payments, indemnification provisions in
favor of the lenders and transactions with affiliates. The financial covenant requires the total net leverage ratio to be
not greater than 3.75 to 1.00.
Under the Credit Agreement, the Company is also subject to other customary limitations, as well as usual and
customary events of default, which include non-payment of principal, interest, fees and other amounts; breach of a
representation or warranty; non-performance of covenants and obligations; default on other material debt;
bankruptcy or insolvency; material judgments; incurrence of certain material Employee Retirement Income Security
Act of 1974 (ERISA) liabilities; and a change of control of the Company.
Under the China Credit Facility, DBTC is subject to usual and customary representations and warranties, and
usual and customary affirmative and negative covenants, which include limitations on liens and additional
indebtedness.
As of March 31, 2023, the Company is in compliance with all financial covenants under the Primary Credit
Facility and China Credit Facility.
F-28
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Note 7. Commitments and Contingencies
Leases. The Company primarily leases retail stores, showrooms, offices, and distribution facilities under
operating lease contracts which vary in lease terms but, in the aggregate, continue in effect through calendar year
2033. Some of the Company's operating leases contain extension options between one to 15 years. Historically, the
Company has not entered into finance leases and its lease agreements generally do not contain residual value
guarantees, options to purchase underlying assets, or material restrictive covenants.
Variable Lease Payments. Certain leases require additional payments based on (1) actual or forecasted sales
volume (either monthly or annually), (2) reimbursement for real estate taxes (tax), (3) common area maintenance
(CAM), and (4) insurance (collectively, variable lease payments). Variable lease payments are generally excluded
from operating lease assets and lease liabilities and are recorded in rent expense as a component of SG&A
expenses in the consolidated statements of comprehensive income. Some leases are dependent upon forecasted
annual sales volume, and lease payments are recognized on a straight-line basis as rent expense over each annual
period when the achievement of the related sales target is reasonably likely to occur. Other variable lease
payments, such as tax, CAM, and insurance, are recognized in rent expense as incurred. Some leases contain one
fixed lease payment that include variable lease payments, which are considered non-lease components. The
Company has elected to account for these instances as a single lease component and the total of these fixed
payments is used to measure the operating lease assets and lease liabilities.
Discount Rate. The Company discounts its unpaid lease payments using the interest rate implicit in the lease
or, if the rate cannot be readily determined, its IBR. Generally, the Company cannot determine the interest rate
implicit in the lease because it does not have access to the lessor's estimated residual value or the amount of the
lessor's deferred initial direct costs. The Company has a centralized treasury function, which enables the Company
to use a portfolio approach to discount lease obligations. Therefore, the Company generally derives a discount rate
at the lease commencement date by utilizing its IBR, which is based on what the Company would have to pay on a
collateralized basis to borrow an amount equal to its lease payments under similar terms. Because the Company
does not currently borrow on a collateralized basis under its revolving credit facilities, it uses the interest rate it pays
on its non-collateralized borrowings under its Primary Credit Facility as an input for deriving an appropriate IBR,
adjusted for the amount of the lease payments, the lease term, and the effect on that rate of designating specific
collateral with a value equal to the unpaid lease payments for that lease.
Rent Expense. The components of rent expense for operating leases recorded in the consolidated statements
of comprehensive income were as follows:
Operating
Variable
Short-term
Total
Years Ended March 31,
2023
2022
2021
$
52,961 $
51,126 $
30,309
5,729
24,265
3,428
$
88,999 $
78,819 $
52,849
24,033
3,015
79,897
F-29
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Operating Lease Liabilities. Maturities of undiscounted operating lease liabilities remaining as of March 31,
2023, with a reconciliation to the present value of operating lease liabilities recorded in the consolidated balance
sheets, are as follows:
Years Ending March 31,
2024
2025
2026
2027
2028
Thereafter
Total undiscounted future lease payments
Less: Imputed interest
Total
Amount
54,948
42,694
44,557
39,779
32,838
62,359
277,175
(30,687)
246,488
$
$
Operating lease liabilities recorded in the consolidated balance sheets exclude an aggregate of $19,506 of
undiscounted minimum lease payments due pursuant to leases signed but not yet commenced. These leases are
primarily for the following:
•
•
•
a new international UGG brand flagship retail store in London, England with an initial term of six
years, which the Company expects to commence in the first quarter of its next fiscal year ending
March 31, 2024 (next fiscal year);
a new international UGG brand flagship retail store in Munich, Germany with an initial term of five
years, which the Company expects to commence in the first quarter of its next fiscal year; and,
a new HOKA brand retail store in Nagoya, Japan with an initial lease term of six years, which the
Company expects to commence in the second quarter of its next fiscal year.
