Having completed its review of Crocs following its expensive takeover of Hey Dude, Standard & Poor’s gave a negative outlook to the company, in contrast with the stable outlook assigned by Moody’s. S&P indicated that it might even downgrade Crocs further if it fails to integrate the casual footwear brand as planned or doesn’t prioritize the repayment of its high debt to lower the debt/Ebitda ratio from three times.
S&P is also concerned that the Crocs brand may fall out of trend, leading to a worse performance than currently expected. The rating agency affirmed its BB- issuer credit rating for Crocs’ new senior unsecured notes, but lowered the issuer-level rating on the company’s existing debt, as the notes are now subordinate to the new debt.
Crocs told analysts at the ICR Conference that it is still on a path to an annual turnover of $5 billion as a stand-alone brand. It reaffirmed its belief that Hey Dude will contribute $1 billion in sales with Crocs’ support at the wholesale level through its direct presence in many countries and its relationships with distributors in many others.
While Hey Dude generated only 5 percent of its sales of $580 million outside the U.S. last year, international sales represented 31 percent of Crocs’ revenues of over $2.3 billion. Furthermore, only 30 percent of Crocs’ top 20 wholesale accounts carry the Italian-born casual footwear brand.
