Deckers Outdoor Corporation (NYSE:DECK) First Quarter 2023 Earnings Conference Call July 28, 2022 4:30 p. m. Eastern Time
Participating companies
Erinn Kohler – Vice President, Investor Relations, Corporate Planning and Business Analysis
Dave Powers – President and Chief Executive Officer
Steven Fasching – Chief Financial Officer
Conference Call Participants
Jonathan Komp – Robert W. Baird
Sam Poser – Williams Trading, LLC
Laurent Vasilescu – Exane, Inc.
Jim Duffy – Stifel Financial Corp.
John Kernan – Cowen Inc.
Pablo Lejuez – Citigroup Inc.
Jay Sole – UBS Group Ltd
Operator
Good morning, and thank you for being here. Welcome to the call of Deckers Brands’ first quarter of fiscal year 2023 earnings convention. Right now, all participants are in listen-only mode. After the presentation, we will organize a Q&A query and the commands will be there for you at that time that you can queue for questions. [Operator Instructions] I would like to remind everyone that this convention call is being recorded.
I will now give way to Erinn Kohler, Vice President of Investor Relations and Corporate Planning. Continue.
Erin Kohler
Good morning and thank you all for being with us today. On the call is Dave Powers, president and chief executive officer; and Steve Fasching, Chief Financial Officer. Before we begin, I’d like to remind everyone of the company’s safe harbor policy. Please note that certain statements made in this call are forward-looking statements within the federal securities laws, which are subject to significant dangers and uncertainties.
These forward-looking statements are intended to qualify for the disclaimer rule established through the Private Securities Litigation Reform Act of 1995. All statements made in this call today, other than statements of old facts, are forward-looking statements and come with statements relating to adjustments in customer behavior, the strength of our logos and demand for our products; adjustments to our product allocation, segmentation and distribution strategies; adjustments to our marketing plans and strategies; adjustments to our capital allocation strategies; the effect of the COVID-19 pandemic on our business and supply chain; our expected revenue; logo performance; the product range; gross margins; expenses; stock market and liquidity position; our possible buyback percentage; and the effects of the macroeconomic environment on our operations and monetary conditions.
The forward-looking statements made in this call constitute management’s existing expectations and are based on the data available at the time such statements are made. Forward-looking statements involve many known and unknown risks, uncertainties and other points that may differ materially from those anticipated, assumed or implied through the forward-looking statements.
The Company has explained some of those dangers and uncertainties and its filings with the SEC, adding the Risk Factors segment of its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. The New York Stock Exchange, the Company expressly disclaims any legal purpose or liability to update any forward-looking statements.
With that, I now pass it on to Dave.
dave powers
Thank you Erin. Hello everyone and thank you for being with us today. I am excited to dive into another quarter of exceptional results, which constitute a smart start to fiscal 2023 and further progress toward our long-term strategies. First Quarter Revenue increased 22% year-over-year to $614 million, and we achieved consistent earnings with a consistent percentage of $1. 66. Revenue expansion was primarily driven through HOKA, with the logo completing its first quarter of $300 million. able to achieve another successful first quarter as we continue to reduce the old seasonality of our portfolio through the expansion of the HOKA call for the year and further diversifying the category mix.
It is vital to note that our first quarter result demonstrated the momentum of our long-term vision to make HOKA a multi-billion dollar major player in the functional sports space, to further diversify products with the UGG logo, geographical and seasonal combination, to grow our DTC Business through customer acquisition and loyalty, and stimulating foreign markets through strategic investments. We are making transparent progress on each of these initiatives.
In the first quarter, HOKA generated overseas sales of $330 million, a 55% increase over last year. UGG products are paired with sandals to get away from seasonal autumn styles. profit growth. Global DTC for all brands increasing by up to 15% thanks to increasing customer acquisition and retention to 13% and 28%, respectively, and profits from foreign markets increasing by up to 36% through last year, which includes previous shipments from distributors
These highlights reflect the strength of Deckers’ market control and the omnichannel features of our exciting logo portfolio. Our disciplined technique for managing logos, marketplaces, and distribution channels continues to serve us well as we create the long-term Deckers. As the macroeconomic environment evolves rapidly, I feel confident in our clients’ demand for our logos and our team’s ability to stay agile and our goals in this dynamic environment.
Steve will provide more main points about our future expectations later in the call. In the meantime, let’s dig into logo and channel functionality for the first quarter of fiscal 2023. Starting with logo highlights, HOKA’s global profit for the first quarter was up 55% from last year at $330 million. This is a significant achievement that has resulted in HOKA’s global profit over the past 12 months, and on June 30, breaking the billion-dollar barrier with much more expansion to come.
The exceptional expansion of the HOKA brands also reached a new milestone for Deckers as a whole, with HOKA’s revenue accounting for more than 50% of the portfolio’s overall quarterly revenue for the first time. -peak periods and full price promotion at premium prices. The expansion of the HOKA brands enhances Deckers’ overall quarterly monetary and operating performance.
The strong HOKA logo quarter was characterized by exceptional earnings expansion in the global logo access point ecosystem, highlighted across global markets with a 66% increase over last year, driven by the strength of the EMEA region, which partially influenced the sales momentum for our suppliers as we strategically built new markets.