Supplemental Disclosure. Key estimates and judgments related to operating lease assets and lease liabilities
that are outstanding and presented in the consolidated balance sheets are as follows:
Weighted-average remaining lease term in years
Weighted-average discount rate
As of March 31,
2023
2022
6.0
3.2 %
5.6
2.6 %
Supplemental information for amounts presented in the consolidated statements of cash flows related to
operating leases were as follows:
Non-cash operating activities
Operating lease assets obtained in exchange for lease
liabilities*
Reductions to operating lease assets for reductions to lease
liabilities*
$
84,988 $
50,190 $
9,861
(1,903)
(5,293)
(12,051)
Years Ended March 31,
2023
2022
2021
*Amounts disclosed include non-cash additions or reductions resulting from lease remeasurements.
F-30
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Purchase Obligations. The Company has various types of purchase obligations, as follows:
Product. The Company has $668,388 of outstanding purchase orders or other obligations with its
manufacturers as of March 31, 2023. The Company has an extended design and manufacturing process, which
requires it to forecast production volumes and estimate inventory requirements several months before consumers
decide to purchase its products. The Company generally orders product three to nine months in advance of the
anticipated shipment dates based primarily on a combination of required product lead time and the timing of orders
received from customers and consumers. Accordingly, the aggregate amount reflects purchase commitments for
products that the Company reasonably expects to fulfill in the ordinary course of business. A significant portion of
the purchase commitments can be cancelled by the Company under certain circumstances; however, the
occurrence of such circumstances is generally limited. As a result, the amount does not necessarily reflect the dollar
amount of the Company’s binding commitments or minimum purchase obligations for products, and instead reflects
an estimate of its future payment commitments based on information currently available.
Commodities. The Company has an aggregate of $175,099 remaining for commodity purchase commitments,
primarily for sheepskin, wool (primarily for UGGpure® (UGGpure)), leather, and sugarcane derived resin or ethylene
vinyl acetate (EVA), as of March 31, 2023 (collectively, commodity contracts). These commitments generally arise
under one to two-year supply agreements. The aggregate amount reflects the remaining commitments under these
purchase orders. The Company typically enters into contracts requiring these purchase commitments that its
affiliates, manufacturers, factories, and other agents (each, a Buyer) must make on or before a specified target
date. These agreements may result in unconditional purchase commitments if a Buyer does not meet the minimum
purchase requirements.
In the event a Buyer does not purchase such minimum commitments by the original target dates, the Company
would be responsible for compliance with any and all minimum purchase commitments under these contracts, either
through deposits or non-cancellable fees. For certain sheepskin supply agreements, the Company would make
additional deposit payments towards the purchase of the remaining minimum commitments and such additional
deposits would be returned as the Buyer purchases the remaining minimum commitments, as these sheepskin
supply agreements do not permit net settlement. There are $16,243 of certain sheepskin supply agreement related
deposits, included in the aggregate commodity purchase commitment amount above, that have not been fully
consumed as of March 31, 2023, which are recorded in other assets in the consolidated balance sheets. This
amount reflects remaining minimum commitments the Company expects will be consumed in future periods in the
ordinary course of business, and that any remaining deposits are expected to become fully refundable or will be
reflected as a credit against purchases. During the year ended March 31, 2023, the Company received refunds of
deposits of $16,877 reflecting the return of funds previously advanced to sheepskin suppliers under certain expired
supply agreements.
Recently, the Company began to enter into purchasing contracts for sugarcane derived resin or EVA, which is
used to manufacture a significant portion of UGG brand products. While EVA purchasing contracts do not require
deposits when minimum volumes are not fully consumed; they are non-cancellable and are subject to fees.
Total future minimum commitments for commodity contracts as of March 31, 2023, are as follows:
Contract Effective Date
Original Target Date
Contract Value
Remaining
Commitment
October 2018*
October 2018
August 2021*
August 2021
November 2021
August 2021
December 2021
September 2020
September 2021
September 2022
September 2022
December 2022
September 2023
September 2024
F-31
$
3,600 $
2,560
25,200
35,000
2,450
72,000
32,920
1,586
2,560
14,657
10,372
2,185
49,102
21,326
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Contract Effective Date
December 2022
April 2022
December 2022
Original Target Date
September 2024
December 2024
September 2025
Contract Value
Remaining
Commitment
45,800
21,561
11,100
43,945
18,266
11,100
$
252,191 $
175,099
*Expired sheepskin supply agreements with minimum purchase obligation deposits outstanding reflected in the remaining
commitment balance, as disclosed above.
The amounts in the table above do not necessarily reflect the dollar amount of the Company’s binding
commitments or minimum purchase obligations, and instead reflect an estimate of its future payment obligations
based on information currently available.
Other. The Company has an aggregate of $234,837 of other purchase commitments as of March 31, 2023.
Included within these purchase commitments are third-party logistics provider (3PL) arrangements, sales
management services, supply chain services, information technology (IT) services, promotional expenses, and
other commitments under service contracts, which are required to be paid during the fiscal years ending March 31,
2024, through 2028.
Litigation. From time to time, the Company is involved in various legal proceedings, disputes, and other
claims arising in the ordinary course of business, including employment, intellectual property, and product liability
claims. Although the results of these matters cannot be predicted with certainty, the Company believes it is not
currently a party to any legal proceedings, disputes, or other claims for which a material loss is considered probable
and for which the amount (or range) of loss is reasonably estimable. However, regardless of the merit of the claims
raised or the outcome, these ordinary course matters can have an adverse impact on the Company as a result of
legal costs, diversion of management time and resources, and other factors.
