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Crocs (CROX) Beats on Q3 Earnings, Raises FY21 Outlook
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In spite of ongoing supply chain issues, Crocs, Inc. (CROX - Free Report) continued with its stellar performance in third-quarter fiscal 2021. Both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Sturdy consumer demand and brand strength contributed to this upbeat performance. Better-than-expected results prompted management to raise fiscal 2021 view.
This designer, manufacturer and marketer of casual lifestyle footwear and accessories saw its shares rising more than 9% during the trading session on Oct 21. Shares of this Zacks Rank #1 (Strong Buy) company have jumped 13.2% in the past three months compared with the industry’s rise of 1.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Management informed that factory closures in Vietnam, the company’s major manufacturing hub, and the global supply chain bottlenecks impacted the business. However, Crocs’ timely actions helped mitigate the impact of the same. The company took immediate action to shift production, enhance factory throughput, leverage air freight, and strategically allocate units.
The company remains optimistic about navigating through these tough times. Notably, it is shifting production capacity to countries namely China, Indonesia, and Bosnia. On its earnings call, the company said, “We can ramp factory production quickly due to the limited inputs and simple configuration of our products.” Crocs is also planning to lower its dependency on West Coast ports by adding East Coast transshipment capabilities to reach key customers in the United States.
Q3 Highlights
Crocs’ adjusted earnings came in at $2.47 per share, surpassing the Zacks Consensus Estimate of $1.90. The figure also surged significantly from earnings of 94 cents in the year-ago period, thanks to gross margin expansion and SG&A leverage.
Revenues skyrocketed 73% (or 72.2% on a constant currency basis) year over year to $625.9 million in the reported quarter and handily beat the Zacks Consensus Estimate of $615 million. The company registered solid revenue growth across all regions. The average selling price was $24.42 for the quarter, reflecting year-over-year increase of about 14.9%.
While direct-to-consumer revenues rose 60.4% year over year to $316.3 million, wholesale revenues surged 88.2% to $309.6 million in the quarter under review. We note that digital sales advanced 68.9%, and accounted for 36.8% of revenues. Within digital, all regions witnessed double-digit increases from year-ago period. Robust traffic, higher pricing and fewer promotions benefited the company.
Total revenues in the Americas region were up 94.8% (94.5% at constant currency) to $455.9 million. Revenues in the Asia-Pacific region amounted to $83.6 million, reflecting an increase of 23.5% (21.2% at constant currency) year over year. The EMEA region witnessed revenue growth of 44% (42.8% at constant currency) to $86.3 million.
Crocs’ adjusted gross profit soared 93.4% to $401.8 million. Adjusted gross margin expanded 680 basis points (bps) to 64.2% on the back of price increases and fewer promotional activities, which more than offset higher freight costs associated with logistics challenges. Positive impact of currency to the tune of roughly 65 bps contributed to the gross margin. Adjusted SG&A expenses grew 48.6% to $196.7 million. Meanwhile, adjusted SG&A expenses, as a percentage of revenues, contracted 520 bps to 31.4%.
Adjusted operating income of $205.1 million, increased significantly from $75.4 million in the last-year quarter. Adjusted operating margin expanded to 32.8% from the prior-year quarter’s 20.8%. The uptick can be attributable to gross margin improvement and SG&A leverage on solid sales growth.
Financial Details
Crocs ended the quarter with cash and cash equivalents of $436.6 million, long-term borrowings of $686 million and stockholders’ equity of $352.8 million. The company’s liquidity position remains strong with $499.7 million in available borrowing capacity.
Management incurred capital expenditures of $35.8 million during the nine-month period ended Sep 30, 2021. The company anticipates capital expenditures of about $75 million for supply chain investments in fiscal 2021.
Crocs repurchased 1.1 million shares worth $150 million during the third quarter. The company is currently implementing the previously announced $500 million fourth-quarter accelerated share repurchase arrangement, which is expected to bring total fiscal 2021 repurchases to $1 billion. Following this execution, the company would have roughly $1 billion of share repurchase authorization remaining for future buybacks.
Outlook
Crocs now estimates fiscal 2021 revenue growth between 62% and 65%, versus its prior projection of 60-65% increase. It envisions sturdy growth in all regions and channels. However, it hinted that EMEA’s fourth-quarter revenues will be disproportionately impacted by the Vietnam supply chain challenges.
Management also guided adjusted operating margin of approximately 28%, which suggests an improvement from the prior view of 25% and significant expansion from 18.9% reported in fiscal 2020. It also expects non-GAAP adjustments of roughly $8-$10 million associated with distribution center investments to hit gross margin.
With respect to fiscal 2022, the company expects revenue growth to surpass 20% year over year. It anticipates gross margin to include an incremental $75 million of air freight compared to prior year. Management forecast adjusted operating margin — excluding the impact of air freight — to be approximately 28%.
Other Stocks to Consider
Hibbett (HIBB - Free Report) has a long-term earnings growth rate of 22.4%. It presently sports a Zacks Rank #1.
Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18%. It presently flaunts a Zacks Rank #1.
Boot Barn Holdings (BOOT - Free Report) has a trailing four-quarter earnings surprise of 38.6%, on average. It currently carries a Zacks Rank #2 (Buy).
