Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crocs Inc (CROX, Financial) reported third quarter results that exceeded guidance in terms of sales and profitability, with consolidated enterprise revenues of $1.1 billion, growing 2% year-over-year.
- The Crocs Brand grew 8%, with international sales up 17% and North America sales up 2%, showcasing strong global performance.
- Adjusted diluted EPS increased by 11% to $3.60 per share, indicating improved profitability.
- The company successfully launched several high-profile collaborations, including partnerships with McDonald's and Bath & Body Works, driving significant consumer engagement.
- Crocs Inc (CROX) achieved inventory turns above their goal of 4 times annually, reflecting efficient inventory management.
Negative Points
- HEYDUDE revenues contracted by 17%, slightly below expectations, indicating challenges in this segment.
- The company noted a consumer pullback in North America post-Labor Day, anticipating a muted consumer environment until the holiday season.
- HEYDUDE's performance marketing strategy shift negatively impacted digital performance, contributing to lower-than-expected sellouts.
- Crocs Inc (CROX) lowered its full-year revenue growth outlook for HEYDUDE from a decline of 8%-10% to approximately 14.5%, reflecting ongoing challenges.
- The company anticipates incremental pressure on EBIT margin rates in 2025 due to continued investments in talent, marketing, digital, and retail.
Q & A Highlights
Q: Could you provide more detail on Crocs North America's performance and expectations for DTC growth in Q4? Also, what role will North America play in Crocs' 2025 outlook?
A: (Susan Healy, CFO) North America is expected to be flat for the second half, with Q4 DTC positive but offset by a planned decline in wholesale. We're mindful of consumer shopping patterns and macro headwinds. (Andrew Rees, CEO) North America is a stable, profitable, cash-generative business that supports international growth and HEYDUDE investments. We expect modest growth in North America, contributing to our overall portfolio.
Q: Can you elaborate on the streamlining of HEYDUDE's account base and its impact on brand profitability?
A: (Andrew Rees, CEO) We focused on large national strategic accounts, cutting smaller ones to ensure adequate segmentation and differentiation. We're elevating ASPs and improving inventory turns. We're investing in marketing, talent, and retail to drive long-term growth, confident in HEYDUDE's potential despite current challenges.
Q: How are you managing the back-to-school season's impact on sales and inventory, and what are your expectations for the holiday season?
A: (Andrew Rees, CEO) Consumers are returning to pre-pandemic shopping patterns, focusing on key events and promotions. We're aligning our order books with expected sell-out to avoid excess inventory. While we've made progress with HEYDUDE, there's still work to be done.
Q: Can you discuss the rationale behind switching Crocs' Amazon business to a 3P model and its impact on your DTC strategy?
A: (Andrew Rees, CEO) Amazon is crucial for reaching consumers. The 3P model allows better brand control and product management. We see it as a productive transition, complementing our crocs.com business and enhancing consumer experience.
Q: What are the key drivers for Crocs' international growth in 2025, given the slowdown in China?
A: (Andrew Rees, CEO) Despite the slowdown, we expect continued growth in China, supported by mono-brand store openings. We're confident in India, Western Europe, and other markets like Australia and South Korea. Japan remains a work in progress, but we see long-term potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