Indemnification. The Company has agreed to indemnify certain of its licensees, distributors, and promotional
partners in connection with claims related to the use of the Company’s intellectual property. The terms of such
agreements range up to five years initially and generally do not provide for a limitation on the maximum potential
future payments. From time to time, the Company also agrees to indemnify its licensees, distributors, and
promotional partners in connection with claims that the Company’s products infringe on the intellectual property
rights of third parties. These agreements may or may not be made pursuant to a written contract. In addition, from
time to time, the Company also agrees to standard indemnification provisions in commercial agreements in the
ordinary course of business. Management believes the likelihood of any payments under any of these arrangements
is remote and would be immaterial. This determination is made based on a prior history of insignificant claims and
related payments. There are currently no pending claims relating to indemnification matters involving the Company’s
intellectual property.
Note 8. Stock-Based Compensation
In September 2015, the Company’s stockholders approved the 2015 Stock Incentive Plan (2015 SIP), the
primary purpose of which is to encourage ownership in the Company by key personnel, whose long-term service is
considered essential to the Company’s continued success. The 2015 SIP reserves 1,275,000 shares of the
Company’s common stock for issuance to employees, directors, consultants, independent contractors, and
advisors. The maximum aggregate number of shares that may be issued to employees under the 2015 SIP through
the exercise of incentive stock options is 750,000. From time to time, the Company grants various types of stock-
based compensation under the 2015 SIP, including time-based restricted stock units (RSUs), performance-based
restricted stock units (PSUs), stock appreciation rights, and non-qualified stock options (NQSOs). The Company
typically makes annual grants of RSUs and long-term incentive plan PSUs (LTIP PSUs), to key personnel, including
employees and directors.
F-32
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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Annual Awards. The Company grants annual awards under the 2015 SIP, which entitle the recipients to
receive shares of the Company’s common stock upon vesting, RSUs are subject to time-based vesting criteria and
typically vest in equal annual installments over three years following the date of grant.
Annual award activity recorded in the consolidated statements of comprehensive income were as follows:
Nonvested, March 31, 2020
Granted
Vested*
Forfeited
Nonvested, March 31, 2021
Granted
Vested*
Forfeited
Nonvested, March 31, 2022
Granted
Vested*
Forfeited
Number of
Shares
162,349 $
47,015
(92,614)
(3,664)
113,086
52,256
(60,034)
(7,441)
97,867
51,955
(45,092)
(15,439)
Weighted-
Average
Grant-Date
Fair Value
124.47
220.31
(104.92)
(147.34)
179.58
363.89
(162.37)
(239.39)
284.00
338.99
(249.67)
(299.96)
Nonvested, March 31, 2023
89,291 $
330.57
* The amounts vested include shares withheld to cover taxes that are not issued to the recipient.
Long-Term Incentive Plan Awards. The Company grants LTIP PSUs under the 2015 SIP that are subject to
the achievement of Company performance targets. A Monte-Carlo simulation model is used to determine the grant
date fair value by simulating a range of possible future stock prices for the Company and each member of the peer
group over the performance periods (further defined for each individual grant below). For each grant of LTIP PSUs,
the Monte-Carlo simulation model factors in key assumptions, such as the market price of the underlying common
stock at the beginning and end of the reporting period, risk free interest rate, expected dividend yield when
simulating total stockholder return (TSR), expected dividend yield when simulating the Company’s stock price, stock
price volatility, and correlation coefficients.
The Company evaluates the probability of achieving performance criteria included in its LTIP PSUs against its
most current forecast at least quarterly. LTIP PSUs recorded in the consolidated statements of comprehensive
income, were as follows:
2023 LTIP PSUs. During fiscal year 2023, the Company approved LTIP PSUs under the 2015 SIP (2023 LTIP
PSUs), which were awarded to certain members of the Company's management team, including the Company's
named executive officers and vice presidents. The 2023 LTIP PSUs are subject to vesting based on service
conditions over either two or three years. In addition, the Company must meet certain revenue and pre-tax income
performance targets individually over three reporting periods for the fiscal year ended March 31, 2023, and the fiscal
years ending March 31, 2024, and 2025 (collectively, the 2025 Measurement Periods). The 2023 LTIP PSUs also
incorporate a relative TSR modifier for both the 24-month performance period ending March 31, 2024, and the 36-
month performance period ending March 31, 2025 (collectively, the 2025 Performance Periods).
To the extent financial performance is achieved above the threshold levels for each of these performance
criteria, the number of 2023 LTIP PSUs that will vest will increase up to a maximum of 200% of the targeted amount
for that award. No vesting of any portion of the 2023 LTIP PSUs will occur if the Company fails to achieve the pre-
established minimum revenue and pre-tax income amounts for each reporting period. Following the determination of
F-33
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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
the Company’s achievement with respect to the revenue and pre-tax income criteria for the 2025 Measurement
Periods, the vesting of each 2023 LTIP PSU will be subject to adjustment based on the application of the TSR
modifier. The amount of the adjustment will be determined based on a comparison of the Company's TSR relative to
the TSR of a pre-determined set of peer group companies for the 2025 Performance Periods.
