Forward-Looking Statements

This report and the information incorporated by reference in this report contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We sometimes use words such as "anticipate," "believe," "continue," "estimate," "expect," "intend," "may," "project," "will" and similar expressions, as they relate to us, our management and our industry, to identify forward-looking statements. Forward-looking statements relate to our expectations, beliefs, plans, strategies, prospects, future performance, anticipated trends and other future events. Specifically, this report and the information incorporated by reference in this report contain forward-looking statements relating to, among other things:

†          our business, growth, operating and financing strategies;

†          our product and geographic mix;

†          the success of new products;

†          the impact of seasonality on our operations;

†          expectations regarding our net sales and earnings growth and other
financial metrics;

†          our development of international distribution channels;

†          trends affecting our financial condition or results of operations;

†          overall global economic trends; and

†          reliable overseas factory production and availability of raw
materials.

We have based our forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business. Actual results may differ materially. Some of the risks, uncertainties and assumptions that may cause actual results to differ from these forward-looking statements are described in Part II, Item 1A, "Risk Factors." In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report and the information incorporated by reference in this report might not happen.

You should read this report in its entirety, together with the documents that we file as exhibits to this report and the documents that we incorporate by reference in this report with the understanding that our future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements and we assume no obligation to update such forward-looking statements publicly for any reason.

The "UGG," "Teva," "Simple," "TSUBO," and "Ahnu" families of related marks, images and symbols are our trademarks and intellectual property. Other trademarks, trade names and service marks appearing in this report are the property of their respective holders. References to "Deckers," "we," "us," "our," or similar terms refer to Deckers Outdoor Corporation together with its consolidated subsidiaries. Unless otherwise specifically indicated, all amounts herein are expressed in thousands, except for share quantity, per share data, and selling prices.

Overview

We are a leading designer, producer, marketer, and brand manager of innovative, high-quality footwear and accessories. We market our products primarily under three proprietary brands:

† UGG®: Premier brand in luxury and comfort footwear and accessories;

† Teva®: High performance sport shoes and rugged outdoor footwear; and

† Simple®: Innovative sustainable-lifestyle footwear and accessories.

In addition to our primary brands, our newest brands include TSUBO®, a line of high-end casual footwear that incorporates style, function and maximum comfort, and Ahnu®, a line of outdoor performance and lifestyle footwear.

We sell our brands through our quality domestic retailers and international distributors and directly to our end-user consumers through our eCommerce business and our retail stores. We sell our products in both the domestic market and in international markets. Independent third parties manufacture all of our products.

Our business has been impacted by several important trends affecting our end markets:

† Recent changes in US and global economic conditions have adversely impacted businesses generally. Some of our customers have been, and more may be, adversely affected. This in turn has, and may continue to, adversely impact our financial results.

† The markets for casual, outdoor and athletic footwear have grown significantly during the last decade. We believe this growth is a result of the trend toward casual dress in the workplace, increasingly active outdoor lifestyles and a growing emphasis on comfort.

† Consumers are more often seeking footwear designed to address a broader array of activities with the same quality, comfort and high performance attributes they have come to expect from traditional athletic footwear.

† Our customers have narrowed their footwear product breadth, focusing on brands with a rich heritage and authenticity as market category creators and leaders.

† Consumers have become increasingly focused on luxury and comfort, seeking out products and brands that are fashionable while still comfortable.

† There is an emerging sustainable lifestyle movement happening all around the world. Consumers are demanding that brands and companies take a more responsible approach when it comes to protecting the environment.

By emphasizing our brands' images and our focus on comfort, performance and authenticity, we believe we can maintain a loyal consumer following that is less susceptible to fluctuations caused by changing fashions and changes in consumer preferences.

Below is an overview of the various components of our business, including some of the important factors that affect each business and some of our strategies for growing each business.

UGG Brand Overview

The UGG brand has become well-known throughout the US as well as internationally. Over the past several years, our UGG brand has received increased media exposure including increased print media in national ads and cooperative advertising with our customers, which has contributed to broader public awareness of the brand and significantly increased demand for the collection. We believe that the increased media focus and demand for UGG products were driven by the following:

†          consumer brand loyalty, due to the luxury and comfort of UGG
footwear;

†          increased marketing in high-end magazines;

†          successful targeting of high-end distribution;

†          adoption by high-profile film and television celebrities as a favored

† increased media attention that has enabled us to introduce the brand to consumers much faster than we would have otherwise been able to;

† increased exposure to the brand driven by our concept stores which showcase all of our product offerings;

† continued geographic expansion across the US and internationally; and

† continued innovation of new product categories and styles.