Usa. The U. S. has risen 49% since last year, with DTC expansion leading to a global wholesale expansion of DTC by 58% since last year, driven by continued momentum with retained consumers, as well as continued acquisition of new consumers and a 53% increase in global wholesale since last year, as the logo increased its market share and existing accounts and benefited from the decided doors added to the strategic accounts. We were excited by the positive signs of the logo and the continued gains from the market share on which HOKA relies across its entire global distribution network.
The highlights come with the expansion of market share in U. S. specialties. In the U. S. , while imposing higher retail prices. Specific styles represent at least a portion of the 10 most sensitive styles based on aggregate knowledge of controlled specialty retail outlets in the United States. The doubling of profits in France, driven by earnings in Paris, which was our third fastest-developing European city in the quarter, and Asia-Pacific, generating the highest regional GDP expansion rate, driven through China and Japan, as those countries benefited from customer awareness of retail outlets.
Around the world, HOKA’s retail outlets have continued to generate excitement among new audiences and generate compelling levels of traffic and purchases. the region. Thanks to a subtle visual selling strategy that complements the customer experience, our outlets in China are now generating higher conversion rates and we are more supplied as we open more outlets in the region.
In the U. S. , the retail team continues to work towards the opening of the HOKA brand’s first permanent location in New York City in the spring of calendar year 2023. This is an exciting undertaking as the HOKA store will feature a raised design adapted to our Prime Minister. High performance brand. Meanwhile, HOKA will open a momentary pop-up location in New York City near Lincoln Center over the next month. Our Chicago site, which opened in the last 3 months, is seeing traffic and generating strong conversion, providing even more confidence in customers’ appetite for HOKA retail stores.
We will use a disciplined technique to open a limited number of doors. But we’re excited about the opportunity to engage with consumers in key cities around the world. In addition, in the context of direct sales to consumers in global markets, HOKA continues to increase the number of consumers acquired and retained to remarkable degrees until last year. During the quarter, DTC acquisition increased as much as 48% and retention increased as much as 58% through last year, with gains among consumers over the ages of 18 to 34. far outpacing those increases. This led to a four percentage point increase in the age mix of 18 to 34, among Americans who shop at hoka. com.
We’re seeing incredible HOKA momentum as the logo continues to motivate humans to fly over earth. HOKA’s logo philosophy is reflected in its new globally incorporated marketing crusade called Fly Human Fly. This crusade has been conscientiously designed as an invitation for humans around the world to notice the arrival of HOKA. As part of the crusade, HOKA introduced the 5th edition of mach, which has temporarily become one of the five most sensitive styles of the logo, as well as a completely redesigned customer website.
The enhanced online page features a new logo aesthetic that complements product presentation with more technical detail and improves visibility of logo values and storytelling across the site. Fly human fly has been online for just over a month. We are very satisfied with the reaction of consumers and feedback from our wholesale partners. However, on the fly human fly landing page in hoka. com, 83% of visitors were new, which is in line with the crusade’s goal of succeeding in a new audience. We believe this crusade will have a significant effect on HOKA logo awareness as we grow the logo into a multi-billion dollar major player in the long-term performance chart.
Speaking of performance, I must congratulate HOKA sponsored athlete Adam Peterman for winning the 2022 100-mile race in the Western States. It was a feat for Adam, as it was the first time he had competed in a 100-mile race. He won dressed in the recently introduced HOKA Speedgoat 5, which is an absolutely redesigned edition of the brand’s most popular trail shoe with less weight and advanced traction with Vibram Megagrip to motivate confidence in all terrains.
Results like those underscore that the hoka logo leadership is a leading functionality logo, enabling athletes to achieve optimal degrees of functionality. Congratulations to Adam and all the other athletes who competed in the hundred Western states sponsored by HOKA this year.
Moving on to UGG, global profit for the quarter declined 2% year-over-year to $208 million. The superior performance was due to superior foreign wholesale sales and distributors, which was offset by the category replacement dynamics, which impacted the global direct-to-consumer business of the logo. UGG’s global logo regions continue to gain advantages from the market allocation and segmentation methods implemented to raise logo awareness and increase call abroad. With a limited fall base product on the market, it was able to generate full-price sales last holiday season and generate open buying opportunities in the spring, boosting the quarter’s results.
UGG has captured a larger share of the market with transition styles such as Ultra Mini and Coquette, as well as the recently introduced Sport Yeah sandal, driving all sales. Briefly discussing the dynamics of the categories impacting UGG’s global DTC. Over the past two years, Fluff franchise has noticed increased relevance as consumers turn to UGGs and modern hybrid slippers to wear at home.
Expecting changes in customers’ habits towards outerwear, UGG’s product team continued to evolve the franchise with the arrival of more spring, summer and outdoor styles, adding the Sport Yes sandal. Sandals were the featured category for UGG the quarter, with strong demand appearing for the outdoor logo of the fall and winter season. At the same time, it effectively shifts customers’ adoption from legacy luxury franchise styles to beach styles in one position.
The lower average selling price in the sandal category has created a profit headwind for Fluff’s exceptional volumes that were sold in the first quarter over the past two years. That said, Fluff Yeah remains the most productive taste among acquired and unwavering consumers. , adding from 18 to 34 years.