The Company granted 2023 LTIP PSU awards of 32,735 at the target performance level during the fiscal year
ended March 31, 2023. The weighted-average grant date fair value per share of the 2023 LTIP PSUs was $387.44.
Based on the Company’s current long-range forecast, it determined that the achievement of at least the minimum
threshold target performance criteria for each of the Measurement Periods for these awards was probable as of the
grant date.
2022 LTIP PSUs. During fiscal year 2022, the Company approved LTIP PSUs under the 2015 SIP (2022 LTIP
PSUs), which were awarded to certain members of the Company's management team, including the Company's
named executive officers and vice presidents. The 2022 LTIP PSUs are subject to vesting based on service
conditions over three years. In addition, the Company must meet certain revenue and pre-tax income performance
targets individually over three reporting periods for the fiscal years ended March 31, 2022, and 2023, and for the
fiscal year ending March 31, 2024 (collectively, the 2024 Measurement Periods). The 2022 LTIP PSUs also
incorporate a relative TSR modifier for 36-month performance period ending March 31, 2024 (the 2024
Performance Periods).
To the extent financial performance is achieved above the threshold levels for each of these performance
criteria, the number of 2022 LTIP PSUs that will vest will increase up to a maximum of 200% of the targeted amount
for that award. No vesting of any portion of the 2022 LTIP PSUs will occur if the Company fails to achieve the pre-
established minimum revenue and pre-tax income amounts for each reporting period. Following the determination of
the Company’s achievement with respect to the revenue and pre-tax income criteria for the 2024 Measurement
Periods, the vesting of each 2022 LTIP PSU will be subject to adjustment based on the application of the TSR
modifier. The amount of the adjustment will be determined based on a comparison of the Company's TSR relative to
the TSR of a pre-determined set of peer group companies for the 2024 Performance Periods.
The Company granted 2022 LTIP PSU awards of 34,822 at the target performance level during the fiscal year
ended March 31, 2022. The weighted-average grant date fair value of the 2022 LTIP PSUs was $407.37 per share.
The Company currently expects to exceed the threshold financial performance levels for each of the performance
criteria, and therefore the number of 2022 LTIP PSUs that is expected to vest is above 100% of the targeted amount
for the awards.
2021 LTIP PSUs. During fiscal year 2021, the Company approved LTIP PSUs under the 2015 SIP (2021 LTIP
PSUs), which were awarded to certain members of the Company's management team, including the Company's
named executive officers and vice presidents. The 2021 LTIP PSUs are subject to vesting based on service
conditions over either two or three years.
In addition, the Company must meet certain revenue and pre-tax income performance targets individually over
three reporting periods for the fiscal years ended March 31, 2021, 2022 and 2023 collectively, the 2023
Measurement Periods) and incorporates a relative TSR modifier for both the 24-month performance period and 36-
month performance period ending March 31, 2023 (collectively, the 2023 Performance Periods). To the extent
financial performance is achieved above the threshold levels for each of these performance criteria, the number of
2021 LTIP PSUs that will vest will increase up to a maximum of 200% of the targeted amount for that award. No
vesting of any portion of the 2021 LTIP PSUs will occur if the Company fails to achieve the pre-established minimum
revenue and pre-tax income amounts for each reporting period. Following the determination of the Company’s
achievement with respect to the revenue and pre-tax income criteria for the 2023 Measurement Periods, the vesting
of each 2021 LTIP PSU will be subject to adjustment based on the application of the TSR modifier. The amount of
the adjustment will be determined based on a comparison of the Company's TSR relative to the TSR of a pre-
determined set of peer group companies for the 2023 Performance Periods.
F-34
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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
The Company granted 2021 LTIP PSU awards of 19,890 at the target performance level during the year ended
March 31, 2021. The weighted-average grant date fair value of the 2021 LTIP PSUs was $376.45 per share. The
Company currently expects to exceed the target financial performance levels for each of the performance criteria,
and the number of 2021 LTIP PSUs that is expected to vest will be at 200% of the maximum amount for the awards.
LTIP PSUs activity recorded in the consolidated statements of comprehensive income were as follows:
Nonvested, March 31, 2020
Granted*
Vested**
Nonvested, March 31, 2021
Granted*
Vested**
Forfeited
Nonvested, March 31, 2022
Granted*
Vested**
Forfeited
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value
153,446 $
39,780
133.53
376.45
(77,098)
(106.37)
116,128
69,644
(69,816)
(12,924)
103,032
65,470
(30,104)
(27,194)
215.30
358.75
(131.33)
(239.81)
344.25
330.70
(319.81)
(323.92)
Nonvested, March 31, 2023
111,204 $
347.86
*The amounts granted are the maximum amounts under the terms of the applicable LTIP PSUs.
