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Crocs (CROX) is Keen on Product Innovation: On Track for Growth?
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Crocs Inc. (CROX - Free Report) has crafted a robust growth story over the years, driven by its focus on innovation and improving brand relevance. This is the key reason for the success of its namesake brand, which has gained significant market share over time. Notably, the Crocs brand grew revenues by 13.8% year over year in second-quarter 2022.
The Crocs brand continued to gain market share in North America, driven by sandals and product introductions. In the last reported quarter, its marketing efforts helped deliver newness and excitement to the brand, reaching customers who were not considered in the past.
Coming to innovation, the company has been diversifying its clog offering and growing sandals. It has witnessed significant success in its height-orientated Clog introductions, including the crush, mega-crush and the Siren. Moreover, growth at its recently launched Dylan, a more elevated and fashion-forward club, has been encouraging.
Coming to sandals, the company sees a great opportunity for expansion in the adjacent $30-billion global Sandal category, driven by its molded technologies, accessible price points and strong go-to-market solutions. Within the sandals category, Classic and Brooklyn continue to be the company’s leading sandal franchises.
CROX’s focus on innovation has been well-reflected in its share price, with the stock outperforming the industry. Shares of this Zacks Rank #3 (Hold) company have rallied 16.1% in the past year compared with the industry’s growth of 0.7%. The stock has also fared better than the sector’s rise of 9% in the same period.
Further optimism on the stock is reflected by its forward estimates, which suggest notable growth. The Zacks Consensus Estimate for CROX’s 2023 sales and earnings suggests growth of 12.8% and 10.8%, respectively, from the year-ago period’s reported numbers.
Image Source: Zacks Investment Research
HEYDUDE Holds Potential
The company’s acquisition of HEYDUDE (in February 2022) has been augmenting its fast-growing footwear business. With the addition of HEYDUDE’s consumer-insight-driven casual, comfortable and lightweight product offerings, Crocs has strengthened and expanded its product portfolio. The acquisition has added to the company’s digital penetration, as HEYDUDE already has a strong online presence.
It is worth noting that in the second quarter, HEYDUDE’s revenues advanced 3% year over year to $239.4 million. For 2023, the company expects revenues from the HEYDUDE brand to grow 14%-18% on a reported basis. Management also remains optimistic about HEYDUDE, which is likely to achieve its sales target of $1 billion in 2023.
Long-Term View
Driven by strong digital sales, improved market share for sandals, growth in Asia and innovative product and marketing, management expects to generate revenues of more than $5 billion by 2026. Management expects four times revenue growth in sandals by 2026. CROX sees long-term opportunities in Asia, primarily in China, which is the second-largest footwear market in the world.
Management expects revenue growth to witness a three-year CAGR of 25% and represent 24% of the total revenues in 2026. The company targets at least 50% of the total revenues to come from digital channels by the end of 2026.
Driven by strong revenue growth, the company anticipates improved profitability and cash flows through 2026. It expects the adjusted operating margin to be more than 26% and the annual free cash flow in excess of $1 billion by the end of 2026.
Hurdles on the Way
Crocs continues to witness rising costs, mainly attributed to costs related to the HEYDUDE acquisition. The persistence of higher costs may weigh on the company’s profitability in the near term. Although inflationary pressure has somewhat eased, rising interest rates have also been concerning for Crocs. For instance, in the second quarter, CROX’s interest expenses increased 30.6% on a year-over-year basis.
Key Picks
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely GIII Apparel Group (GIII - Free Report) , Guess (GES - Free Report) and Live Nation Entertainment (LYV - Free Report) .
The Zacks Consensus Estimate for GIII Apparel’s current financial year’s sales and earnings per share suggests growth of 8% and 14.7%, respectively, from the year-ago period’s reported figures. GIII has a trailing four-quarter earnings surprise of 526.6%, on average.
Guess has a trailing four-quarter earnings surprise of 43.4%, on average. It flaunts a Zacks Rank #1 at present. GES shares have risen 35.3% in the past year.
The Zacks Consensus Estimate for Guess’ current financial-year sales and earnings suggests growth of 3.7% and 9.9%, respectively, from the year-ago period's reported figures.
Live Nation has a trailing four-quarter earnings surprise of 34.6%, on average. It currently sports a Zacks Rank #1. Shares of LYV have risen 2.7% in the past year.
The Zacks Consensus Estimate for LYV’s current financial-year sales and earnings suggests growth of 21% and 57.8%, respectively, from the year-ago period's reported figures.
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Crocs (CROX) is Keen on Product Innovation: On Track for Growth?
