Crocs Reports Robust Q2 2023 Sales, Raises FY23 Outlook

Crocs Inc (CROX) reported significant growth in its second-quarter FY23 sales, which rose by 11.2% year-on-year to reach a record of $1.07 billion, surpassing the analysts’ consensus of $1.04 billion. This robust performance has been reflected across various segments of the company. On a constant currency basis, Direct-to-Consumer (DTC) sales rose by 26%, while wholesale experienced a slight growth of 0.2%.

Regional Sales Performance

The revenues from Crocs Brand in North America amounted to $474.6 million, marking an increase of 12.2% Y/Y. The brand’s Asia Pacific revenues exhibited a significant leap with a 33.2% increase. However, the EMEALA revenues saw a marginal decline of 0.2%.

HEYDUDE Brand Performance

HEYDUDE Brand’s DTC revenues grew by a robust 29.7%, and its digital revenues escalated by 36.7% compared to the previous year.

Operational Metrics and Profitability

Crocs’ operational metrics also highlighted an encouraging picture. The gross margin expanded 630 basis points to 57.9%, while the adjusted gross margin improved 290 basis points to 58.1%. Furthermore, income from operations rose by a healthy 28.4% to $318.5 million. The increase in operating margin to 29.7% from 25.7% a year ago was primarily attributed to higher gross margins and significantly fewer HEYDUDE acquisition expenses.

On the flip side, selling, general, and administrative expenses saw an increase of 21.2% to $302.8 million. The company held $166.2 million in cash and equivalents as of June 30, 2023, while its inventories decreased 7.5% Y/Y to $436.3 million.

Updated Outlook for FY23

Based on its strong performance, Crocs has raised its FY23 sales forecast to $4 billion – $4.06 billion, up from the earlier forecast of $3.94 billion – $4.04 billion. This update stands against the Street view of $4.02 billion. The company also raised its FY23 adjusted EPS outlook to $11.83 – $12.22, from the prior view of $11.17 – $11.73. This is higher than the consensus of $11.57.

For Q3, Crocs expects its revenue to be in the range of $1.013 billion – $1.034 billion, against the consensus of $1.06 billion. The company also expects its adjusted EPS to be between $3.07 – $3.15, closely aligned with the consensus of $3.09.

Share Price Movement

Despite the encouraging Q2 results and raised outlook, CROX shares were trading lower by 5.06% at $113.74 in premarket at the last check on Thursday. In a broader perspective, the footwear stock which started 2023 on a strong note has since slowed due to softer outlooks. However, with a composite rating of 97 out of a best-possible 99, CROX stock still has a promising performance.

Performance of Other Footwear Brands

Deckers Brands

Deckers Brands (DECK), the maker of Hoka shoes, is another company to watch out for in the footwear industry. Deckers Brands has been seeing accelerating earnings growth over the last three quarters and analysts expect a 28% jump to $2.13 per share for Q2. However, Wall Street expects sales growth to slow for the fifth consecutive quarter, increasing only 7% to $661 million.

DECK stock hit an all-time high of 562.97 on July 12 as shares bolted 38% higher year to date. However, shares edged slightly lower early Thursday ahead of earnings. The stock holds a 97 Composite Rating and a 98 EPS Rating, indicating a strong performance.

Skechers

Skechers (SKX), a major competitor in the footwear market, showed promising Q1 performance, with adjusted earnings leaping nearly 25% after three consecutive declines.

For Q2 results, FactSet forecasts an 8.6% earnings drop to 53 cents per share while revenue is expected to increase by 2.4% to $1.91 billion. SKX stock was briefly above the 54.77 flat base buy point on July 18 but retreated about 4% in the week since. If there’s a negative earnings surprise, it could trigger the 7% to 8% sell rule, further impacting the stock’s performance.

Conclusion

The earnings reports for Q2 2023 give us a glimpse into the dynamic world of the footwear industry. While Crocs continues to exceed expectations with its sales and earnings growth, other brands are dealing with their own unique challenges.

For more details on Crocs’ financial performance, visit their official website here. For comprehensive coverage of the entire footwear industry, investors are advised to monitor the individual performance of brands, their earnings reports, and industry trends.