** The amounts vested include shares withheld to cover taxes that are not issued to the recipient.
Long-Term Incentive Plan Options. The Company approved the issuance of LTIP NQSOs under the 2015
SIP, including the November 2016 (2017 LTIP NQSOs) and June 2017 (2018 LTIP NQSOs) grants, which were
awarded to certain members of the Company’s management team, with a maximum contractual term of seven
years from the grant date. If the recipient provided continuous service, the LTIP NQSOs would vest after the
Company had determined it achieved the target performance criteria by the date specified in the award. Each
vested LTIP NQSO provides the recipient the right to purchase a specified number of shares of the Company’s
common stock at a fixed exercise price per share based on the closing price of the common stock on the date of
grant. As of March 31, 2020, the Company determined that the target performance criteria related to the 2018 LTIP
NQSOs for the fiscal year ended March 31, 2020, were achieved. During the years ended March 31, 2023, 2022,
and 2021, no LTIP NQSOs were granted, but options previously granted remain exercisable for both the 2017 LTIP
NQSOs and the 2018 LTIP NQSOs.
LTIP option activity recorded in the consolidated statements of comprehensive income were as follows:
Vested, March 31, 2020
Exercised
Vested, March 31, 2021
Exercised
Number of
Shares
302,939 $
(107,197)
195,742
(45,810)
Weighted-
Average
Grant-Date
Fair Value
66.02
(63.20)
67.56
(67.11)
Weighted-
Average
Remaining
Contractual
Term
(Years)
5.0
3.6
Aggregate
Intrinsic
Value
$
20,594
51,452
F-35
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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Vested, March 31, 2022
Exercised*
Vested, March 31, 2023
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value
Weighted-
Average
Remaining
Contractual
Term
(Years)
149,932
(64,043)
85,889 $
67.70
(68.66)
66.99
2.6
1.8
Aggregate
Intrinsic
Value
30,896
$
33,037
*The amounts exercised include shares withheld to cover taxes that are not issued to the recipient.
Grants to Directors. Each of the Company’s nonemployee directors was entitled to receive common stock
with a total value of $170 for annual service on the Board of Directors during the year ended March 31, 2023. The
shares are issued in equal quarterly installments with the number of shares being determined using the rolling
average of the closing price of the Company’s common stock during the last ten trading days leading up to, and
including, the grant date, which is in alignment with the Company’s equity grant guidelines. Each of these shares is
fully vested on the date of issuance.
Employee Stock Purchase Plan. The 2015 Employee Stock Purchase Plan (ESPP) authorizes 1,000,000
shares of the Company’s common stock for sale to eligible employees using their after-tax payroll deductions, which
are refundable until purchases are made, and are liability-classified. ESPP shares are excluded from basic earnings
per share until purchases are made but are included in diluted earnings per share as after-tax payroll deductions
are made. Each consecutive purchase period is six months (purchase period) in duration and shares are purchased
on the last trading day of the purchase period (no look-back provision) at a 15% discount to the closing price on that
date. Purchase windows take place in February and August of each fiscal year. The net difference between the
timing of compensation expense incurred and remeasured during the purchase period and purchase windows are
recorded in other accrued expenses in the consolidated balance sheets.
Stock-Based Compensation. Components of stock-based compensation recorded in the consolidated
statements of comprehensive income were as follows:
Years Ended March 31,
2023
2022
2021
Stock-based compensation
RSUs
PSUs
LTIP PSUs
Grants to Directors
Subtotal
Other stock-based compensation
Employee Stock Purchase Plan
Total stock-based compensation, pre-tax
Income tax benefit
$
13,249 $
12,093 $
—
11,275
1,863
26,387
510
26,897
—
12,865
1,507
26,465
351
26,816
(6,557)
(6,496)
Total stock-based compensation, net of tax
$
20,340 $
20,320 $
7,820
1,900
11,555
1,195
22,470
231
22,701
(5,441)
17,260
F-36
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Unrecognized Stock-Based Compensation. Total remaining unrecognized stock-based compensation as of
March 31, 2023, related to non-vested awards that the Company considers probable to vest and the weighted-
average period over which the cost is expected to be recognized in future periods, are as follows:
RSUs
LTIP PSUs
Total
Note 9. Derivative Instruments
Weighted-
Average
Remaining
Vesting Period
(Years)
1.1
1.6
Unrecognized
Stock-based
Compensation
$
$
14,829
15,891
30,720
As of March 31, 2023, and 2022, the Company has no outstanding derivative contracts, however, settled
derivative contracts with notional values are as follows:
Designated Derivative Contracts
Non-Designated Derivative Contracts
Total
Years Ended March 31,
2023
2022
$
$
96,345 $
110,430
31,044
38,659
127,389 $
149,089
The following table summarizes the effect of Designated Derivative Contracts and the related income tax
effects of unrealized gains or losses recorded in the consolidated statements of comprehensive income for changes
in AOCL:
Gain (Loss) recorded in Other comprehensive income
Reclassifications from Accumulated other comprehensive loss
into net sales
Total
Years Ended March 31,
2023
2022
2021
1,504 $
4,161 $
(1,223)
(1,504)
(4,161)
— $
— $
1,223
—
$
$
The following table summarizes the effect of Non-Designated Derivative Contracts recorded in the
consolidated statements of comprehensive income:
Gain recorded in SG&A expenses
$
1,518 $
611 $
267
Subsequent to March 31, 2023, through May 11, 2023, the Company entered into no Non-Designated
Derivative Contracts, but did enter into Designated Derivative Contracts with notional values totaling $127,512,
respectively, which are expected to mature over the next 12 months. As of May 11, 2023, the Company’s
outstanding hedging contracts were held by an aggregate of three counterparties.
