Coming off a year when global revenues rose by nearly 54 percent to more than $3.5 billion and adjusted operating margin hit 28 percent, Crocs continues to see markets outside the U.S., including Europe, as important growth vehicles for both of its brands. In Q4, Crocs brand sales rose 75.6 percent in the EMEALA region despite an exit from a direct Russia business as the brand continued to gain momentum in the direct and distributor markets. The group anticipates that thrust will continue in 2023 in both the digital and wholesale channels, although the expansion will unlikely match the same growth rate.
As for Heydude, which generated $895.9 million in revenue for the company following its February 2022 acquisition, Crocs intends to continue testing brand distribution outside the U.S. in 2023 with select wholesale partners and direct distribution in Southern Europe and the Middle East. Heydude will launch a digital business in the U.K. and Germany in late Q2 or early Q3.
Q4 driven by sandals, Heydude
Operating income rose 37.5 percent to $220.1 million from $160.0 million in the period ended Dec. 31. But net income declined by 11.1 percent to $137.7 million. Gross margin slid to 52.5 percent from 63.4 percent, with half of the decline attributed to the addition of the Heydude brand. Adjusted gross margin slipped by 760 basis points to 56.1 percent, with half the fall-off attributed to promotions and the remainder split between inflationary costs and higher freight and inventory handling costs.
The company spent $7.5 million on expansion and duplicate distribution centers in Q4.
Total period revenues rose by 61 percent to $945.2 million from $586.6 million as the company sold 27 million pairs, up 20.8 percent year-over-year, at an average price of $23.95, down 3.6 percent on a constant-currency basis. Sandal sales increased by 53 percent, accounting for 10 percent of Crocs’ brand revenues. Clog sales were 9 percent higher, becoming 79 percent of all brand revenues. Heydude brand revenues increased 36.6 percent year-over-year to $279 million, with strength in the digital channel. Consolidated digital sales, e-commerce and e-tail for both brands rose by 80 percent year-over-year.
2022 international constant-currency sales increased by 47 percent
Annual operating income rose by 24.5 percent to $850.8 million from $683.1 million. Net income was down by 25.6 percent at $540.2 million versus $725.7 million. The gross margin for the year was 52.3 percent versus 61.4 percent. Total revenues increased by 54 percent to $3.55 billion versus $2.31 billion as EMEALA sales rose by nearly 47 percent to $540.5 million, which included a 32 percent year-over-year improvement in comparable direct-to-consumer sales. Year-end inventory was $472 million, including a 42 percent year-over-year spike in Crocs’ goods to $303 million.
2023 Outlook
Cautious about the potential impact of macroeconomic events in the U.S. and Europe as the year progresses, the group currently sees full-year, constant-currency revenue growth of 10 to 13 percent. Crocs’ sales are expected to increase by 6 to 8 percent (9 to 11 percent in constant currency), and Heydude revenues are forecast to grow in the “mid-20s” on a reported basis. The company has a $165 to $180 million capital expenditures budget for the year that will be used for a new Heydude distribution center in Las Vegas, new technology systems for the brand and the expansion of corporate facilities.