In a global direct-to-customer context, although dollar revenue is lower than last year due to those product line adjustments, UGG demand remains strong, with the logo posting increases of 8% and 13% and earning and retaining customer loyalty respectively compared to last year. It should be noted that foreign DTC acquisition and retention earnings are trending well above those global figures as we continue to expand the logo heat overseas. Their styles drive the acquisition of new customers around the world. they come with the aforementioned Fluff Yeah and Sport Yeah, as well as the sleek Clem gold sandal and the Tasman franchise that continues to catch fire.
We are encouraged by continued customer interest and wider adoption of UGG’s diverse product range. Overall, the first quarter was a smart start to the year for UGG. UGG is well placed for effectively the entire fiscal year 2023. And I’m even more excited about the brand’s long-term, following our recent announcement of Anne Spangenberg as president of Fashion Lifestyle.
Anne as a proven leader with significant logo building experience in our industry, most recently as Nike’s Chief Merchant, and has already started in recent weeks when she starts diving into all things UGG and interacting with our talented logo. multifunctional team and business partners. In his new role, we will build on UGG’s strategic priorities, focusing on product diversification, customer adoption and the evolution of franchises in our omnichannel market. I would like to welcome Anne and thank the UGG team for the cross-functional collaboration and teamwork that has allowed the logo to have a strong position in the market as we try to fulfill this role.
From an attitude of channel functionality in the first quarter, earnings in the global wholesale segment, adding distributors, were the main driving force of growth, up 25% from last year. HOKA, as well as the advantages of adding doors with strategic accounts. UGG also contributed to wholesale profit gains through the continued adoption of the brand’s diversified collection of products in foreign regions, which continue to gain advantages from market reset activities.
Earnings from direct sales to global customers in the first quarter increased 15% compared to the previous year. and the seasonal dynamics I mentioned earlier in the call. Overall, our direct-to-customer business continues to profit from the growing influence of hoka brands, i. e. in the outdoor neighborhoods of the former peak periods of UGG.
In the quarter just ended, HOKA accounted for 53% of DTC’s revenue, up from 39% last year and 27% 2 years ago, and to the maximum all DTC activities of the HOKA logos are carried out through e-commerce, our most successful channel. Logo replacement dynamics are a source of creativity for our results.
With that, I will give the floor to Steve to provide more important points about our first quarter monetary results, as well as our reaffirmed outlook for fiscal 2023.
Steven Fasching
Thank you, Dave, good afternoon, everyone. As Dave just shared, our first quarter effects showed wonderful progress toward the direction of the fiscal year we defined in May, while we completed a number of key projects for our business this quarter. HOKA has been the main driving force of functionality as the logo continues to gain share in the global market. UGG’s revenue was slightly lower than last year, basically due to category adjustments during the quarter, as well as excess previous sales in the past year. But the logo is well placed to deliver another solid year and we’re excited about what lies ahead under Anne’s leadership.
With the current uncertainty of the macroeconomic environment, we continue our disciplined and culpable technique to manage our business and will remain agile to respond to this dynamic environment. Our call for signals leads us to the brands in our portfolio continuing to resonate well with consumers. And while not immune to macroeconomic headwinds, Deckers has traditionally demonstrated his ability to correct his trajectory if necessary. We remain committed to our long-term methods that have continued to serve us well, and we will build on the strong operating style we have built over the past five years.
Let’s now move on to the main points of our effects for the first quarter of fiscal 2023. Revenue for the first quarter of fiscal 2023 $614 million, up 22% from last year. HOKA’s earnings increased 55% year-over-year, representing almost all of this quarter’s earnings expansion was due to exceptional demand in the logo’s global hotspot ecosystem and stock availability. For the first time, HOKA accounted for more than 50% of the portfolio’s overall quarterly earnings, and in the past 12 months ending June 30, the logo generated more than a billion dollars in profits.
Gross margin for the quarter was 48%, down 360 from 51. 6% last year. This is in line with our stance in the first half of emerging sea and air freight prices, as well as the effects of unfavourable exchange rates that we will put pressure on margins for the rest of this year.
In addition, first-quarter gross margin was impacted by UGG’s product line and normalized promotional activity, as the logo sold more sandals and reduced certain styles in line with pre-pandemic activity and channel diversity that moved into the wholesale and seller segment. in particular, our overseas distribution company that shipped products beyond the previous years. These headwinds were partially offset through the benefits of accumulation in hoka’s earnings mix, the logo that generated the highest gross margin in the portfolio in the first quarter. and benefits from HOKA’s value enhancements.
Sg dollar expenses
Let’s move on to our balance sheet. As of June 30, 2022, we had ended June with $695 million in money and money equivalents. Inventories amounted to $840 million, up 83% from the same time last year. operational grades due to supply chain disruption and the era when we didn’t have noticeable loans. During the first quarter, we repurchased approximately $100 million of percentages at an average value of $260. 12. As of June 30, 2022, the Company had approximately $354 million remaining under its percentage repurchase authorization.
After the end of the quarter, the Board of Directors approved an accumulation of $1. 2 billion in addition to the Company’s existing percentage buyback authorization, which now accounts for more than 15% of our market capitalization, underscoring the Board’s confidence in our long-term strategy. plan.
Now, for the supply chain update. Over the past few quarters, we have updated in percentage the state of our logistics network and our ongoing mitigation efforts as we navigate macro supply chain disruptions. We are pleased that there will be a relative improvement in this domain in the first quarter, but I will mention a brief percentage before discussing our outlook for fiscal 2023. Transit times have improved compared to last year, but we still enjoy reduced latency and stock calendar visibility with only around 40% in transit, and continue to prioritise stock retention in the country of sale.
