In This Article:
Crocs CROX has been gaining from solid consumer demand, owing to new clog and sandal introductions, as well as continued momentum in the HEYDUDE brand and strong direct- to-consumer growth. This led to a robust surprise trend in the first quarter of 2023. The company’s top and bottom lines surpassed their respective Zacks Consensus Estimate for the 12th straight quarter.
Shares of this Zacks Rank #3 (Hold) company rallied 120.7% in the past year compared with the industry’s growth of 4.3%.
Crocs’ first-quarter adjusted earnings of $2.61 per share increased 27.3% year over year. Revenues improved 33.9% year over year (or 36.2% on a constant-currency basis) to $884.2 million. The top line witnessed growth across all regions and channels.
Image Source: Zacks Investment Research
The company’s recent acquisition of HEYDUDE, which sells lightweight, casual shoes and sandals for men, women and children, is likely to have added value to its fast-growing footwear business. This is the second high-growth, exceptionally profitable brand added to Crocs’ portfolio.
Crocs believes that HEYDUDE’s consumer-insight-driven casual, comfortable and lightweight products perfectly fit its existing range of products. The acquisition is likely to have diversified Crocs’ brand portfolio and added to its digital penetration, as HEYDUDE already has a strong online presence.
Notably, HEYDUDE’s first-quarter revenues increased 104.8% year over year to $235.4 million. For 2023, revenues related to the buyout are likely to grow in the mid-20% range on a reported basis. Management remains optimistic about HEYDUDE, which is expected to achieve its sales target of $1 billion this year.
Driven by these factors, management raised its guidance for 2023. Revenues are anticipated to grow 11-14% (from the previously projected 10-13%) to $3.9-$4 billion. Adjusted earnings are expected in the range of $11.17-$11.73 per share, up from the previous guidance of $11-$11.31. The adjusted operating margin is projected in the band of 26-27% compared with the previously anticipated 26%.
For second-quarter 2023, revenues are expected to grow 6-9% to $1,026-$1,049 million. Adjusted earnings are projected in the range of $2.83-$2.98 per share. The adjusted operating margin is anticipated to be 26%.
However, Crocs has been reeling under inflation, elevated freight costs and higher promotions. As a result, adjusted SG&A expenses increased 17.1% year over year to $277.2 million in the first quarter of 2023. Going ahead, these headwinds might affect the company’s profitability.