Years Ended March 31,
2023
2022
2021
F-37
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Note 10. Stockholders' Equity
Stock Repurchase Program. The Company’s Board of Directors has approved various authorizations under
the Company’s stock repurchase program to repurchase shares of its common stock, including an approval on July
27, 2022, to increase its stock repurchase authorization by $1,200,000 (collectively, the stock repurchase program).
As of March 31, 2023, the aggregate remaining approved amount under the stock repurchase program is
$1,356,635. The stock repurchase program does not obligate the Company to acquire any amount of common stock
and may be suspended at any time at the Company’s discretion. Stock repurchase activity under the Company’s
stock repurchase program was as follows:
Dollar value of shares repurchased (1) (2)
Total number of shares repurchased (3)
Weighted average price paid per share
Years Ended March 31,
2023
2022
2021
$
$
297,372 $
356,653 $
99,147
928,262
1,043,554
307,080
320.35 $
341.77 $
322.87
(1) The dollar value of shares repurchased excludes the cost of broker commissions, excise taxes, and other costs
associated with the program.
(2) May not calculate on rounded dollars.
(3) All share repurchases were made pursuant to the Company's publicly announced stock repurchase program in open-
market transactions.
Accumulated Other Comprehensive Loss. The components within AOCL, net of tax, recorded in the
consolidated balance sheets are as follows:
Cumulative foreign currency translation loss
Note 11. Basic and Diluted Shares
As of March 31,
2023
2022
$
(39,035) $
(24,955)
The reconciliation of basic to diluted weighted-average common shares outstanding was as follows:
Basic
Dilutive effect of equity awards
Diluted
Excluded
RSUs and PSUs
LTIP PSUs
Deferred Non-Employee Director Equity Awards
Years Ended March 31,
2023
2022
2021
26,504,000
27,508,000
28,055,000
182,000
281,000
351,000
26,686,000
27,789,000
28,406,000
3,000
76,000
2,000
2,000
66,000
1,000
4,000
116,000
1,000
Excluded Awards. The equity awards excluded from the calculation of the dilutive effect have been excluded
due to one of the following: (1) the shares were antidilutive; (2) the necessary conditions had not been satisfied for
the shares to be deemed issuable based on the Company's performance for the relevant performance period; or (3)
the Company recorded a net loss during the period presented (such that inclusion of these equity awards in the
calculation would have been antidilutive). The number of shares stated for each of these excluded awards is the
maximum number of shares issuable pursuant to these awards. For those awards subject to the achievement of
performance criteria, the actual number of shares to be issued pursuant to such awards will be based on Company
performance in future periods, net of forfeitures, and may be materially lower than the number of shares presented,
which could result in a lower dilutive effect, respectively. Refer to Note 8, "Stock-Based Compensation," for further
information on the Company's equity incentive plans.
F-38
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DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Note 12. Reportable Operating Segments
Information reported to the Chief Operating Decision Maker (CODM), who is the Company’s Principal
Executive Officer, is organized into the Company’s six reportable operating segments and is consistent with how the
CODM evaluates performance and allocates resources. The Company does not consider international operations to
be a separate reportable operating segment, and the CODM reviews such operations in the aggregate with the
reportable operating segments.
Segment Net Sales and Income from Operations. The Company evaluates reportable operating segment
performance primarily based on net sales and income (loss) from operations. The wholesale operations of each
brand are generally managed separately because each requires different marketing, research and development,
design, sourcing, and sales strategies. The income (loss) from operations of each of the reportable operating
segments includes only those costs which are specifically related to each reportable operating segment, which
consist primarily of cost of sales, research and development, design, sales and marketing, depreciation,
amortization, and the direct costs of employees within those reportable operating segments. The Company does not
allocate corporate overhead costs or non-operating income and expenses to reportable operating segments, which
include unallocable overhead costs associated with the Company’s warehouse and DCs, certain executive and
stock-based compensation, accounting, finance, legal, IT, human resources, and facilities, among others.
Inter-segment sales from the Company’s wholesale reportable operating segments to the DTC reportable
operating segment are at the Company’s cost, and there is no inter-segment profit on these inter-segment sales,
nor are they reflected in income (loss) from operations of the wholesale reportable operating segments as these
transactions are eliminated in consolidation.