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Crocs (CROX) Beats on Q3 Earnings, Raises FY21 Outlook
In spite of ongoing supply chain issues, Crocs, Inc. (CROX - Free Report) continued with its stellar performance in third-quarter fiscal 2021. Both the top and the bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Sturdy consumer demand and brand strength contributed to this upbeat performance. Better-than-expected results prompted management to raise fiscal 2021 view.
This designer, manufacturer and marketer of casual lifestyle footwear and accessories saw its shares rising more than 9% during the trading session on Oct 21. Shares of this Zacks Rank #1 (Strong Buy) company have jumped 13.2% in the past three months compared with the industry’s rise of 1.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Management informed that factory closures in Vietnam, the company’s major manufacturing hub, and the global supply chain bottlenecks impacted the business. However, Crocs’ timely actions helped mitigate the impact of the same. The company took immediate action to shift production, enhance factory throughput, leverage air freight, and strategically allocate units.
The company remains optimistic about navigating through these tough times. Notably, it is shifting production capacity to countries namely China, Indonesia, and Bosnia. On its earnings call, the company said, “We can ramp factory production quickly due to the limited inputs and simple configuration of our products.” Crocs is also planning to lower its dependency on West Coast ports by adding East Coast transshipment capabilities to reach key customers in the United States.
Q3 Highlights
Crocs’ adjusted earnings came in at $2.47 per share, surpassing the Zacks Consensus Estimate of $1.90. The figure also surged significantly from earnings of 94 cents in the year-ago period, thanks to gross margin expansion and SG&A leverage.
Revenues skyrocketed 73% (or 72.2% on a constant currency basis) year over year to $625.9 million in the reported quarter and handily beat the Zacks Consensus Estimate of $615 million. The company registered solid revenue growth across all regions. The average selling price was $24.42 for the quarter, reflecting year-over-year increase of about 14.9%.
While direct-to-consumer revenues rose 60.4% year over year to $316.3 million, wholesale revenues surged 88.2% to $309.6 million in the quarter under review. We note that digital sales advanced 68.9%, and accounted for 36.8% of revenues. Within digital, all regions witnessed double-digit increases from year-ago period. Robust traffic, higher pricing and fewer promotions benefited the company.
Total revenues in the Americas region were up 94.8% (94.5% at constant currency) to $455.9 million. Revenues in the Asia-Pacific region amounted to $83.6 million, reflecting an increase of 23.5% (21.2% at constant currency) year over year. The EMEA region witnessed revenue growth of 44% (42.8% at constant currency) to $86.3 million.
Crocs, Inc. Price, Consensus and EPS Surprise
Crocs, Inc. price-consensus-eps-surprise-chart | Crocs, Inc. Quote
A Look into Margins
Crocs’ adjusted gross profit soared 93.4% to $401.8 million. Adjusted gross margin expanded 680 basis points (bps) to 64.2% on the back of price increases and fewer promotional activities, which more than offset higher freight costs associated with logistics challenges. Positive impact of currency to the tune of roughly 65 bps contributed to the gross margin.
Adjusted SG&A expenses grew 48.6% to $196.7 million. Meanwhile, adjusted SG&A expenses, as a percentage of revenues, contracted 520 bps to 31.4%.
Adjusted operating income of $205.1 million, increased significantly from $75.4 million in the last-year quarter. Adjusted operating margin expanded to 32.8% from the prior-year quarter’s 20.8%. The uptick can be attributable to gross margin improvement and SG&A leverage on solid sales growth.
Financial Details
Crocs ended the quarter with cash and cash equivalents of $436.6 million, long-term borrowings of $686 million and stockholders’ equity of $352.8 million. The company’s liquidity position remains strong with $499.7 million in available borrowing capacity.
Management incurred capital expenditures of $35.8 million during the nine-month period ended Sep 30, 2021. The company anticipates capital expenditures of about $75 million for supply chain investments in fiscal 2021.
Crocs repurchased 1.1 million shares worth $150 million during the third quarter. The company is currently implementing the previously announced $500 million fourth-quarter accelerated share repurchase arrangement, which is expected to bring total fiscal 2021 repurchases to $1 billion. Following this execution, the company would have roughly $1 billion of share repurchase authorization remaining for future buybacks.
Outlook
Crocs now estimates fiscal 2021 revenue growth between 62% and 65%, versus its prior projection of 60-65% increase. It envisions sturdy growth in all regions and channels. However, it hinted that EMEA’s fourth-quarter revenues will be disproportionately impacted by the Vietnam supply chain challenges.
Management also guided adjusted operating margin of approximately 28%, which suggests an improvement from the prior view of 25% and significant expansion from 18.9% reported in fiscal 2020. It also expects non-GAAP adjustments of roughly $8-$10 million associated with distribution center investments to hit gross margin.
With respect to fiscal 2022, the company expects revenue growth to surpass 20% year over year. It anticipates gross margin to include an incremental $75 million of air freight compared to prior year. Management forecast adjusted operating margin — excluding the impact of air freight — to be approximately 28%.
Other Stocks to Consider
Hibbett (HIBB - Free Report) has a long-term earnings growth rate of 22.4%. It presently sports a Zacks Rank #1.
Abercrombie & Fitch (ANF - Free Report) has a long-term earnings growth rate of 18%. It presently flaunts a Zacks Rank #1.
Boot Barn Holdings (BOOT - Free Report) has a trailing four-quarter earnings surprise of 38.6%, on average. It currently carries a Zacks Rank #2 (Buy).