We believe the luxury and comfort features of UGG products will continue to drive long-term consumer demand. Recognizing that there is a significant fashion element to UGG footwear and that footwear fashions fluctuate, our strategy seeks to prolong the longevity of the brand by offering a broader product line suitable for wear in a variety of climates and occasions and by limiting distribution to selected higher-end retailers. As part of this strategy we have increased our product offering, including a growing spring line, an expanded men's line, and a fall line that consists of a range of luxurious collections for both genders. These collections include: our fashion collection, a variety of casual comfort collections, our knit collection, and cold weather offerings, as well as our Classic, Ultra, Ultimate and Slippers collections.

Teva Brand Overview

Though participation in many traditional outdoor recreational activities is on the decline, we continue to see consumer preferences shifting towards an outdoor lifestyle and to outdoor activities that can be done in a day, an afternoon, or even an hour. Because of our Teva brand's heritage in outdoor footwear as well as our continued commitment to product innovation, the brand remains popular with traditional outdoor athletes and enthusiasts. Although 2009 sales have been lower than 2008, the Teva brand has held up well through the recent economic downturn. Sell-through of the Teva products at retail has been strong throughout 2009 across all channels of distribution, and we believe the brand has begun to appeal to a new generation of outdoor consumers entering the market. The Teva

product line now includes a broad range of performance and lifestyle products and price points, both open and closed toe footwear, appropriate for all seasons, for men, women and children.

We see continuing opportunity to grow the Teva brand within our core outdoor specialty and sporting goods channels of trade. We also believe there are significant expansion opportunities into the family footwear, department store, and better footwear channels. Through effective channel management and clear product line segmentation, we believe we can grow the Teva brand in all of these channels without alienating our core consumer or retailers in the outdoor specialty channel. However, we cannot assure investors that these efforts will be successful.

Simple Brand Overview

The Simple brand is committed to style and innovation in sustainably-produced footwear and accessories. The brand brings sustainable products to the market, growing the brand's business, while at the same time bringing environmental awareness and creating meaningful, environmentally friendly products for a global market. The Simple brand is a leader in sustainable footwear and accessories. We feel that how we make Simple products is just as important as why we make them. That means our goal is to find more sustainable and innovative ways of doing business. We are committed to our goal of making Simple products 100% sustainable, thus minimizing the ecological footprint left on the planet. Green Toe®, our collection of sustainable footwear, represents a revolutionary shift in thinking about footwear by building a shoe from the inside out using sustainable materials and processes.

The progress in Green Toe has influenced the rest of the Simple product line, which has led to the development of additional product platforms, such as ecoSNEAKS®. This product collection also uses sustainable materials such as water-based cements, certified organic cotton, British Leather Consortium (BLC) and International Standards Organization (ISO) 14001 leathers, hemp, and outsoles made from recycled car tires. We promote our Simple brand by emphasizing that we make fashionable, youthful, functional and sustainable footwear. Our goal is to create a dialogue with the consumer through all communication vehicles and to show people that sustainability is an emerging lifestyle for everyone, not just environmentally conscious individuals. Our print advertising campaigns include national publications and alternative weekly publications in select cities around the world. Our online advertising campaign reaches consumers through websites that focus on sustainability as well as popular culture. Additionally, we sponsor environmental-themed concerts and green festivals to showcase and tell the sustainable lifestyle brand story.

Other Brands Overview

Our other brands consist primarily of the TSUBO and Ahnu brands. In May 2008, we acquired 100% of the ownership interest of TSUBO, LLC. TSUBO, meaning pressure point in Japanese, is marketed as high-end casual footwear for men and women. The brand is the synthesis of ergonomics and style, with a full line of sport and dress casuals, boots, sandals and heels constructed to provide consumers with contemporary footwear that incorporates style, function and maximum comfort. The TSUBO brand has a rich heritage with consumers in major cities around the world who appreciate design, pay attention to detail, and will not sacrifice comfort. We intend to build on this heritage, positioning the TSUBO brand as the premium footwear solution for people in the city, providing all day comfort, style and quality. The TSUBO brand strives to become well known in the most important style, design, architecture, art and fashion centers around the world. We will continue to create product addressing consumers' unique needs: all-day comfort, innovative style and superior quality. At the same time, we will market to the TSUBO brand consumers where they live, emphasizing regional advertising and in-market grass roots, product placement and public relations efforts.

In March 2009, we acquired 100% of the ownership interest of Ahnu, Inc. Founded in 2006 and headquartered in Alameda, California, Ahnu is an outdoor performance and lifestyle footwear brand with products for men, women and children. The name Ahnu is derived from the goddess of balance and well-being in Celtic mythology. The brand focuses on balancing work and play, family and friends, and self and society. The Ahnu brand product goal is to achieve uncompromising footwear performance by developing footwear that will provide the appropriate balance of traction, grip, flexibility, cushioning and durability for a variety of outdoor activities - whether on trails, beaches or sidewalks. Ahnu products are sold throughout the US, primarily at outdoor specialty stores and independent shoe stores, as well as in Canada and New Zealand.

