Crocs, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Crocs Brand:
  • Drove brand relevance through icon iterations, e.g., Classic Clog was named one of the Greatest Shoes of All Time and displayed at MoMA. Clogs grew 10% in 2024, with six major clog franchises, and the InMotion Clog and Echo Wave mule were launched.
  • Fortified product pillars outside clogs through new wearing occasions. Sandals grew 3% in 2024, with Getaway, Brooklyn, and Miami franchises performing well. Jibbitz grew 6%, with focus on driving penetration in digital and wholesale channels.
  • Focused on digitally-led social-first marketing, with big consumer moments in 2024 like Tmall Global Brand Day and strong engagement on TikTok.
  • Gained market share globally. North America grew 3% for seventh consecutive year, international grew 19%, with China growing 64% and Western Europe growing 18%.
• HEYDUDE Brand:
  • Focused on creating a community through connecting with youth female culture and maintaining connection with male fan base, with high-profile influencers like Sydney Sweeney and Jelly Roll. Social following reached 2.4 million.
  • Built the core with Wendy and Wally assortments on three major platforms, and invested in Austin Lift and Paul franchises. Fourth quarter direct-to-consumer channel was up 7%, first positive inflection in five quarters.
  • Stabilized and accelerated North America while laying groundwork for international growth, with plans to open 10 more premium outlet stores in 2025.

Segment Performance

• Crocs Brand: In 2024, revenues were $3.3 billion, growing 10%. North America grew 3%, international grew 19%. Fourth quarter Crocs Brand revenues were $762 million, up 5%, with DTC up 6% and wholesale up 4%. For the full year, DTC grew 11% and wholesale grew 9%. Units sold increased 6% to 127 million pairs, and ASPs increased 2% to $25.52.
• HEYDUDE Brand: 2024 revenues were $824 million, down 13%. Fourth quarter revenues were $228 million, flat to prior year, with DTC up 7% and wholesale down 8%. For the full year, wholesale revenues were down 20% and DTC revenues were down 4%. ASPs were up 6% to $30.54, and unit volume was 27 million, down 18% from prior year.

Guidance

• Full Year 2025: Enterprise revenue growth on reported basis expected to be 2%-2.5%, constant currency expected to be 3.5%-4%. Crocs Brand revenue growth expected to be ~4.5%, with North America slightly up and International up ~10%. HEYDUDE revenue expected to be down 7%-9%. Adjusted operating margin expected to be approximately 24%. Adjusted diluted earnings per share expected in the range of $12.70 to $13.15.
• First Quarter 2025: Enterprise revenues expected to be down ~3.5% (reported basis), down ~1.5% on constant currency. Crocs Brand North America expected to be down mid-single digits. HEYDUDE revenue expected to be down 14%-16%. Adjusted gross margins expected to be up slightly, adjusted operating margin expected to be ~21.5%, with ~80 basis points negative impact from foreign currency and tariffs. Adjusted diluted earnings per share expected in the range of $2.38 to $2.52.

Risks

• Geopolitical climate has become more volatile, which may impact business operations.
• Tariffs: Guidance embeds additional 10% tariff on goods imported from China into the US beginning February 4, and anticipated additional 25% tariff on goods importing from Mexico beginning in March, which will have an approximate $11 million headwind to gross profit for the enterprise or roughly 25 basis points to margin rate.

Question and Answer

• Q: Jonathan Komp from Baird asked about Crocs Brand in North America's performance and SG&A outlook.

A: Andrew Rees said Crocs Brand in North America is confident in product pipeline, and Susan Healy explained SG&A growth is due to investments in DTC, talent, and marketing with second half expected to have low-single-digit growth as lapping 2024 second half investments.

• Q: Chris Nardone from Bank of America asked about Crocs Brand North America wholesale order books and share repurchases.

A: Andrew Rees said confident in wholesale order books, and Susan Healy mentioned commitment to leverage target and $1.3 billion share repurchase authorization.

• Q: Adrienne Yih from Barclays asked about Crocs North America future opportunities and HEYDUDE's outlook.

A: Andrew Rees said international is easiest growth for Crocs Brand, and HEYDUDE has green shoots and long-term potential.

• Q: Jim Duffy from Stifel asked about HEYDUDE's wholesale partners and distribution.

A: Andrew Rees said engaged with wholesale partners, and Susan Healy mentioned Q1 challenges in North America due to Easter shift and leap year lap.

• Q: Bob Drbul from Guggenheim asked about 24% operating margin commitment and HEYDUDE's Travis Hunter deal.

A: Andrew Rees said 24% margin is flexible with investments in DTC, marketing, etc., and not predicting Travis Hunter's draft attire but mentioned his authenticity with the brand.

• Q: Anna Andreeva from Piper Sandler asked about gross margins, promos, and HEYDUDE's new stores.

A: Susan Healy said gross margins expected to be down slightly but up slightly without FX and tariff impact, and Andrew Rees said promo environment was dynamic and HEYDUDE plans to open 10 more stores in 2025.

• Q: Laura Champine from Loop Capital asked about pricing philosophy and using pricing to offset costs.

A: Andrew Rees said pricing is market-driven, considering competition and brand trajectory, and not planning significant short-term price increases but being nimble.

• Q: Tom Nikic from Needham asked about HEYDUDE's product development.

A: Andrew Rees said HEYDUDE is in early innings of extending beyond core Wally and Wendy, with examples like Austin Lift and Bradley boot performing well.