There will be some immediate pain, largely negative wholesale growth in Q4, as Crocs takes additional steps to shore up the fortunes of its Heydude business. Those efforts are focused on distribution clean-up, greater segmentation by distribution channel coupled with stronger control of digital pricing, and the establishment of a retail outlet strategy for the brand, whose annual revenues are forecast to contract by 4 to 6 percent from 2022’s pro forma sales of $986 million. CEO Andrew Rees told analysts that Heydude will surpass $1 billion in 2024 sales despite having lower figures in H1/24, predominantly in North America.
Crocs has already closed over 600 Heydude retail accounts and shifted the brand’s distribution focus from largely small mom-and-pop shops to larger strategic partners that include family footwear and sporting goods chains. Additionally, an unspecified number of digital retailers have been stripped of their rights to the Heydude brand, and initial test markets have been established in Europe for potential expansion in the next two or three years. Crocs has already cleaned up the brand’s inventory as it came in 41 percent year-over-year on Sept. 30. But Heydude has faced more restricted open-to-buy orders for Spring ’24, with wholesale orders lighter than the company expected.
“With Heydude, we are focused on protecting profitability and elevating the marketplace, even if that comes at the expense of near-term revenues,” Rees told analysts.
As for the parent’s Q3 results, net income grew by 4.5 percent to $177.0 million year-over-year on 6.2 percent total revenue growth to $1.05 billion. Ebit inched up 1.7 percent to $233.4 million as gross margin expanded by 70 basis points to 55.6 percent from 54.9 percent. Crocs’ brand revenues increased by 11 percent on a constant-currency basis to $798.8 million, bolstered by a 29 percent improvement in Asia, where the company welcomed former Nike executive Carol Chen as SVP/GM of the APAC region. Heydude brand sales fell 8.3 percent to $246.9 million, with 15 percent growth in the d-t-c channel offset by declines in wholesale.
By geography, EMEALA sales in Q3 rose 8.3 percent to $142.8 million, increased by 8.0 percent in North America to $480.7 million and jumped 26.5 percent in Asia-Pacific to $175.2 million.
