Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, our financial condition and results of operations are subject to a variety of market

risks, including those associated with commodity prices; foreign currency exchange rates; and inflation, and, to a

lesser extent, interest rates and credit risks. We regularly assess these risks and have established policies and

business practices designed to mitigate their effects. There have been no material changes in our primary risk

exposures or management of market risks since the prior year.

Commodity Price Risk

We are exposed to commodity price fluctuations associated with the cost of raw materials used in our

manufacturing process, including sheepskin and sugarcane-derived ethylene-vinyl acetate (sugarcane-derived EVA)

(collectively, commodities). 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. To manage price volatility and ensure availability for our commodities, we currently enter

into fixed purchasing contracts with designated suppliers of sheepskin and sugarcane-derived EVA. Our fixed

pricing agreements are non-cancellable and may be subject to fees, including certain sheepskin purchasing

contracts requiring deposits when minimum volumes are not fully consumed. In the event of significant price

increases for our 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 fixed pricing agreement strategy for our

commodities.

Refer to Note 8, “Commitments and Contingencies,” of our consolidated financial statements in Part IV within this

Annual Report for further information on purchase obligations for commodities.

Foreign Currency Exchange Rate Risk

Although most of our sales and inventory purchases are denominated in US dollars, our global operations in the

international markets where our products are sold and manufactured expose us to risk of foreign currency exchange

rate fluctuations between the US dollar and primarily the currencies of Europe, Asia, Canada, and Latin America.

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 hedge

certain foreign currency exchange rate risks arising 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.

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Foreign currency exchange rate fluctuations affect our results of operations and can make comparisons from year to

year more difficult. Foreign currency exchange rates at the end of the reporting period used to remeasure monetary

assets and liabilities (excluding the effect from derivative instruments) had a positive but immaterial impact on our

income from operations for the year ended March 31, 2026.

We use a sensitivity analysis technique to evaluate the effect that changes in the market value of foreign exchange

currencies will have on our forward foreign exchange contracts. As of March 31, 2026, a hypothetical 10% foreign

currency exchange rate fluctuation would have caused the fair value of our financial instruments on our

consolidated balance sheets to change by approximately $34,500. As of March 31, 2026, there are no known

factors that we expect to result in a material change in the near-term in the general nature of our primary foreign

currency exchange rate risk exposure. Refer to the section titled “Summary of Significant Accounting Policies” in

Note 1, “General,” and Note 10, “Derivative Instruments,” of our consolidated financial statements in Part IV within

this Annual Report for further information on our use of derivative contracts and related accounting policies.

We do not, and do not intend to, engage in the practice of trading forward foreign currency exchange rate derivative

securities for profit.

Inflation Risk

Inflationary pressures, including higher supply chain, labor and overhead, and raw material costs, may adversely

affect our financial condition and operating results unless we are able to offset these increases through strategic

product price increases, negotiating cost-sharing arrangements with suppliers, or generating operating cost

efficiencies. Inflation could also reduce consumer confidence and discretionary spending, which could negatively

impact the demand for our products.

Interest Rate Risk

Our exposure to market risk for interest rates primarily relates to our cash and cash equivalents balances, and our

revolving credit facilities.

As of March 31, 2026, we had a cash and cash equivalents balance of $1,907,249. Our cash and cash equivalents

balances include cash on hand, demand deposits, and other highly liquid investments, such as money-market

funds, with an original maturity of three months or less. Cash and cash equivalents held by us are affected by

variable, short-term, market interest rates. Interest rates fluctuate as a result of many factors, including

governmental monetary policies, domestic and international economic and political considerations, and other factors

that are beyond our control. Using our average invested cash equivalents balance for the year ended March 31,

2026, the hypothetical effect of a 100 basis point change in applicable interest rates would result in a change of

approximately $16,300 to interest income recorded in our consolidated statements of comprehensive income, along

with our operating cash flows, but would not impact the fair market value of the related underlying instruments.

Refer to the section titled “Summary of Significant Accounting Policies” in Note 1, “General,” and Note 4, “Fair Value

Measurements,” of our consolidated financial statements in Part IV within this Annual Report for further information

on our cash and cash equivalents.

Because our revolving credit facilities bear interest at variable, short-term rates we are exposed to changes in

market interest rates that could impact the cost of servicing debt. As there were no outstanding balances under our

revolving credit facilities as of March 31, 2026, a 100 basis point change in applicable interest rates would have

resulted in no change to interest expense recorded in our consolidated statements of comprehensive income during

the year ended March 31, 2026. 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.

We do not, and do not intend to, engage in any interest rate hedging activity. We also do not, and do not intend to,

engage in the practice of trading interest rate derivative securities for profit.

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Credit Risk

We have cash on deposit with various large, reputable financial institutions and have invested in highly rated money

market funds. The amount of cash and cash equivalents held with certain financial institutions exceeds government‐

insured limits, and we may purchase investments not guaranteed by the government. Accordingly, there is a risk

that we will not recover the full principal of our investments or that their liquidity may be diminished.

We are also exposed to credit‐related losses in the event of nonperformance by the financial institutions that are

counterparties to our forward currency exchange rate forward contracts. The credit risk amount is our unrealized

gains on our derivative instruments, based on foreign currency exchange rates at the time of nonperformance.

To mitigate our credit risk, we have adopted the global investment policy and the foreign exchange risk

management policy that emphasizes preservation of principal and liquidity. Consistent with these policies, we seek

to enter into transactions with creditworthy and reputable financial institutions, by monitoring their credit standing,

and by limiting exposure to any one counterparty. We have not experienced material credit losses, and do not

believe our credit risk exposure is significant.