We believe that the TSUBO and Ahnu brands complement our existing portfolio of lifestyle brands, and that the TSUBO and Ahnu brands' target consumer, product selection, industry niche and relative under-penetration in the marketplace make these brands a good fit for us. We expect to leverage our design, marketing and distribution capabilities to grow these brands into meaningful brands over the next several years, consistent with our mission to build niche brands into global market leaders. Nevertheless, we cannot assure investors that our efforts will be successful.

eCommerce Overview

Our eCommerce business, which sells all of our primary brands, enables us to meet the growing demand for these products, sell the products at retail prices and provide significant incremental operating income. The eCommerce business enables us to directly interact and reinforce our relationships with the consumer. Our Teva and UGG Australia websites both won BizRate's Circle of Excellence Platinum Awards for both 2007 and 2008. The award recognizes online retailers with top customer satisfaction ratings. In prior years, our eCommerce business has had significant revenue growth, much of which occurred as the UGG brand gained popularity and as consumers continued to increase usage of the internet for footwear and other purchases.

Managing our eCommerce business requires us to focus on the latest trends and techniques for web design, to generate internet traffic to our websites, to effectively convert website visits into orders, and to maximize average order sizes. We plan to continue to grow our internet business through improved website features and performance, increased marketing and international websites. Overall, our eCommerce business benefits from the strength of our brands and, as we grow our brands over time, we expect this division to continue to be an important segment of our business. Nevertheless, we cannot assure investors that revenue from our eCommerce business will not continue to decline.

Retail Stores Overview

As of September 30, 2009, we had a total of 16 retail stores worldwide. Continuing to build on the success of our existing UGG Australia stores, in September 2009, we opened an outlet store in Cabazon, California. Additionally, in October 2009, we opened an UGG Australia concept store in Honolulu, Hawaii. Internationally, our stores in the UK were successful in their first holiday season. In May and September 2009, we opened an UGG Australia concept store in Tokyo, Japan and Manchester, UK, respectively.

In July 2008, we entered into a joint venture agreement with an affiliate of Stella International Holdings Limited for the opening of retail stores and wholesale distribution for the UGG brand in China. Under this agreement, we opened our first UGG Australia concept store in Beijing in December 2008. The joint venture is owned 51% by Deckers.

Our retail stores enable us to directly impact our customers' experience, meet the growing demand for these products, sell the products at retail prices and provide us with incremental annual operating income. In addition, our UGG Australia concept stores allow us to showcase our entire line; whereas, a retailer may not carry the whole line.

Seasonality

Our business is seasonal, with the highest percentage of UGG brand net sales occurring in the third and fourth quarters of each year and the highest percentage of Teva brand net sales occurring in the first and second quarters. To date, our other brands have not had a seasonal impact on the Company.

                                                     2009
                                   First      Second       Third      Fourth
                                  Quarter     Quarter     Quarter     Quarter
Net sales                        $ 134,226   $ 102,548   $ 228,414
Income from operations*          $  19,326   $   3,225   $  53,080

                                                     2008
                                   First      Second       Third      Fourth
                                  Quarter     Quarter     Quarter     Quarter
Net sales                        $  97,535   $  91,116   $ 197,288   $ 303,506
Income (loss) from operations*   $  17,060   $  (6,944 ) $  43,081   $  63,722

                                                     2007
                                   First      Second       Third      Fourth
                                  Quarter     Quarter     Quarter     Quarter
Net sales                        $  72,575   $  52,730   $ 129,381   $ 194,243
Income from operations           $  15,072   $   2,864   $  30,660   $  56,957

With the dramatic growth in the UGG brand in recent years, combined with the introduction of a fall Teva product line, net sales in the last half of the year have exceeded that for the first half of the year. Given our expectations for each of our brands in 2009, we currently expect this trend to continue. Nonetheless, actual results could differ materially depending upon the economic environment, consumer preferences, availability of product, competition and our customers continuing to carry and promote our various product lines, among other risks and uncertainties. See Part II, Item 1A, "Risk Factors."

Results of Operations



Three Months Ended September 30, 2009 Compared to Three Months Ended
September 30, 2008



The following table summarizes the Company's results of operations:



                                           Three Months Ended September 30,
                                   2009                  2008                 Change
                             Amount        %       Amount        %       Amount       %
Net sales                   $ 228,414     100.0 % $ 197,288     100.0 % $ 31,126      15.8 %
Cost of sales                 130,463      57.1     111,948      56.7     18,515      16.5
Gross profit                   97,951      42.9      85,340      43.3     12,611      14.8
Selling, general and
administrative expenses        44,871      19.6      42,259      21.4      2,612       6.2
Income from operations         53,080      23.2      43,081      21.8      9,999      23.2
Other income, net                (105 )     0.0        (421 )    -0.2        316      75.1
Income before income
taxes                          53,185      23.3      43,502      22.0      9,683      22.3
Income taxes                   19,434       8.5      17,445       8.8      1,989      11.4
Net income                     33,751      14.8      26,057      13.2      7,694      29.5
Net loss (income)
attributable to the
noncontrolling interest            74       0.0         (43 )     0.0        117     272.1
Net income attributable
to Deckers Outdoor
Corporation                 $  33,825      14.8 % $  26,014      13.2 % $  7,811      30.0 %