For example, during the first quarter, stocks sometimes arrived earlier than expected, so we shipped more products. However, with little visibility into when certain shipments will arrive, we are able to maintain higher stock levels to allow our brands to meet the significant market demand we are seeing. It’s so complicated to know when stocks will arrive that we expect higher stock levels to continue this fiscal year.
On the expense side, we are confident that the value increases implemented in the HOKA and UGG brands will offset freight headwinds and support second-half margins to meet our full-year 2023 forecast. Given the previous arrival of inventory, we now plan to use fewer air shipments than originally planned for the HOKA brand. However, as the dollar continues to appreciate, we anticipate further currency headwinds, and this expected relief in air shipments deserves to help offset those monetary pressures.
Now let’s move on to our advice. And with this momentum in mind, we reaffirm our guidance for the full year 2023, which as a reminder includes an expansion of earnings from 10% to 11% over last year, with a gross margin of 50 base issues higher than last year expecting around 51. 5%. Sg
While we have maintained our overall guidance, I would like to highlight some additional elements anticipated in the forecast, which come with a more potent expansion in HOKA’s revenue that is now expected to increase by up to 40% compared to last year, reflecting construction on higher stock availability, which aligns with our expectation to use fewer air shipments than originally planned, and more foreign currency headwinds, which mainly affect UGG’s expansion due to the wholesale business style of the brands and the expected concentration of expansion in foreign regions.
This reaffirmation of the forecast excludes all rates that can be considered unique and does not foresee any effect on additional percentage buybacks. In addition, our direction does not mean any significant deterioration in existing risks and uncertainties, including, but not limited to, the additional effects of the current COVID-19 pandemic on our operations and economic conditions, adding supply chain disruptions, similar restrictions and expenses, labor shortages, inflationary pressures, changes in customer confidence, and recessionary pressures, further strengthening of the US dollar and geopolitical tensions.
As macroeconomic uncertainty persists, we strengthen our brands and continue to see positive symptoms of customer demand. Deckers is used to staying agile, showing the unique ability to respond to market dynamics in conversion, and we’re well placed to drive compelling earnings expansion. and leading operating margins.
Thank you all. I will now turn the call on to Dave for his last comments.
dave powers
Thank you, Steve. We are very pleased with the start of fiscal year 2023. Our portfolio generated earnings expansion of more than 20% in the first quarter, and our organization continued to grow on key strategic initiatives. The entire HOKA team and all the other people in the shared service who created the logo to succeed in branding the billion dollars in profits. significant scale point.
What’s exciting for our business is that HOKA has a lot more expansion to come, as the logo remains the goal of its strategic expansion plan. HOKAH.
From a skill perspective, we are fortunate to have strengthened our leadership team with the recent promotion of Angela Ogbechie to Director of Supply Chain and the hiring of Anne Spangenberg as President of Fashion and Lifestyle. and pay attention to their contributions that are sure to enhance Deckers’ corporate culture and secure the good fortune of our long-term strategic initiatives. “
I would also like to thank our control team and all our employees for their flexibility and focus on our goals, while managing the transition. With our strong portfolio of brands, committed workers, and rigorous control of the company, I don’t think I’ve ever been more excited about the opportunities ahead for Deckers. And I that the Board of Directors recently approved the accrual of our buyback authorization percentage, which now represents a total of more than 15% of Deckers’ existing market capitalization, as an impressive vote of confidence in our company, our brands, our other people, and our long-term strategic plan for our organization. Many thanks to all our stakeholders for their continued support.
With that, I’ll pass the to the operator for questions and answers. Operator?
Q&A session
Operator
We will now begin the question and answer session. [Operator Instructions] The first is by Jonathan Komp with Robert W. Baird. Continue.
jonathan komp
Thank you. Good afternoon. First of all, I need to ask you a query about the UGG logo. It is curious to know your opinion on the general suitability of the UGG logo in the market, this would possibly be more of a national problem. Do you have with your wholesale partners and a general mind about how you expect UGG to behave in the current environment?
dave powers
Yes. That’s David. Je can answer at first. We are delighted with UGG’s performance. That’s down a bit for the quarter as expected. And that’s largely due to the fact that we’re looking to surpass last year’s Fluff Yeah company. So, you can pretty much take advantage of all of last year’s lack or decline, I mean, to the Fluff franchise. And we’ve stuck with Sport Yeah and some of the other vintage sneakers that are working well. But the game Yeah has a lower price. So, as an example, on our online e-commerce page in the US. In the U. S. , sales of the UGG brand declined, but sets increased. Therefore, it is a quarterly dynamic, we are at the end of luxurious activity. But its core business around the world remains strong and healthy. Our order eBook is strong and healthy.
And we believe that our chances are good for the rest of the year and, in fact, we have the shares in a position to do so. Steve can communicate a little more about the actions. But the good news is that we have stocks here. It is here before and we must have it in our accounts before. Therefore, the setup from the brand point of view, entering the current part of the year, still looks smart. But we are a little cautious here, because we are still at the beginning of the year and there are many considerations about actions in the channel and the consumer.
But when it comes to the suitability of the logo globally, we still see a lot of signs, the order books still seem to be in shape. And we have a stock if the company is going to be there afterwards.
