Crocs said it is targeting an operating margin of at least 26 percent on annual sales of $5 billion by 2026, with 50 percent of the turnover or more due to be generated through digital channels. This would compare with an adjusted operating margin of 18.9 percent in 2020 on sales of $1.4 billion in 2020. The company is also aiming for annual free cash flow of over $1 billion.
The new five-year business plan would imply a compound annual growth rate (CAGR) of more than 17 percent. It was unveiled at an Investor Day where Crocs’ management also confirmed its recently upgraded forecast for the current financial year, which calls for its sales to go up by between 60 and 65 percent in 2021, generating an adjusted operating margin of 25 percent.
The company is looking for a sales mix of 55 percent wholesale and 45 percent DTC (direct-to-consumer) by 2026. Its goal for the digital channel – consisting of own e-commerce, e-tailers and third-party marketplaces – looks realistic as it has been growing by 53 percent a year since 2019, reaching $700 million, or about half of total revenues, in the 12 months ended last June 30. The Covid pandemic has been a boosting factor.
Besides its planned further expansion over the internet, Crocs wants to gain market share in sandals and capture new growth opportunities in Asia while innovating in terms of products and marketing.
The sandal business, which currently represents 16 percent of the sales mix for Crocs, is expected to quadruple in the next five years, giving the brand a stronger position in an addressable global market estimated at over $30 billion. Expansion in the category will also help boost sales of the company’s Jbbitz charms, which tend to enhance customer retention.
In terms of geographies, Crocs is looking for a five-year CAGR of 20 percent in its five major markets – the U.S., China, Japan, Germany and South Korea – which represented 75 percent of its revenues last year. The brand is aiming for a regional mix of 56 percent Americas (up from 65% presently), 20 percent EMEA (up from 17%) and 24 percent Asia (compared with just 18%). It plans to build up its presence in Asia through investments in ambassadors, branding and digital capabilities.
Crocs has also announced that it expects to have repurchased $500 million worth of its own shares in the first nine months of this year. The move will be followed by an accelerated share repurchase program that should double the total amount to $1 billion by the end of the year.
