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Here's Why Crocs (CROX) is Marching Ahead in the Industry
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Crocs, Inc. (CROX - Free Report) has exhibited a bullish run on the bourses in the past year. CROX has been gaining from solid consumer demand as well as broad-based growth across all markets, channels and categories for a while. Increased focus on product innovation and marketing, investments in digital capabilities and potential gains from the HEYDUDE buyout were also positives.
The stock has gained 5.1% in a year against the industry’s decline of 11.9%. Additionally, the Zacks Consensus Estimate for CROX’s current financial year’s sales and earnings suggests growth of 48.6% and 22.1%, respectively, from the year-ago period’s reported numbers.
Factors Narrating Crocs’ Growth Story
Clogs, sandals and Jibbitz act as key drivers for this one of the leading footwear brands. In fourth-quarter 2021, Clog sales remained strong, representing 80% of the total footwear revenues compared with 72% recorded in 2020. The Classic Clog franchise witnessed triple-digit sales growth, while sandals’ sales advanced 30%, driven by strength in personalizable Classic Slide and Classic Sandal.
CROX has been benefiting from its expanded digital and omnichannel capabilities for a while. Increased focus on the Crocs mobile app and global social platforms aided digital sales. Within digital, all regions witnessed double-digit increases from the year-ago period’s tallies. Gains from strategic collaborations, influencer campaigns plus digital and social marketing efforts remained upsides. As a result, fourth-quarter digital sales surged 48% year over year and accounted for 40.3% of revenues. The metric also soared an impressive 122% from fourth-quarter 2019 level.
Moving on, CROX’s recent acquisition of HEYDUDE, which sells lightweight, casual shoes and sandals for men, women and children, bodes well. With this buyout, Crocs looks to add value to its fast-growing footwear business. This is the second high-growth, highly profitable brand added to the Crocs portfolio.
Management believes that HEYDUDE’s consumer-insight-driven casual, comfortable and lightweight products perfectly fit its existing portfolio. The acquisition is likely to diversify Crocs’ brand portfolio and add to its digital penetration, as HEYDUDE already has a strong online presence. The acquisition is expected to be immediately accretive to CROX’s revenues, operating margins and earnings.
This presently Zacks Rank #3 (Hold) player expects HEYDUDE to generate revenues of $700-$750 million, including the period prior to the closing of the acquisition. Crocs expects HEYDUDE to deliver revenues of $620-$670 million on a reported basis, beginning Feb 17, 2022. Going forward, the HEYDUDE brand is likely to achieve $1 billion of revenues by 2024.
Driven by these factors, management issued an encouraging guidance for the first quarter and 2022. Crocs expects revenue growth (excluding HEYDUDE) of more than 20% for 2022. Adjusted earnings are envisioned to be $9.7-$10.25. For first-quarter 2022, revenues are projected to grow 31-37% to $605-$630 million. Excluding the HEYDUDE acquisition, revenues are likely to be $520-$535 million, reflecting organic growth of 13-16%.
Image Source: Zacks Investment Research
Hurdles to Overcome
Crocs is persistently witnessing operational headwinds related to the ongoing supply-chain challenges and last year’s adverse impacts of factory closures due to the COVID-19 pandemic. Port congestions, increasing material costs and a shortage of truck drivers remain concerns.
CROX notes that global inflation contributing to incremental freight costs, particularly air freight, will continue through the first half of 2022. Management expects air freight costs of $75 million to likely hurt gross margins in the first half of 2022, with air freight expenses of $30 million expected to be incurred in the first quarter of 2022.
Bottomline
Despite ongoing industry-wide supply-chain disruptions, we are optimistic that Crocs’ growth plans, including strategic buyouts, solid demand and online strength are likely to help the stock sustain its stellar show. Topping it, the VGM Score of A and a long-term earnings growth rate of 15% raise optimism.
Stocks to Consider
Some better-ranked stocks from the same industry are Gildan Activewear (GIL - Free Report) , Delta Apparel (DLA - Free Report) and Oxford Industries (OXM - Free Report) .
The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales and earnings suggests growth of 8.9% and 3.3% each from the year-ago period’s reported numbers, respectively.
Delta Apparel currently carries a Zacks Rank of 2. DLA has a trailing four-quarter earnings surprise of 95.5% on average.
The Zacks Consensus Estimate for Delta Apparel's current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the corresponding year-ago period's reported numbers.
Oxford Industries is currently Zacks #2 Ranked. OXM has a trailing four-quarter earnings surprise of 96.7%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 51.9% and 523.8%, respectively, from the corresponding year-ago period's reported numbers.