Steven Fasching
Yeah, I think, Jon, just to get on top of that, like Dave said, the order books are kept, we’re seeing a lot of brand demands, so we feel smart about it. Like we said about stock, we were going to bring in stock earlier this year, so that’s the kind of message we’re getting around about it. . So feel according to the stock, where it is, which will continue to accumulate, however, we are well placed from this point of view to satisfy the orders we have. And we continue to see consumer reaction to this. Very positive about the functionality and prospects of UGG.
And then, just to remind everyone, we’re coming out of too many years of UGG expansion. And as we have said well documented over the last year, it was replenishing the stock grades exhausted in the channel. We have a strong expansion as well as the replenishment of stocks and we feel comfortable about it.
jonathan komp
Yes, great. And then just a separate query about HOKA. Dave, I think you discussed the expansion of logo opening, and I just wanted to stand my ground and get your opinion, short-term in express initiatives, and then longer term. What do you think of this comment and the opportunity you see today for HOKA?
dave powers
Yes, it’s actually similar to two things. One is to simply expand the success of the product to reach new consumers, and then expand our success also around the world, especially in China. But it’s essentially a logo in the works, and we have incredible authenticity. , and they are a very vital logo in this space. And we’ll maintain that authenticity as we go along. Therefore, the Western states and the UTMB, and the Ironman championships that are at the center of this logo, and they will be. aware of the fact that there is a large consumer base who purchase the HOKA logo on all age and end-use equipment.
And so with the new Fly Human Fly crusade we’ve launched, restoring our authenticity in the ultra game with the occasions I mentioned. prospect of walking, or just general comfort. So we welcome all those customers, we the athletes, are awake all day and want functional shoes, and we’re running tactics to identify greater communication and engagement with those people, while still being true to the authenticity of the lopass. And it’s more from a product standpoint, we don’t necessarily open a new distribution to go after those customers.
We are satisfied with the trade index, but we are in less than 20% of its outlets, we are just starting to enter the trunk and open more outlets around the world, especially in China, where we see a giant customer. base that enters our retail outlets and Internet sites who like the brand. people swap their all-white Nikes for all-white HOKA, which is also very encouraging for us. And we knew a lot of optimism on the account, from the Foot Locker account to see what we can do with the young client there as well.
jonathan komp
it’s a Thank you color again.
dave powers
thanks jon
Steven Fasching
Ok thanks.
Operator
The next one comes from Sam Poser of Williams Trading. Continue.
sam poser
Good afternoon. Thank you for answering my questions. Well, I’ll just ask my question. Can you tell us that you talked about it a little earlier, but can you give us the wholesale profit through the category or brand, please?
Erin Kohler
Hello, Sam, of course. So, the net sales of wholesale distributors, I will give you only this component through the brand. So, for UGG, $138 million, HOKA $232 million, Teva $47 million, Sanuk $11 million and then all the others, adding Koolaburra $2 million. That brings it to its total wholesale distributor of $429 million.
sam poser
Thank you so much. Then a few, two more. It lost a lot of sales at UGG, uniformly a smart quarter in the third quarter of last year. How do you see the third quarter of this year now that your shares are flowing better?And then with HOKA, you make $330 million, can you give us a concept of speed to get to the 40% buildup that you’re thinking about, because $330 million well above any quarter you’ve ever had. Or how do we think about the flow of profits there to succeed at 40%?
dave powers
Yes, I will start with UGG. Et and then let Steve deal with the HOKA problem. So, we’re sure UGG is in the tail in the third quarter, as you said, we had stocks last year. few sales last year. And the good news is that we have stocks, obviously, in the previous chain, and we have more stocks coming soon. So, from an inventory perspective, I think we’ll be in very good shape for the third quarter. There are still a lot of questions about customer promotions, etc. We’re not, we’ve done it in the last two years for UGG in the third quarter, we’ve been very, very clean, minimal promotions, tight stock.
We’re looking at a bit of back and forth to normalize the season, but we don’t expect or model intense promotional activity right now. We want the suitability of the logo and not look for the top line, because we believe we can make a lot of profit if we wish, during the year with HOKA. But as for the look and feel of the setup, we’re in a stock position, we have exciting new product launches in the UGG logo, we think they’ll resonate a lot of good. And we have a new crusade, a Christmas crusade that we’re running right now. So in terms of seizing the opportunity, we’re in good shape. I think your query is your macroeconomic environment globally, and what that goes to not only for the logo, but also for wholesale partners, who also have limited stocks or large stocks in general.
Steven Fasching
Yes, Sam on the HOKA issue, what we said and somehow indicated in a strong first quarter performance, where we shipped more products, was higher stock availability in June, and that was largely due to HOKA. it gave us the opportunity to ship more products than we had planned with stock availability, which was largely driven by HOKAH, wasn’t it?So, I think what you’re seeing over the course of the quarter is our ability to make this product market a little earlier than expected, which is encouraging and will keep a close eye on them. But that’s what’s causing some of those sync issues.
And again, let’s go back to why we don’t provide quarterly guidance. We only see the time, the delay between the quarters. So it’s very complicated with what we’re trying to show exactly when things will happen. when we have the opportunity to launch a product a little earlier than expected, we get all the credit for it. And that’s what you’ve noticed with HOKA this quarter.
sam poser
One last thing, do you expect DTC activity to outpace wholesaler this year, considering the maneuvers late last year in wholesale shipments?
