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Crocs (CROX) 2021 View Raised on Brand Strength, Stock Dips

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Crocs Inc. (CROX - Free Report) raised its 2021 revenue and adjusted operating margin guidance to reflect strength in the Crocs brand despite the ongoing supply-chain challenges. Meanwhile, it reiterated the initial view for 2022. Driven by the anticipated strength for the Crocs brand, the company reiterated its view of generating $5 billion in revenues by 2026 before including HEYDUDE revenues.

The company now estimates year-over-year revenue growth of 67% for 2021. Earlier, the company projected revenue growth of 62-65%. For the fourth quarter of 2021, it anticipates revenue growth of 42%.

The company now expects an adjusted operating margin of 30% for 2021, which reflects an improvement from the prior view of 28% and suggests a significant expansion from 18.9% reported in 2020. For the fourth quarter, the adjusted operating margin is estimated to be 28%. The company notes that it completed share repurchases of $1 billion in 2021.

For 2022, the company continues to expect revenue growth of more than 20% for the Crocs brand, excluding HEYDUDE. Additionally, it anticipates revenues of $700-$750 million from HEYDUDE in 2022. The company expects the 2022 gross margin to include an incremental $75 million of air freight compared with the prior year.

The company’s forecast for 2022 excludes revenues from the to-be-acquired HEYDUDE brand. Crocs expects to conclude the HEYDUDE transaction in first-quarter 2022, following the satisfaction of customary closing conditions and regulatory approvals. The company expects HEYDUDE to be immediately accretive to Crocs’ revenues, operating margins and earnings in 2022.

Management forecasts an adjusted operating margin of 25% for the Crocs brand, including air freight impacts. Earlier, the company anticipated an adjusted operating margin of 28%, excluding the impacts of air freight. Crocs anticipates an adjusted operating margin of 26% from HEYDUDE in 2022.

Although the company provided an upbeat view for 2021, it failed to impress investors, sending the stock down 2.8% on Jan 10. The stock was probably punished as investors remain more concerned and focused on the ongoing supply-chain headwinds, hurting retailers' sentiments.

What’s More?

Crocs’ shares have rallied 57.8% in the past year, driven by the increasing popularity of casual footwear as consumers switched from formal wear to more comfortable footwear. The Zacks Rank #1 (Strong Buy) company’s gain significantly outpaced the industry’s decline of 0.7% in the same period.

Sturdy consumer demand and brand strength have been contributing to Crocs’ robust growth story. The company’s focus on product innovation and marketing, digital capabilities, and tapping of growth opportunities in Asia also bode well.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Crocs’ timely actions helped mitigate the impacts of factory closures in Vietnam, its major manufacturing hub, and the global supply-chain bottlenecks in the third quarter. The company took immediate action to shift production, enhance factory throughput, leverage air freight, and strategically allocate units.

Crocs remains optimistic about navigating through the tough times. Notably, it is shifting production capacity to countries, namely China, Indonesia and Bosnia. Management notified that the company could ramp up factory production due to the limited inputs and simple configuration of products. Crocs is also planning to lower its dependency on the West Coast ports by adding East Coast transshipment capabilities to reach the key customers in the United States.

Stocks to Watch

We have highlighted some more top-ranked stocks from the same industry, namely Delta Apparel (DLA - Free Report) , Oxford Industries (OXM - Free Report) and Ralph Lauren (RL - Free Report) .

Delta Apparel, a Zacks Rank #1 stock at present, has a trailing four-quarter earnings surprise of 95.5%, on average. The DLA stock has gained 40.1% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Delta Apparel’s current financial-year sales and earnings per share suggests growth of 11.6% and 9.4%, respectively, from the year-ago period’s reported numbers.

Oxford Industries currently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 96.7%, on average. Shares of OXM have risen 29.6% in the past year.

The Zacks Consensus Estimate for Oxford Industries’ current financial-year sales and earnings per share suggests growth of 51.4% and 521.6%, respectively, from the year-ago period’s reported numbers.

Ralph Lauren currently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 86%, on average. Shares of RL have gained 0.9% in the past year.

The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and earnings per share suggests growth of 34.5% and 331.8%, respectively, from the year-ago period’s reported numbers. RL has an expected long-term earnings growth rate of 15%.