Crocs, Inc. lowered its annual revenue guidance and reported a significant decline in its Q2 operating margin, factors which contributed to a nearly 14 percent decline in its stock price early today. The company is now forecasting 14 to 17 percent constant currency revenue growth for its Crocs brand (10 to 13% on a reported basis) for the fiscal year to a range of $2.545 billion to $2.615 billion. The current outlook for overall company revenues is $3.395 billion to $3.505 billion, including a reported $850 million to 890 million sales contribution from its Heydude brand. Additionally, Crocs has dropped its annual adjusted EPS guidance by 3.3 to 5.5 percent to a range of $9.50 to $10.30 a share. Annual spending on air freight is still projected at $75 million.
The group’s second quarter revenues were driven by double-digit increases in EMEALA (Europe, Middle East, Africa, and Latin America) and Asia-Pacific and a $232.4 million contribution from Heydude. Net income declined 50 percent to $160.3 million from $319.0 million despite a 51 percent increase in total revenues to $964.6 million from $640.8 million. Operating margin came in at 25.7 percent versus 30.5 percent in the year-ago period as a currency loss of more than $1.2 million negatively impacted Ebit, which came in at $214.3 million versus $190.6 million in the year-ago period. Gross margin was 51.6 percent, down from 61.7 percent in Q2/21 on higher freight costs, continued supply chain challenges, and ongoing global inflation that was partially offset by higher prices and product mix. Inventories were up 135 percent from FY21 end at $501.5 million versus $213.5 million. The company sold 32.4 million pairs of Crocs, up 3.3 million pairs from the year-ago period, and 8.1 million pairs of Heydude footwear.
During Q2, Crocs brand revenues rose 19.4 percent on a constant currency basis (+14.3% reported) to $732.2 million. Digital sales increased 20.8 percent (+16.8% reported) to represent 37.2 percent of brand revenues versus 36.4 percent in the year-ago period. Wholesale revenues were 80.6 percent higher during the period.
By region, EMEALA revenues rose 48.4 percent on a constant-currency basis (+32.8% reported) to $160.4 million. APAC quarterly sales for the Crocs brand were up 27.6 percent (+17.4% reported) to $148.9 million; in the brand’s home North American market, Q2 revenues for Crocs rose 7.8 percent (+7.6% reported) to $422.9 million.