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Here's Why Crocs (CROX) is Marching Ahead in the Industry
Crocs, Inc. (CROX - Free Report) has exhibited a bullish run on the bourses in the past year. CROX has been gaining from solid consumer demand as well as broad-based growth across all markets, channels and categories for a while. Increased focus on product innovation and marketing, investments in digital capabilities and potential gains from the HEYDUDE buyout were also positives.
The stock has gained 5.1% in a year against the industry’s decline of 11.9%. Additionally, the Zacks Consensus Estimate for CROX’s current financial year’s sales and earnings suggests growth of 48.6% and 22.1%, respectively, from the year-ago period’s reported numbers.
Factors Narrating Crocs’ Growth Story
Clogs, sandals and Jibbitz act as key drivers for this one of the leading footwear brands. In fourth-quarter 2021, Clog sales remained strong, representing 80% of the total footwear revenues compared with 72% recorded in 2020. The Classic Clog franchise witnessed triple-digit sales growth, while sandals’ sales advanced 30%, driven by strength in personalizable Classic Slide and Classic Sandal.
CROX has been benefiting from its expanded digital and omnichannel capabilities for a while. Increased focus on the Crocs mobile app and global social platforms aided digital sales. Within digital, all regions witnessed double-digit increases from the year-ago period’s tallies. Gains from strategic collaborations, influencer campaigns plus digital and social marketing efforts remained upsides. As a result, fourth-quarter digital sales surged 48% year over year and accounted for 40.3% of revenues. The metric also soared an impressive 122% from fourth-quarter 2019 level.
Moving on, CROX’s recent acquisition of HEYDUDE, which sells lightweight, casual shoes and sandals for men, women and children, bodes well. With this buyout, Crocs looks to add value to its fast-growing footwear business. This is the second high-growth, highly profitable brand added to the Crocs portfolio.
Management believes that HEYDUDE’s consumer-insight-driven casual, comfortable and lightweight products perfectly fit its existing portfolio. The acquisition is likely to diversify Crocs’ brand portfolio and add to its digital penetration, as HEYDUDE already has a strong online presence. The acquisition is expected to be immediately accretive to CROX’s revenues, operating margins and earnings.
This presently Zacks Rank #3 (Hold) player expects HEYDUDE to generate revenues of $700-$750 million, including the period prior to the closing of the acquisition. Crocs expects HEYDUDE to deliver revenues of $620-$670 million on a reported basis, beginning Feb 17, 2022. Going forward, the HEYDUDE brand is likely to achieve $1 billion of revenues by 2024.
Driven by these factors, management issued an encouraging guidance for the first quarter and 2022. Crocs expects revenue growth (excluding HEYDUDE) of more than 20% for 2022. Adjusted earnings are envisioned to be $9.7-$10.25. For first-quarter 2022, revenues are projected to grow 31-37% to $605-$630 million. Excluding the HEYDUDE acquisition, revenues are likely to be $520-$535 million, reflecting organic growth of 13-16%.
Image Source: Zacks Investment Research
Hurdles to Overcome
Crocs is persistently witnessing operational headwinds related to the ongoing supply-chain challenges and last year’s adverse impacts of factory closures due to the COVID-19 pandemic. Port congestions, increasing material costs and a shortage of truck drivers remain concerns.
CROX notes that global inflation contributing to incremental freight costs, particularly air freight, will continue through the first half of 2022. Management expects air freight costs of $75 million to likely hurt gross margins in the first half of 2022, with air freight expenses of $30 million expected to be incurred in the first quarter of 2022.
Bottomline
Despite ongoing industry-wide supply-chain disruptions, we are optimistic that Crocs’ growth plans, including strategic buyouts, solid demand and online strength are likely to help the stock sustain its stellar show. Topping it, the VGM Score of A and a long-term earnings growth rate of 15% raise optimism.
Stocks to Consider
Some better-ranked stocks from the same industry are Gildan Activewear (GIL - Free Report) , Delta Apparel (DLA - Free Report) and Oxford Industries (OXM - Free Report) .
Gildan Activewear presently has a Zacks Rank #2 (Buy). GIL has a trailing four-quarter earnings surprise of 66.6%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales and earnings suggests growth of 8.9% and 3.3% each from the year-ago period’s reported numbers, respectively.
Delta Apparel currently carries a Zacks Rank of 2. DLA has a trailing four-quarter earnings surprise of 95.5% on average.
The Zacks Consensus Estimate for Delta Apparel's current financial year’s sales and earnings per share suggests growth of 11.9% and 10.1%, respectively, from the corresponding year-ago period's reported numbers.
Oxford Industries is currently Zacks #2 Ranked. OXM has a trailing four-quarter earnings surprise of 96.7%, on average.
The Zacks Consensus Estimate for Oxford Industries’ current financial year’s sales and earnings suggests growth of 51.9% and 523.8%, respectively, from the corresponding year-ago period's reported numbers.