Overview. The increase in net sales was primarily due to an increase in UGG product sales. The increase in income from operations resulted primarily from the increase in net sales, partially offset by a lower gross margin and higher selling, general and administrative expenses.

Net Sales



The following table summarizes net sales by location and net sales by brand and
distribution channel:



                                                   Three Months Ended September 30,
                                                                             Change
                                                  2009        2008       Amount      %
Net sales by location:
US                                             $  179,047   $ 162,294   $ 16,753    10.3 %
International                                      49,367      34,994     14,373    41.1
Total                                          $  228,414   $ 197,288   $ 31,126    15.8 %

Net sales by brand and distribution channel:
UGG:
Wholesale                                      $  194,842   $ 165,195   $ 29,647    17.9 %
eCommerce                                           5,862       8,378     (2,516 ) -30.0
Retail stores                                      12,046       5,102      6,944   136.1
Total                                             212,750     178,675     34,075    19.1
Teva:
Wholesale                                           7,318       9,584     (2,266 ) -23.6
eCommerce                                           1,576       1,486         90     6.1
Retail stores                                         132         148        (16 ) -10.8
Total                                               9,026      11,218     (2,192 ) -19.5
Simple:
Wholesale                                           2,594       4,304     (1,710 ) -39.7
eCommerce                                             799         705         94    13.3
Retail stores                                         151         159         (8 )  -5.0
Total                                               3,544       5,168     (1,624 ) -31.4
Other:
Wholesale                                           2,962       2,200        762    34.6
eCommerce                                             113          27         86   318.5
Retail stores                                          19           -         19       *
Total                                               3,094       2,227        867    38.9
Total                                          $  228,414   $ 197,288   $ 31,126    15.8 %

Total eCommerce $ 8,350 $ 10,596 $ (2,246 ) -21.2 %

Total Retail stores $ 12,348 $ 5,409 $ 6,939 128.3 %

The increase in net sales was primarily driven by strong sales for the UGG brand. In addition, our weighted-average wholesale selling price per pair increased 6.6% to $58.56 for the three months ended September 30, 2009 from $54.92 for the three months ended September 30, 2008, resulting primarily from higher UGG sales, which generally carry a higher average selling price. During the quarter, we experienced an increase in the number of pairs sold of our UGG brand, as well as contributions from our new brands, partially offset by a decrease in the number of pairs sold of our Teva and Simple brands. This resulted in an 8.6% overall increase in the volume of footwear sold for all brands of approximately 3.8 million pairs for the three months ended September 30, 2009 compared to approximately 3.5 million pairs for the three months ended September 30, 2008.

Wholesale net sales of our UGG brand increased primarily due to an increase in both domestic and international shipments of fall product, as well as an increase in the weighted-average wholesale selling price per pair, partially due to certain product price increases related to cost increases. We cannot assure investors that UGG brand sales will continue to grow at their past pace or that revenue from UGG products will not at some point decline.

Wholesale net sales of our Teva brand decreased primarily due to a decrease in the number of pairs sold. In addition, we experienced a decrease in the weighted-average wholesale selling price per pair, which was impacted by increased closeout sales. The decline in sales was also the result of lower sell-in, which we attribute to not having an optimal assortment of products at lower price points to drive the volume.

Wholesale net sales of our Simple brand decreased primarily due to a decrease in the number of pairs sold as well as a decrease in the weighted-average wholesale selling price per pair, as we experienced a lower than normal rate of reorder business in the third quarter of 2009. In addition, Simple brand sales were higher in the third quarter of 2008 in part due to the launch of Planet Walkers®, a collection which has since been discontinued.

Wholesale net sales of our other brands increased, as we reported a full quarter of activity for all brands, which were acquired during 2008 and 2009.

Net sales of our eCommerce business decreased primarily from more second quarter backorders carried into and shipped in the third quarter of 2008 than 2009 for the UGG brand. We also experienced a decrease in our average selling prices because of the product mix shift of lower UGG brand sales, which generally carry higher selling prices.

Net sales of our retail store business, which are primarily UGG sales, increased largely due to the addition of eight new stores opened since September 30, 2008. We do not expect this growth rate to continue because as we increase the number of our stores, each new store will have less proportional impact on our growth rate. For those stores that were open during the full third quarter of . . .