Steven Fasching
Yes, I think right now the way we see things is equivalent between those channels. So, it’s still early and we’ll see, but right now, the way we look is somewhat equivalent.
sam poser
Thank you for the success.
dave powers
Yes. thanks sam
Operator
The next one comes from Laurent Vasilescu of Exane BNP Paribas. Continue.
laurent vasilescu
Good afternoon. Thank you very much for answering my question. I wanted to stay on top of HOKA and the global marketing campaign. Dave, are there any key classes you can share with us from this campaign?Can you remind us, I think in 10-K for fiscal 2022, marketing accounted for about 8% of sales, a significant increase from a few years ago, 5%, which is wonderful to see. Steve, where do you think marketing is headed in this exercise?And can you talk a little bit about the nuances, the distribution in terms of marketing expenses, because a percentage of sales differs between the two big brands?
dave powers
Yes, I’m going to talk a little bit about HOKA. This is the first global crusade ever made through the logo. Therefore, we felt it was vital to update the messages and communication of the logo. what this logo can be for other people around the world. And we’ve been on the path to inspiring athletes around the world of all kinds to get active and be there for them. And so it’s a way to bring in all the other product launches that we’re going through, whether it’s a Clifton, or Bondi, or Speedgoat, to have a little more consistency in the crusade look to have a consistent tone of voice and be more consistent with global consumers around the global.
Therefore, we are very satisfied with the way in which it has been obtained. We get very positive feedback from our wholesale partners. We are getting very positive KPIs on our online page. The number of new visitors for the quarter increased tremendously and is very healthy for us, as you can see from some of the retention and acquisition numbers, which are going in the right direction. And this is a foundation and a story that we can continue to build from head to toe and build genuine power and aspirational positioning for the brand. So far so good. I think we want to raise a little more granularity, if that’s the right word in the crusade and get some of the wonderful performances and athletes from UTMB and the Western states in Ironman and tap into the influencers a little bit more in the fieldArray But we think the platform is the right one. The redesign of the online page has proven to be a huge success so far, our landing page, time spent and live time and conversion rates have increased.
And that’s why we’re very satisfied. But this is the beginning of a long adventure with this campaign. And so far, we’re seeing wonderful adoption globally and a reaction from consumers and wholesale accounts.
Steven Fasching
Yes. Hello, Laurent, I’m Steve. Only in marketing expenses. In recent years, we have increased marketing expenses. When it comes to logos, we spend more on marketing in proportion to sales on HOKA and create other logos. , and this is a component of what drives the creation of our overall market and marketing as a percentage of earnings growth. What we see, as Dave just explained, is maximum productivity with our marketing spend. I have talked a lot, the knowledge of the HOKA logo is still low compared to other logos.
And so with marketing spending, with the campaigns that we launch, we see a lot of productivity and how that increases logo awareness across consumers and creates logo awareness. It is a lever that we use very well and productively and we will continue to do so. . And as you’ve noticed with the global campaign, and as Dave said, we’re going to continue to refine and raise awareness through those campaigns.
laurent vasilescu
It’s great. Nice to hear it. And then as a follow-up question, I think you discussed in your comments, Dave, on Foot Locker, maybe you can give us a little more detail about the type of customer you see there. What’s the answer? And then Steve, I think in his 10-K, he signed another lease for a pretty giant distribution center. It is expected to be operational for the next two years, followed by the Indiana distribution center last year. Is it concentrating on hoka’s multimillion-dollar purpose?Is there a channel effort there? It is essentially DTC any color that would be very useful. Thank you.
dave powers
Of course. So this is the beginning, we just put the product in Foot Locker. It’s in a handful of retail stores that we think are suitable for the consumer, who is younger, sportier, but still fashion-conscious in retail stores that we think Foot Locker Group can constitute the logo in a positive way, and then we’re also in line with certain styles. So, it’s too early to get percentage results, but I’ll say we’re satisfied with the way it was launched. we went, we are satisfied with the feedback we received from footlocker. As I mentioned, we see more and more young consumers adopting the logo. Therefore, we feel smart in the long run. So far, so smart at launch, we’re going to take our time and the field we still have with the expansion of distribution, as we did with Dick’s.
But they are either strategic and successful in consumers where they need to shop in environments that can provide the logo in a positive way, or they do. And we’re going to continue to monitor and see how things are going. But there are no primary plans, particularly to increase the number of doors. We are still in less than 20% of Dick retail outlets. You can see the effects we get through our own DTC channels, very healthy right now. And we will continue to monitor and distribute them.
Steven Fasching
Ouais. Et only in the distribution centers, Laurent, we are expanding, as you mentioned, our presence and the available space, in part to manage the expansion we anticipated with the company and, in particular, to help manage the further expansion of the HOKA Business. We also have levers. So, we have other fixes in the 3PLs that we can replace the distribution models. We’re expanding the area in the Midwest, as you mentioned, we also have some distribution through 3PL on the East Coast that we can also look at. So it’s helping us plan for the future. We know those things take time. What I would also say is that we are introducing more automation. So a lot of what we’re creating in the Midwest is a higher automated processing center, which allows us to be effective when we set them up and they work well. So more to come in that, though, that’s how we see it.
laurent vasilescu
It’s wonderful to hear. Thank you very much for answering my questions.
Steven Fasching
Right.
dave powers
Ok thanks.
