The Crocs brand has started 2024 “with momentum” after sales in 2023 jumped by 14 percent to $3.0 billion, but management now expects it will take a bit longer to reach a $5.0 billion 2026 sales target unveiled in 2021.
“I don’t think it’s realistic to achieve the $5 billion by 2026,” Andrew Rees, CEO of Crocs Inc., which also owns the Heydude label, told analysts in an earnings call. “I think quite a few things have changed since we provided that guidance around the global supply chain. We had to pull back out of Russia because of all the issues that you’re well aware of. And frankly, currency as well cost us about $200 million in the top line.” Rees said that management would be “focused at driving the continued growth in a profitable and sustainable way” at the Crocs brand and would most likely “take a bit longer” to reach the $5 billion goal.
In Q4 of 2023, Crocs’ enterprise revenues increased by 1.6 percent, or 1.5 percent at constant rates, to $960 million. Sales for the Crocs brand grew by 10.0 percent to $732 million and were 9.9 percent higher at constant currency rates. Revenues at Heydude were instead down by a reported 18.5 percent, or 18.7 percent at constant rates, to $228 million. Anne Mehlman, CFO and incoming President of the Crocs brand, said that fourth-quarter results “exceeded the high end of our guidance across all metrics.”
The group gross margin in the quarter rose by 2.8 percentage points to 55.3 percent, while the adjusted gross margin widened by 2.40 percentage points to 55.7 percent, with margins boosted by significant freight tailwinds. The adjusted operating margin fell by 1.9 percentage points to 24.1 percent. Adjusted earnings per share decreased by 2.6 percent to $2.58 but topped company guidance of $2.05 to $2.35.
For the full year, group sales grew by 11.5 percent, or 12.0 percent at constant rates, to nearly $4.0 billion. Crocs brand revenues increased by 13.3 percent, or 14.0 percent at constant rates, to $3.0 billion, while Heydude brand revenues increased by 6.0 percent to $949 million.
Growth in both the fourth quarter and full year was led by the international business of the Crocs brand. For the full year, international sales increased by 23 percent against 8 percent growth in North America. All Tier 1 markets – China, India, Japan, South Korea, the US and Western Europe – posted sales increases, as Crocs highlighted triple-digit growth in Australia and China and double-digit growth in South Korea and the UK.
Management also highlighted growth in the Crocs sandals business last year, with full-year sales of the product category jumping by 29 percent to surpass the $400 million sales mark and rising to 13 percent of all brand sales. Clog sales increased by 12 percent, while the Jibbitz personalization business grew 17 percent to over $250 million, representing over 9 percent of the total Crocs brand sales mix.
International sales now represent 41 percent of all Crocs brand sales. Rees underscored the untapped potential in China, which reached the threshold of $120 million in sales last year but still represents only 4 percent of Croc brand revenues.
Heydude opened five outlet locations in the second half of 2023, and management has “been pleased with the results thus far.” It plans to open up to 30 more outlet stores this year.
In Q1 of 2024, Crocs expects overall revenue growth in a range of down 1.5 percent to up 0.5 percent, with the Crocs brand rising by 6 to 8 percent and Heydude falling by 20 to 23 percent. Adjusted diluted EPS is forecast at $2.15 to $2.25. For the full year of 2024, the company still anticipates overall revenue growth of 3 to 5 percent, with a 4 to 6 percent gain at Crocs and Heydude revenues flat to slightly up, as that brand is seen recovering as the year progresses.
