Crocs, Inc. (CROX) delivered a positive surprise in its third-quarter financial report, exceeding analyst expectations for earnings per share. However, the company also announced a reduction in its revenue guidance, primarily driven by the ongoing challenges faced by its HEYDUDE brand.
The company reported adjusted earnings per share of $3.60, a 11% increase year-over-year, exceeding the Street’s estimate of $3.10. Quarterly revenues reached $1.062 billion, a 2% increase compared to the previous year, surpassing analysts’ consensus of $1.05 billion.
While the Crocs brand continued to perform well, with revenues growing 7.4% to $858 million (or 7.9% on a constant currency basis), the HEYDUDE brand experienced a significant 17.4% decline in revenue, reaching $204 million.
CEO Andrew Rees acknowledged the brand’s struggles, stating, “We have sharpened our strategy around HEYDUDE as we work to create higher brand relevance through our product and marketing initiatives.” He further elaborated that the brand’s recent performance and the current market environment indicate a longer-than-anticipated turnaround.
Looking ahead to the fourth quarter, Crocs anticipates adjusted diluted earnings per share in the range of $2.20 to $2.28, which falls short of the analyst estimate of $2.72. The company expects revenue to remain flat or exhibit a slight increase year-over-year. While the Crocs brand is projected to grow by around 2%, the HEYDUDE brand is expected to experience a decline of 4% to 6%.
For the full fiscal year 2024, Crocs forecasts revenue growth of approximately 3%, a downward revision from the previous guidance of 3% to 5%. This revised forecast reflects the continued challenges faced by the HEYDUDE brand, with projected revenue declining around 14.5% (a more significant decline than the previously anticipated 10% to 8% decrease).
Following the earnings announcement, several analysts adjusted their price targets on Crocs. Baird analyst Jonathan Komp maintained an “Outperform” rating but lowered the price target from $190 to $180. UBS analyst Jay Sole kept a “Neutral” rating but reduced the price target from $146 to $122. Keybanc analyst Ashley Owens maintained an “Overweight” rating and cut the price target from $155 to $150. Raymond James analyst Rick Patel downgraded the rating for Crocs from “Outperform” to “Market Perform.”
As the HEYDUDE brand continues to struggle, investors will be closely watching its performance and Crocs’ efforts to revive its growth trajectory. The company’s ability to navigate these challenges will be crucial for its long-term success.
