Crocs reported better-than-expected second-quarter sales and raised its full-year guidance on the back of strong global demand for its products, despite supply chain disruptions caused by the Covid-19 pandemic.
Easily beating an analyst consensus forecast of $565.2 million, the company posted record revenues of $640.8 million for the three months to June 30, up by 93 percent from a year ago, as consumers turned to the bra nd for its iconic multi-colored clogs to wear with lockdown outfits and for other uses.
Sales were 88 percent higher than a year ago on a currency-neutral basis and up by 79 percent from the more normal second quarter of 2019, indicating that the higher level of demand was not only due to the easing of the pandemic.
The company now expects its revenues to go up between by 60 to 65 percent this year as compared to 2020, with growth in all regions and channels and an increase of 60 to 70 percent in the third quarter.
Net income rocketed to $319 million in the latest quarter from $56.6 million a year ago. Excluding one-off items, adjusted earnings went up to $144.4 million from $68.8 million.
The gross margin jumped by a full 7.4 percentage points to 61.7 percent. The adjusted gross margin rose by 6.6 points to 61.8 percent and the operating margin expanded to 30.5 percent from 17.1 percent.
Digital sales increased by 25.4 percent and came to represent 36.4 percent of revenues in the quarter, down from 56.1 percent during the pandemic last year.
Total direct-to-consumer sales made up 52 percent of second-quarter revenues and were up 78.6 percent year-on-year to $333.4 million. Wholesale revenues jumped by 112 percent to $307.3 million, driven by the demand from the company’s top 20 retail accounts and distributors, who had been more prudent in the orders last year.
On a geographical basis, sales in the Americas were up by 135.6 percent to $405.7 million. In Europe, the Middle East, and Africa, sales rose by 52.6 percent in terms of local currencies to $108.3 million, with increases of 82 percent at wholesale and 29 percent in DTC channels. Revenues from the Asia-Pacific region increased by 27.1 percent to $126.8 million, led by South Korea.
In terms of volume, total footwear sales grew by 79 percent to 29.1 million during the quarter, and they were up by 53 percent from the second quarter of 2019. Average selling prices increased by 8 percent to $21.84 thanks to higher pricing, lower promotions and a more favorable product mix. Sales of Jibbitz charms for its shoes more than tripled.
Crocs said its clog sales were “outstanding” during the period, increasing by 101 percent year-on-year to represent 74 percent of total footwear revenues versus 68 percent last year. Sales of sandals rose by 57 percent in the second quarter, but the management still expects this category to outpace its more classic clogs in the longer term.
Andrew Rees, the company’s CEO, expressed concern about the short-term impacts of Covid-19 on supplies including temporary factory closures in Vietnam, the company’s most significant manufacturing location, which is now battling the pandemic. He said “global logistics remain challenging and volatile” as the world emerges from the pandemic.
However, Rees remained optimistic about the overall business, noting that the supply challenges have been factored into the company’s raised guidance for this year.
The company anticipates operating margin of 24 to 26 percent in the third quarter and 25 percent for the full year. Price hikes will also be coming in the next year, mostly in markets outside of the U.S.
As reported elsewhere, Crocs is committing to net zero carbon emissions by 2030. The company will focus on transitioning to sustainable ingredients, minimizing packaging, using resources responsibly, and exploring solutions for product after-life.