Operator
The next one comes from Jim Duffy with Stifel. Continue.
jim duffy
Thank you. Good afternoon. Very good guys. I wanted to ask about the status of wholesale channel inventories in this specialized channel, HOKA has obviously won shares. Do you think HOKA has maintained its inventory break-even point in this channel now?And then, I’m curious to know if you see signs of moderation in the expansion in the category that catches some of the other brands incorrectly in inventory.
Steven Fasching
Yes, Jim, that’s Steve. Good question. We are following this carefully. And as you mentioned, we’re expanding our presence and stocks have increased, we don’t have safe stock levels, some of the others, but our productivity is much higher than that of other logos. So, the racing specialty is very productive, I think, we’re probably the maximum productivity logo at a lot of those outlets, which translates into a significant turnover of that stock, so our ability to fill it. So I think, again, that the stock is growing, that we have more stock available, we’re going to continue to feed that channel, there are more opportunities, I think, and our groups as well. So we will continue to take advantage of it. And now, especially with a higher stock position, we are in a better position to continue this business.
dave powers
And I also think we’re hearing that some of the specialized career accounts are filled, regularly not only with HOKA shares, but with all of their stock. Therefore, there is a limited capacity to be able to bring more stocks. But as Steve said, HOKA’s productivity compared to others is exceptional, with top retail sales and full-price sales with superior margins. So, we have the stock now and we’re about to be able to manage this channel a lot more than we’ve done in the last two years. We were in chase mode.
jim duffy
The super logo signs animating five of the 10 most sensible styles, is impressive.
dave powers
Ouais. Ouais. Et The other thing is that we’re running more cutting-edge releases. So, we’re going to bring innovation and new concepts to market faster, and we’re going to use this channel a lot to verify and be informed. on the road and launch new cutting-edge products faster, DTC and the specialized channel Run at the beginning of the calendar year 2023.
jim duffy
Super. Et Dave, I also need to ask about the addition of Anne Spangenberg, what are the special skills that Anne gives you that make her very suitable to lead the lifestyle division. And what are the spaces in which you are maximum?excited about your opportunities to make an impact?
dave powers
Yes, collectively, as an ELT, as a board of directors, and as an organization, we are very excited to have and register with the company. He has been here for almost 3 weeks, he is on the right track. It was a fantastic addition to the ELT. First of all, I’d say he’s the right kind of leader for Deckers. She is an inspiring leader. She is an empathetic leader. He gained incredible experience in his years at Nike, all in marketing, storytelling and branding. He spent three years in China, rebuilding the repositioning of this market and oversaw a large venture for Nike.
And so, the core skill we love about Anne, she is an exceptional trader, first and foremost, she understands and appreciates the products, she knows how to bring the product to market convincingly with a head-to-toe narrative. clothes. And it doesn’t come from the fashion world. But you know, we have a whole team of other people who are experts in this field. And what we’re looking for here is an inspiring leader who can get the most out of this team. .
And at the same time, edit and expand our storytelling, which many other people have learned from Nike over the years. So the combination of his leadership and sales experience, the global execution he oversaw at Nike gives us wonderful leadership. for this logo and you can unlock the true perspective of this logo that goes beyond the $2 billion it represents lately.
jim duffy
Very well. Thanks guys.
dave powers
Ok thanks.
Operator
The next one comes from John Kernan with Cowen. Continue.
John Kernan
Excellent. Thank you for accepting my question. Congratulations on the wonderful quarter.
dave powers
Ok thanks.
John Kernan
Could you tell us about the value increases you made in the first quarter and what you expect for the current part of the year and the impact on gross margin as you expected?Thank you.
Steven Fasching
Yes, John, that’s Steve. No we’ve replaced anything we said before. Therefore, at the beginning of this calendar year we brought value increases similar to those of HOKA, we found that this leads to some improvements in gross margin. Obviously, this is and has been compensated through the upper freight. This is helping to ease some of the pressures. And we will continue to deal with this date over the next quarter. What we also said and where we haven’t changed our position are the value increases in some similar products for UGG, which will begin in our third quarter. Again, that was part of what we stated in our original guidelines. Therefore, we have not replaced anything. So, we won’t change the way we look at price increases, we’ll keep tracking that. But our values are pretty well established for the seasons, and it would be more of a long-term opportunity, not something we would expect this year.
dave powers
Yes, I think for UGG, in particular, we increased costs and about 30% on the line for the third quarter. So, though, in places where we think we can get it, and we hear from our wholesale partners that we can get it too. . Yes.
John Kernan
I got it maybe just a quick follow-up. He discussed that the specialized execution is a bit complete in the wholesale aspect of HOKA. Any other main points you may provide in relation to the wholesale channel of UGG and HOKA. We’ve heard updates from some of your peers in the industry. And it turns out that there is some caution in this wholesale channel.
dave powers
Yeah, I mean, from what I’m hearing, I wouldn’t necessarily say it’s caution. But I think wholesalers are filling their stock. They have been kind to many of their key logos over the past two years. And they fill up. And logistics remains a challenge for logos and wholesalers. Space becomes a challenge. And so we’re hearing a little bit about that in the market, so we think it’s smart that they gave us the shares early and we were able to get the shares in the channel to capture that space. So I think it’s going to be a dynamic this year that wholesalers will have to go through as they check to fill their stocks and get back into the right position for the rest of the year. So we don’t see that affecting our business yet. The demand is still strong, the aptitude of the logo is very strong. We don’t hear you talking about crazy cancellations or anything. It’s pretty normalized. So we are still satisfied with our possibilities. But it’s a dynamic we hear.
