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Crocs stock down despite sales beating Q4 estimates

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Yahoo Finance's Brad Smith discusses the outlook for Crocs growth after the shoe company beats analyst expectations for fourth quarter sales.

Video Transcript


ALEXIS CHRISTOFOROUS: They were once named one of the world's worst inventions by "Time Magazine," but Crocs are certainly having their moment. The rubber shoemaker is coming off a record year and expects that momentum to continue into 2022. Here with more is Yahoo Finance's Brad Smith. Hi Brad.

BRAD SMITH: Hey Alexis. Yeah, one of the OG meme shoes there for Crocs. And inflationary retail price environment though combined with limited drops propping the secondary market, it's provided some wiggle room for a trendy value with key celebrity partnerships. Enter Crocs with the jibbitz.

Monday, Crocs announced that they expect to record 2021 revenue with roughly 67% growth over 2020 while the previous guidance was approximately [? 60% ?] to 65%, 62% to 65% growth there. Now the big number here to focus in on-- $2.31 billion. That's the expected revenue for full year 2021 results applying the 67% year-over-year growth to the 2020 full year revenue figure of $1.38 billion.

And despite the upward guidance, shares, they've shed about 6% today. Amid the broader market selloff, that we've been watching, Crocs down 11% during 2022, a continuation of one of the bands that we've seen in this move lower for them. And it'd be easy to chalk it up to a sell the news type of trade. But the selling sentiment, it's been in place since November as Crocs has moved 35% off of the highs of late 2021.

From a shareholder value perspective, the 104% return during the 2021 calendar year, that was the best trading calendar year for the company since 2018. But how sustainable is growth on top of a record revenue year? Crocs is expecting that 2022 revenues will grow 20% compared to 2021, excluding Hey Dude. And we'll get into that in a second.

So even though early months of the novel COVID-19 pandemic induced a sprint for the foam slippers thus creating a glass slipper Cinderella moment for Crocs with cultural collapse to match, the prevailing pressure from holders of Crocs is indeed the revenue resiliency in question during a new demand generation phase. So I've reached out to comment from an analyst, foreign analyst who covers this company to gauge their outlook in light of the updates. And I hope to have an update later for our coverage of Crocs as well, Alexis.

- Hey, Brad. You know, you touched on it a second ago. But what does the acquisition of private footwear label Hey Dude for Crocs' growth? Because it didn't come cheap that's for sure.

BRAD SMITH: Yeah, that's right. So the updates that we received today were not inclusive of revenue to be seen from their acquisition of Hey Dude. Crocs rounded out their 2021 we do remember, and as you mentioned, by acquiring Hey Dude in a cash and stock deal worth about $2 and 1/2 billion. And as part of today's news from Crocs, we did receive the full year pro forma revenues for Hey Dude, approximately $700 to $750 million.

And we'll see if that can get to a $1 billion stature that the brand may be looking for by 2024. But from here, the company is expecting to hit $5 billion in revenue by 2026 even before the Hey Dude revenues, as Crocs CEO Andrew Rees has said as part of today's revenue guidance.

And so the Hey Dude acquisition certainly provides a lean further into that comfort category for Crocs, but doubtful that Crocs is going to be propelling Hey Dude products to StockX fame the same way that some limited edition Crocs have been able to make their way into the secondary and resale market. And a consideration for any brand carrying a cultural relevance such as Crocs does is the opportunity for, perhaps, metaverse product recognition and monetization.

Partnerships for Crocs already been present in games such as NBA 2K22, as seen by [INAUDIBLE] EA Sports. But, again, further highlights the demand generation mix, creating near-term uncertainty for investors, resulting in price action that we've been tracking. Shares already crossing below that 200-day moving average. So we're going to be keeping a close eye on what action this sets up for investors as we move on throughout the rest of this year.

ALEXIS CHRISTOFOROUS: All right, Brad Smith, thanks so much. We appreciate the skinny there on Crocs.

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