Crocs, Inc. CROX posted solid results for fourth-quarter 2024, wherein the bottom and top lines surpassed the Zacks Consensus Estimate. While revenues grew year over year, earnings dipped. Results gained from strength in the Crocs brand and outstanding international growth. With respect to the HEYDUDE brand, management has been making improvements to aid sustainable growth.
Driven by solid results in the fourth quarter of 2024, Crocs’ shares jumped nearly 24% in the trading hours yesterday. In the past three months, the company’s shares have gained 12.5% compared with the industry’s 9.2% growth.
Crocs’ adjusted earnings of $2.52 per share beat the Zacks Consensus Estimate of $2.29 but dipped 2.3% year over year.
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An Insight Into CROX’s Q4 Performance
Consolidated revenues rose 3.1% year over year to $990 million and beat the consensus estimate of $960 million. On a constant-currency basis, revenues improved 3.8% year over year. The top line witnessed solid growth in the direct-to-consumer (DTC) channel. DTC revenues increased 5.5% while wholesale revenues fell 0.2%. On a constant-currency basis, DTC revenues jumped 6.1% while wholesale revenues rose 0.7%. The company has introduced the Getaway, a multi-silhouette franchise.
The Crocs brand’s revenues grew 4% year over year to $762.1 million, including a 5% increase in DTC revenues and a 2.7% rise in wholesale revenues. DTC comparable sales for the Crocs brand rose 0.3%. The HEYDUDE brand’s revenues were flat year over year at $227.7 million. The decline was due to an 8.6% decrease in wholesale revenues and a 7.2% increase in DTC revenues. DTC comparable sales for the HEYDUDE brand fell 8.3%. Total revenues in North America were flat year over year at $471 million while revenues in the International region climbed 11.5% to $291 million. The company’s China business rose 25% year over year.
The Zacks Consensus Estimate for the Crocs and HEYDUDE brands’ revenues is currently pegged at $750 million and $214 million, respectively. The consensus mark for revenues at North America is pinned at $464 million while the estimate for International revenues is $292 million.
Crocs, Inc. Price, Consensus and EPS Surprise
Crocs, Inc. Price, Consensus and EPS Surprise
Crocs, Inc. price-consensus-eps-surprise-chart | Crocs, Inc. Quote
The adjusted gross profit rose 7.2% year over year to $572.9 million. The adjusted gross margin expanded 220 basis points (bps) to 57.9%. Adjusted selling, general and administrative (SG&A) expenses, as a percentage of revenues, increased 610 bps to 37.7%. Adjusted operating income tumbled 13.5% year over year to $200 million. The adjusted operating margin contracted 390 bps to 20.2% from the year-ago quarter.
Financial Details of CROX
The company ended the quarter with cash and cash equivalents of $180 million, long-term borrowings of $1.35 million and stockholders’ equity of $1.84 billion. It had $809 million of borrowing capacity on its $1-billion revolver. It generated $923 million of free cash flow in the year.
During the quarter, the company repaid $75 million of debt. CROX repurchased roughly 2 million shares for $225 million. It had $324 million of share repurchase authorization available for future repurchases at the end of the fourth quarter.
Capital expenditure was $69 million as of Dec. 31, 2024. The company anticipates capital expenditure to be in the range of $80-$100 million in 2025 related to the expansion of its distribution capabilities.
CROX’s Q1 Guidance
Management has issued guidance for the first quarter of 2025. This Zacks Rank #4 (Sell) company expects revenues to dip 3.5% year over year assuming currency rates as of Feb. 10, 2025. This reflects an adverse impact of about $19 million from foreign currency. At constant currency, management expects enterprise revenues to be down about 1.5%.
Crocs brand’s revenues are likely to dip 1% to remain flat year over year, buoyed by mid-single-digit international growth. HEYDUDE brand’s revenues are anticipated to fall in the band of 14-16%, due to decreases in wholesale. For the first quarter, management expects North America business to be down mid-single-digits, with the adverse impacts of the Easter shift.
The adjusted gross margin is likely to rise slightly for the enterprise. Adjusted earnings are projected to be in the bracket of $2.38-$2.52 per share, with the adjusted operating margin likely to be 21.5%, including an adverse impact of 80 bps from foreign currency and pending tariffs. The earnings per share view does not reflect any impact of potential future share repurchases.
What to Expect From CROX Ahead?
The company’s outlook embeds an extra 10% tariff on goods imported from China into the United States starting Feb. 4, and the expected additional 25% tariff on goods imported from Mexico starting this March. In 2025, management projects the share of enterprise imports into the United States from China to be about 15%, with Crocs at 10% and HEYDUDE at 27%. The company’s exposure to Mexico is likely to be under 4% and for the Crocs brand only. For the enterprise, the company estimates a nearly $11-million headwind to gross profit from such additional tariffs or roughly 25 bps to the gross margin. It has a solid pipeline planned for the year.
For 2025, enterprise revenues are likely to grow about 2-2.5% year over year, assuming currency rates as of Feb. 10, 2025, consisting of adverse currency of $62 million. On a constant-currency basis, it projects enterprise revenues to increase in the band of 3.5-4%.
While revenues for the Crocs brand are expected to rise 4.5% backed by international strength, the metric for the HEYDUDE brand is anticipated to decline in the band of 7-9%. In North America, it projects growth for the full year be slight. For International, it expects growth to be approximately 10%.
CROX anticipates the adjusted gross margin to drop slightly, hurt somewhat by foreign currency and tariffs. It expects mid-teens adjusted SG&A growth in the first half of 2025 and a low-single-digit rise in the back half. This includes a marketing spend of 9-10% as a percent of revenues.
Crocs still forecasts an adjusted operating margin of 24% for 2025, including a negative currency impact of about 60 bps from both foreign currency and pending tariffs. The combined GAAP tax rate is still expected to be 21.5% while the adjusted tax rate is likely to be 18%. Adjusted earnings per share are envisioned to be in the range of $12.70-$13.15, down from $13.17 recorded last year. This view does not assume any impact of share repurchases ahead.
Key Consumer Discretionary Picks
We have highlighted three better-ranked stocks, namely, G-III Apparel Group GIII, Gildan Activewear GIL and Royal Caribbean RCL.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 113.4%, on average. The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales indicates growth of 1.7% from the year-ago figure.
Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.4%, on average.
The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 13.8% from the year-ago figure.
Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 18.5%, on average.
The Zacks Consensus Estimate for RCL’s 2025 sales and EPS indicates an increase of 18.7% and 72.1%, respectively, from the year-ago levels.
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