John Kernan
Heard. Thank you.
dave powers
It is ok. Thank you, Jean.
Steven Fasching
Thank you, Jean.
Operator
The next one comes from Paul Lejuez of Citi Research. Continue.
Pablo Lejuez
Hi, thanks guys. I’m curious if maybe I’ll communicate a little more about the trends you’ve noticed in the DTC aspect of the company for each of the brands as the quarter progresses, things fell behind schedule. a kind of ups and downs in the company in the DTC aspect, or perhaps a deterioration challenge shifts again, either for UGG and HOKA. And curious, if you can only communicate a little more about stocks, I think you discussed your – you had a higher percentage of goods in transit, I was just curious to know what the comparison was, compared to a year ago and what stocks look like in terms of available sets compared to last year. Thank you.
dave powers
Yes, I’m going to tell you a little bit about e-commerce. As you saw in the hoka results, a very healthy quarter for UGG, we saw an improvement with the new crusade and launch, when it started. And that helped in the current part of the quarter, it created a little more excitement, a little more awareness, the first time visitors were on the order of 70%. And so, a very healthy company is still normal buyers, new consumers, young consumers coming to the site, higher KPIs, as I mentioned, on landing pages and conversion on the pages of some. So that’s good. And it’s broad-based, it’s in all categories, it’s not a star among the group. It’s just that the total logo sees this point of interest in adoption.
Within UGG, the real challenge for DTC, as I mentioned, is in the slippers category. And it’s a mix of the dramatic slowdown in Fluff’s activity compared to a year ago, which still helped during the pandemic. Glued with Sport Yeah. But is at a lower price. So, as I mentioned, DTC profits were down or e-commerce went down for UGG, but the pools went up. So, as I said, I think that at this time, the dynamic at all times thinks about the main business, then I know that this core business feels strong, the inheritance shoes always strong, and the men always strong. A little sweetness in the children, but it was also related.
So other than that, the logo still meets expectations in the categories we needed. And as I said, as we get into the second and third quarters, fluff’s dynamic will be us, and it will be a more normalized business.
Steven Fasching
And then Paul, just a little bit in stock, in terms of percentage in transit, it was a little bit better, but in higher dollar amounts, so we still have higher dollar amounts in transit. I think it’s vital to note that . And then, added to that stock this year compared to last year, there’s about $70 million more in additional freight, as rates went up last year. So, we’re dealing with a particularly larger amount of freight, which is also included in those higher stock values. And then the other with a large hoka-like accumulation percentage is that we are expanding HOKA’s shares to help expand this activity that contributes to the top stock balance. And just to remind everyone, the average value in a HOKA is above average. So it also contributes to an elevator.
Pablo Lejuez
You said, did you give a breakdown of HOKA shares compared to UGG?
Steven Fasching
Not us.
Pablo Lejuez
It is ok. Thanks guys. Good luck.
Steven Fasching
it’s okay.
dave powers
Ok thanks.
Operator
The next one comes from Jay Sole, and that will be the last Array. He’s at UBS. Please continue.
jay sole
Super. Thank you for answering my question. You provided a lot of key points that affected gross margin during the quarter. Is it conceivable to give us a little more detail about the profitability of the origin chain, the gross margin and the basis points, and then in the origin chain, you mentioned, you are starting to see some improvement. And does it give us a concept of the scope of the improvement and the kind of visibility you have in the trajectory of those challenges, perhaps less difficult and less difficult as the training progresses?
Steven Fasching
Yes. Of course, Jay. Then it’s Steve. Therefore, of the base 360 problems minimized since last year in the quarter, approximately 260% is due to an accumulation in freight transport. Therefore, it is similar to the ocean and air. , because we use air in the first quarter, whereas a year ago we didn’t start air shipping until later in the year. So that’s where we’re going to have headwinds in the first component of the year rather than the headwinds when you get into the last component of the year, so about 260 in freight, there are about 50 basic FX-like issues and then everything else was kind of all the other things that informamos. Ouais. Et just to remind you, Shipping, as we talked about, includes air and ocean. And then the timing component of your query was?
jay sole
Only in the origin chain, you said, some improvements, like, yes, how do you evolve from here?
Steven Fasching
Yes, what we’re seeing and that’s what contributed to the smart first quarter. We have noticed an improvement, as we have commented, in the comments ready. Therefore, the product arrives a little earlier than expected. So we see things flowing. Visibility is still limited, as I also mentioned in the ready comments. Therefore, we try to get higher indicators when the stock arrives. The good news is that at the West Coast port, collective bargaining is still ongoing, so we haven’t interrupted similar to that. But they’re still ongoing, so we’re going to keep an eye on this.
So, again, seeing stocks go up, which is good, gives us maximum skill, as we demonstrated the quarter with June and with HOKA and the ability to go out and be in a better position than a year ago to be able to write. meet part of the demand. So let’s see how things go. We continue to work on this as we look for tactics to improve, but encouraged by some of the innovations we’ve seen, we continue to look for more innovations.
jay sole
they gave it to me Okay. Thank you so much.
Operator
The convention is over. Thank you for today’s presentation. You can now log out.