After a strong start to 2022, Crocs, Inc. is eyeing approximately $3.5 million in total annual revenues as it continues marching its way to longer-term objectives of $5+ billion in annual sales for the Crocs brand by 2026 and $1+ billion in annual revenues for the recently acquired Heydude brand by 2024.
Both brands showed strength in the first quarter as consolidated revenues rose nearly 47 percent on a constant currency basis (43.5 percent reported) to $660.1 million, with sales of the Crocs brand up 18.5 percent to $545.2 million and Heydude sales coming in at $114.9 million for the six weeks from Feb. 17 until the March 31 period end. Net income was off 26 percent at $72.76 million compared to $98.4 million as EBIT slipped to 15.0 percent from 26.6 percent and gross margin fell 580 basis points to 49.2 percent from 55.0 percent. Incremental air freight costs negatively impacted the margin rate.
The Crocs brand generated an 18.7 increase in wholesale revenues to $344.3 million as the average selling price (ASP) rose 19.6 percent on price increases and a less promotional environment. Direct-To-Consumer sales were 18.2 percent (19.7 percent C$) higher at nearly $201 million. Total pairage was down 1.1 percent year-over-year to 26.5 million. Heydude generated $86.9 million in wholesale revenues and $28.0 million from the D-T-C channel. Geographically, North American sales rose 19.5 percent to $319.5 million, including an 18.5 percent jump in DTC; sales into Asia, impacted by softness in both China and Japan but strength in South Korea and India, stepped 22 percent higher to $96 million. The new EMEALA region combing the EMEA with Latin America generated a 27 percent topline gain to $130 million.
Continued strong pre-books, the product innovation pipeline, and the performance of its two brands globally contributed to the company’s decision to raise its FY22 total revenue outlook to $3.5 billion from $3.4 billion, representing year-on-year growth of 52 to 55 percent. Crocs’ sales are expected to increase more than 20 percent with Heydude brand revenues pegged at $750 to $800 million ($840 to $890 million on an annualized basis). The annual adjusted operating margin has been lifted to 26 to 27 percent, with $75 million in H1 air freight costs expected to weigh on the annual gross margin rate. The company will spend $170 to $200 million in Capex this year, largely on supply chain investments.
Meanwhile, the current second-quarter outlook estimates 43 to 49 percent consolidated revenue growth to $918 to $957 million, with the Crocs’ label growing 12 to 15 percent on a reported sales basis and Heydude brand revenues in the $200 to $220 million range.
The company’s objective to reach $5+ billion in sales for the Crocs label will be met through several actions: investments in digital to make its 50 percent of brand revenues, growing Asia to approximately 25 percent of the top line, increasing China’s revenue contribution to approximately 10 percent from less than 5 percent currently, and quadrupling the brand’s sandals business to more than $1.2 billion. The $1+ billion topline objective for Heydude will be reached through additional marketing and supply chain investments, increased distribution through leveraged wholesale relationships, and testing a retail footprint for enhanced brand awareness.