Reportable operating segment
comprehensive income, was as follows:
information, with a reconciliation
to
the consolidated statements of
Net sales
UGG brand wholesale
HOKA brand wholesale
Teva brand wholesale
Sanuk brand wholesale
Other brands wholesale
Direct-to-Consumer
Total
Income (loss) from operations
UGG brand wholesale
HOKA brand wholesale
Teva brand wholesale
Sanuk brand wholesale
Other brands wholesale
Direct-to-Consumer
Unallocated overhead costs
Total
Years Ended March 31,
2023
2022
2021
$ 1,004,356 $ 1,088,082 $
871,799
925,877
149,111
27,678
53,653
628,674
129,094
30,316
60,573
405,243
105,928
26,566
69,375
1,466,611
1,213,600
1,066,730
$ 3,627,286 $ 3,150,339 $ 2,545,641
$
267,013 $
315,240 $
292,718
285,257
32,595
2,891
(1,678)
508,948
155,344
33,294
6,463
14,028
435,414
111,208
27,120
(162)
21,573
349,465
(442,275)
(395,076)
(297,717)
$
652,751 $
564,707 $
504,205
F-39
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Depreciation, amortization, and accretion
Years Ended March 31,
2023
2022
2021
UGG brand wholesale
HOKA brand wholesale
Teva brand wholesale
Sanuk brand wholesale
Other brands wholesale
Direct-to-Consumer
Unallocated overhead costs
Total
Capital expenditures
UGG brand wholesale
HOKA brand wholesale
Teva brand wholesale
Sanuk brand wholesale
Other brands wholesale
Direct-to-Consumer
Unallocated overhead costs
Total
$
611 $
416 $
945
—
1,490
382
10,276
34,154
701
—
1,490
382
9,771
30,118
47,858 $
42,878 $
532
611
—
1,727
382
11,121
26,157
40,530
826 $
109 $
(31)
1,229
1,191
—
—
—
19,789
72,709
—
—
—
11,872
44,542
$
94,553 $
57,714 $
56
—
8
40
11,175
25,533
36,781
$
$
Segment Assets. Assets allocated to each reportable operating segment include trade accounts receivable,
net, inventories, property and equipment, net, operating lease assets, goodwill, other intangible assets, net, and
certain other assets that are specifically identifiable for one of the Company's reportable operating segments.
Unallocated assets are those assets not directly related to a specific reportable operating segment and generally
include cash and cash equivalents, deferred tax assets, net, and various other corporate assets shared by the
Company's reportable operating segments.
Assets allocated to each reportable operating segment, with a reconciliation to the consolidated balance
sheets, are as follows:
Assets
UGG brand wholesale
HOKA brand wholesale
Teva brand wholesale
Sanuk brand wholesale
Other brands wholesale
Direct-to-Consumer
Total assets from reportable operating segments
Unallocated cash and cash equivalents
Unallocated deferred tax assets, net
Unallocated other corporate assets
Total
F-40
As of March 31,
2023
2022
$
261,683 $
382,837
446,450
293,025
94,735
41,405
24,448
219,194
1,087,915
981,795
72,592
413,901
91,140
40,766
32,429
191,193
1,031,390
843,527
64,217
393,116
$ 2,556,203 $ 2,332,250
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Note 13. Concentration of Business
Regions and Customers. The Company sells its products globally to customers and end consumers in
various countries, with net sales concentrations as follows:
International net sales
% of net sales
Years Ended March 31,
2023
2022
2021
$ 1,175,789
$ 982,546
$ 784,164
32.4 %
31.2 %
30.8 %
Net sales in foreign currencies
$ 832,632
$ 744,213
$ 611,897
% of net sales
Ten largest customers as % of net sales
23.0 %
25.2 %
23.6 %
27.4 %
24.0 %
27.8 %
For the years ended March 31, 2023, 2022, and 2021, no single foreign country comprised 10.0% or more of
the Company’s total net sales. No single global customer accounted for 10.0% or more of the Company’s net sales
during the years ended March 31, 2023, 2022, and 2021.
As of March 31, 2023, the Company has no customers that represent 10.0% of trade accounts receivable, net,
compared to one customer that represents 11.2% of trade accounts receivable, net, as of March 31, 2022.
Management performs regular evaluations concerning the ability of the Company’s customers to satisfy their
obligations to the Company and recognizes an allowance for doubtful accounts based on these evaluations.
Cash and Cash Equivalents. The Company maintains a portion of its cash in Federal Deposit Insurance
Corporation (FDIC) insured bank deposit accounts which, at times, may exceed federally insured limits. To date, the
Company has not experienced any losses in such accounts. The Company does not believe, based on the size and
strength of the banking institutions used, it is exposed to any significant credit risks in cash.
Suppliers. The Company's production is concentrated at a limited number of independent manufacturing
factories, primarily in Asia. Sheepskin is the principal raw material for certain UGG brand products and most of the
Company's sheepskin is purchased from two tanneries in China, which is sourced primarily from Australia and the
United Kingdom (UK).