Crocs Inc. (CROX - Free Report) has crafted a robust growth story over the years, driven by its focus on innovation and improving brand relevance. This is the key reason for the success of its namesake brand, which has gained significant market share over time. Notably, the Crocs brand grew revenues by 13.8% year over year in second-quarter 2022.
The Crocs brand continued to gain market share in North America, driven by sandals and product introductions. In the last reported quarter, its marketing efforts helped deliver newness and excitement to the brand, reaching customers who were not considered in the past.
Coming to innovation, the company has been diversifying its clog offering and growing sandals. It has witnessed significant success in its height-orientated Clog introductions, including the crush, mega-crush and the Siren. Moreover, growth at its recently launched Dylan, a more elevated and fashion-forward club, has been encouraging.
Coming to sandals, the company sees a great opportunity for expansion in the adjacent $30-billion global Sandal category, driven by its molded technologies, accessible price points and strong go-to-market solutions. Within the sandals category, Classic and Brooklyn continue to be the company’s leading sandal franchises.
CROX’s focus on innovation has been well-reflected in its share price, with the stock outperforming the industry. Shares of this Zacks Rank #3 (Hold) company have rallied 16.1% in the past year compared with the industry’s growth of 0.7%. The stock has also fared better than the sector’s rise of 9% in the same period.
Further optimism on the stock is reflected by its forward estimates, which suggest notable growth. The Zacks Consensus Estimate for CROX’s 2023 sales and earnings suggests growth of 12.8% and 10.8%, respectively, from the year-ago period’s reported numbers.
Image Source: Zacks Investment Research
HEYDUDE Holds Potential
The company’s acquisition of HEYDUDE (in February 2022) has been augmenting its fast-growing footwear business. With the addition of HEYDUDE’s consumer-insight-driven casual, comfortable and lightweight product offerings, Crocs has strengthened and expanded its product portfolio. The acquisition has added to the company’s digital penetration, as HEYDUDE already has a strong online presence.
It is worth noting that in the second quarter, HEYDUDE’s revenues advanced 3% year over year to $239.4 million. For 2023, the company expects revenues from the HEYDUDE brand to grow 14%-18% on a reported basis. Management also remains optimistic about HEYDUDE, which is likely to achieve its sales target of $1 billion in 2023.
Long-Term View
Driven by strong digital sales, improved market share for sandals, growth in Asia and innovative product and marketing, management expects to generate revenues of more than $5 billion by 2026. Management expects four times revenue growth in sandals by 2026. CROX sees long-term opportunities in Asia, primarily in China, which is the second-largest footwear market in the world.
Management expects revenue growth to witness a three-year CAGR of 25% and represent 24% of the total revenues in 2026. The company targets at least 50% of the total revenues to come from digital channels by the end of 2026.
Driven by strong revenue growth, the company anticipates improved profitability and cash flows through 2026. It expects the adjusted operating margin to be more than 26% and the annual free cash flow in excess of $1 billion by the end of 2026.
Hurdles on the Way
Crocs continues to witness rising costs, mainly attributed to costs related to the HEYDUDE acquisition. The persistence of higher costs may weigh on the company’s profitability in the near term. Although inflationary pressure has somewhat eased, rising interest rates have also been concerning for Crocs. For instance, in the second quarter, CROX’s interest expenses increased 30.6% on a year-over-year basis.
Key Picks
We have highlighted three better-ranked stocks from the Consumer Staple sector, namely GIII Apparel Group (GIII - Free Report) , Guess (GES - Free Report) and Live Nation Entertainment (LYV - Free Report) .
GIII Apparel currently sports a Zacks Rank #1 (Strong Buy). Shares of GIII have rallied 55.9% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial year’s sales and earnings per share suggests growth of 8% and 14.7%, respectively, from the year-ago period’s reported figures. GIII has a trailing four-quarter earnings surprise of 526.6%, on average.
Guess has a trailing four-quarter earnings surprise of 43.4%, on average. It flaunts a Zacks Rank #1 at present. GES shares have risen 35.3% in the past year.
The Zacks Consensus Estimate for Guess’ current financial-year sales and earnings suggests growth of 3.7% and 9.9%, respectively, from the year-ago period's reported figures.
Live Nation has a trailing four-quarter earnings surprise of 34.6%, on average. It currently sports a Zacks Rank #1. Shares of LYV have risen 2.7% in the past year.
The Zacks Consensus Estimate for LYV’s current financial-year sales and earnings suggests growth of 21% and 57.8%, respectively, from the year-ago period's reported figures.