Promo Environment Makes Crocs’ Near-Term Performance Hard to Predict
Crocs, which raised its annual guidance last week after another strong quarter, is facing a bit of a dilemma in North America, particularly the U.S. market. Elevated footwear inventory levels at retail are pressuring margins. Still, Crocs is continuing to gain share. In the third quarter, North American revenues inched up 1.8 percent to $445.3 million as Direct-to-Consumer sales increased 13 percent against 70 percent comparable growth in the year-ago period. While wholesale sell-in the market was down 15 percent, the sellthrough rate improved at a high-single digit rate as the company worked with its largest wholesale partners to manage inventory levels.
Inflationary expenses and higher freight and inventory handling costs pressured the gross margin, which was 54.9 percent versus 63.9 percent in the year-ago period ended Sept. 30. But Crocs cautioned that an estimated 45 percent of the higher expenses were transitory.
Overall, Crocs’ quarterly profit improved 10 percent to $1693 million in the third quarter as total revenues grew 57 percent to $985.1 million. D-T-C accounted for 45 percent of the topline as digital penetration reached 37 percent, a figure that the company wants to take to 50 percent or more. The company also want to double sales of its Jibbitz business and make China approximately 10 percent of total revenues from a current less than 5 percent.
The Crocs brand is now forecast to grow annual revenues by 17 percent to a range of $2.607-$2.63 billion. Heydude, meanwhile, is expected to contribute $850-$890 revenues, resulting in total annual revenues of $3.455-$3.52 billion.