Long-Lived Assets. Long-lived assets, which consist of property and equipment, net, recorded in the
consolidated balance sheets, are as follows:
United States
Foreign*
Total
As of March 31,
2023
2022
$
$
244,529 $
208,078
22,150
14,371
266,679 $
222,449
*No single foreign country’s property and equipment, net, represents 10.0% or more of the Company’s total property and
equipment, net, as of March 31, 2023, and 2022.
F-41
Table of Contents
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Fiscal Years Ended March 31, 2023, 2022, and 2021
(dollar amounts in thousands, except per share or share data)
Note 14. Quarterly Summary of Information (Unaudited)
The Company’s business is seasonal, with the highest percentage of UGG and Koolaburra brand net sales
occurring in the quarters ending September 30th and December 31st and the highest percentage of Teva and
Sanuk brand net sales occurring in the quarters ending March 31st and June 30th. Net sales for the HOKA brand
occur more evenly throughout the year, reflecting the brand's year-round performance product offerings. Due to the
magnitude of the UGG brand relative to the Company’s other brands, the Company’s aggregate net sales in the
quarters ending September 30th and December 31st have historically significantly exceeded the Company’s
aggregate net sales in the quarters ending March 31st and June 30th. However, as the Company continues to take
steps to diversify and expand its product offerings by creating more year-round styles, and as net sales of the HOKA
brand continue to increase as a percentage of the Company’s aggregate net sales, the Company has seen and
expects to continue to see the impact from seasonality decrease over time. However, the Company’s seasonality
has been impacted by supply chain challenges and it is unclear whether these impacts will be minimized or
exaggerated in future periods as a result of these disruptions.
The following is summarized unaudited quarterly financial data for the last two fiscal years:
Net sales
Gross profit
Income from operations
Net income
Net income per share
Basic
Diluted
Net sales
Gross profit
Income from operations
Net income
Net income per share
Basic
Diluted
Fiscal Year 2023
Quarter Ended
6/30/2022
9/30/2022
12/31/2022
3/31/2023
$
614,461 $
875,614 $ 1,345,640 $
791,571
294,752
56,341
44,849
421,921
127,831
101,524
712,529
362,660
278,662
396,168
105,919
91,787
$
$
1.67 $
1.66 $
3.83 $
3.80 $
10.55 $
10.48 $
3.49
3.46
Fiscal Year 2022
Quarter Ended
6/30/2021
9/30/2021
12/31/2021
3/31/2022
$
504,678 $
721,902 $ 1,187,752 $
736,007
260,503
61,832
48,124
367,088
128,181
102,063
621,221
293,396
232,943
358,739
81,298
68,819
$
$
1.73 $
1.71 $
3.69 $
3.66 $
8.49 $
8.42 $
2.54
2.51
F-42
Table of Contents
Schedule II
DECKERS OUTDOOR CORPORATION AND SUBSIDIARIES
TOTAL VALUATION AND QUALIFYING ACCOUNTS
(dollar amounts in thousands)
Allowances for doubtful accounts, sales discounts, and chargebacks against gross trade accounts receivable
related to wholesale channel sales recorded in the consolidated balance sheets, are as follows:
Allowance for doubtful accounts (1)
Balance at Beginning of Year
Additions
Deductions
Balance at End of Year
Allowance for sales discounts (2)
Balance at Beginning of Year
Additions
Deductions
Balance at End of Year
Allowance for chargebacks (3)
Balance at Beginning of Year
Additions
Deductions
Balance at End of Year
Total
As of March 31,
2023
2022
2021
$
(9,044) $
(9,730) $
(1,983)
451
—
686
(6,989)
(3,052)
311
$
$
$
$
$
$
(10,576) $
(9,044) $
(9,730)
(2,831) $
(3,016) $
(19,745)
(20,713)
16,920
20,898
(5,656) $
(2,831) $
(18,716) $
(13,770) $
(27,400)
(32,062)
29,844
27,116
(16,272) $
(18,716) $
(32,504) $
(30,591) $
(1,030)
(16,414)
14,428
(3,016)
(13,127)
(23,214)
22,571
(13,770)
(26,516)
(1)
(2)
(3)
The additions to the allowance for doubtful accounts represent estimates of the Company’s bad debt expense or
recovery based on the factors on which the Company evaluates the collectability of its accounts receivable, with
actual recoveries netted into additions. Deductions are for the actual amounts written off against outstanding trade
accounts receivables.
The additions to the allowance for sales discounts represent estimates of discounts to be taken by the Company’s
customers based on the amount of outstanding discounts for meeting certain order, shipment, and prompt
payments terms. Deductions are for the actual discounts taken by the Company’s customers against outstanding
trade accounts receivables.
The additions to the allowance for chargebacks represent chargebacks and markdowns taken in the respective
year, as well as an estimate of amounts that will be taken in the future related to sales in the current reporting
period. Deductions are for the actual amounts written off against outstanding trade accounts receivables.
F-43
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250 Coromar Drive | Goleta, California, 93117
805.967.7611
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