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Crocs' (CROX) Q2 Earnings & Revenues Beat Estimates, View Up

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Crocs, Inc. (CROX - Free Report) reported better-than-expected second-quarter 2021 results, wherein both top and bottom lines increased year over year. Results gained from solid demand for its products as well as continued business momentum. Management lifted its 2021 view and also issued guidance for the third quarter of 2021.

Consequently, shares of Crocs jumped more than 9% during the close of the trading session on Jul 22. Shares of the Zacks Rank #3 (Hold) company have soared 55.5% in the past three months against the industry’s decline of 0.8%.

Q2 Highlights

Crocs’ adjusted earnings came in at $2.23 per share during second-quarter 2021, surpassing the Zacks Consensus Estimate of $1.62. The figure also surged significantly from $1.01 in the year-ago quarter.

Revenues skyrocketed 93.3% (88.4% at constant-currency) to $640.8 million in the reported quarter and exceeded the Zacks Consensus Estimate of $545 million. The metric also surged 79% from second-quarter 2019. Wholesale and retail revenues improved 112.1% and 78.6% year over year, respectively.

Solid performance in all regions along with healthy demand in its key products, including Clogs, Sandals and Jibbitz, drove the top line. E-commerce sales grew 25% year over year in the quarter under review, accounting for 36% of total revenues. This marked the 17th successive quarter of double-digit growth. E-commerce sales also surged 99% from second-quarter 2019.

The company’s adjusted gross profit advanced 116.4% to $396.3 million. Adjusted gross margin expanded 660 basis points (bps) to 61.8% on the back of price increases and fewer promotional activities, which more than offset higher freight costs. Positive impact of foreign currency to the tune of roughly 90 bps contributed to the gross margin.

Adjusted SG&A expenses grew 82.8% to $199.9 million in the first quarter. Meanwhile, adjusted SG&A, as a percentage of sales, contracted 180 bps to 31.2%.

Adjusted operating income was $196.4 million, up from $73.8 million in the last-year quarter. Adjusted operating margin expanded significantly to 30.7% from the prior-year quarter’s 22.3%. The uptick can be attributable to lower SG&A costs, robust sales and improved gross margins.

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Segments at a Glance

Total revenues in the Americas region were up 136.4% (135.6% at constant currency) to $405.7 million in the first quarter. Revenues in the Asia-Pacific region was $126.8 million, increasing 35.5% (27.1% at constant currency) year over year. The EMEA region witnessed revenue growth of 63.1% (52.6% at constant currency) to $108.3 million.

Financial Details

Crocs ended the quarter with a cash balance of $197.9 million. The company generated $242.4 million in cash from operating activities. It incurred capital expenditures of $21.3 million and the metric is expected to be $80-$100 million in 2021.

The company repurchased 2.9 million shares worth $300 million under its $1-billion share repurchase plan. The company had borrowing of $386.4 million as of Jun 30, 2021. This included $350 million of senior notes, which were issued in March 2021. As of Jun 30, the company has a strong liquidity position with $454.7 million of available borrowings under its credit lines.

Crocs, Inc. Price, Consensus and EPS Surprise

Outlook

Driven by solid second-quarter results, management raised its 2021 guidance. It now expects revenue growth of 60-65%, up from the earlier guided view of 40-50% growth. Adjusted operating margin is now anticipated to be almost 25%, which suggests an improvement from the prior view of 22-24%. Also, $8-$10 million of distribution center investments are likely to affect the gross margin.

For third-quarter 2021, revenues are expected to grow 60-70%. Gross margin is likely to be negatively impacted by a $3-million investment related to distribution centers. Adjusted operating margin is projected to be 24-26%.

Stocks to Consider

G-III Apparel Group (GIII - Free Report) currently has an impressive long-term earnings growth rate of 11.6% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PVH Corp. (PVH - Free Report) flaunts a Zacks Rank #1 and a long-term earnings growth rate of 18%.

Gildan Activewear (GIL - Free Report) has a long-term earnings growth rate of 28.5%. The company flaunts a Zacks Rank #2 (Buy).


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