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Crocs (CROX) Q3 Earnings & Revenues Beat on Solid Demand
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Crocs, Inc. (CROX - Free Report) posted impressive results for third-quarter 2023, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. Solid consumer demand for Crocs and HEYDUDE brands, supported by effective pricing actions, has helped the company experience impressive growth.
Both brands experienced market share gains during the back-to-school season. This resulted in a 17.8% increase in direct-to-consumer (“DTC”) sales in the third quarter.
We note that this Zacks Rank #3 (Hold) stock has gained 1.7% in the past month compared with the industry’s growth of 2.6%.
Image Source: Zacks Investment Research
Q3 in Detail
Crocs’ adjusted earnings of $3.25 per share surpassed the Zacks Consensus Estimate of $3.09 and advanced 9.4% year over year.
Revenues advanced 6.2% year over year to $1,045.7 million in the reported quarter and beat the Zacks Consensus Estimate of $1,027 million. On a constant-currency basis, revenues improved 5.8% year over year. The top line witnessed solid growth in the DTC channel and across all regions.
DTC revenues rose 17.8% (or 17.7% on a constant-currency basis) year over year. Wholesale revenues declined 3.6% (or 4.3% on a constant-currency basis) year over year in the quarter under review.
The Crocs brand’s revenues grew 11.6% year over year to $798.8 million, including an 18.5% increase in DTC revenues and a 4.5% rise in wholesale revenues. DTC comparable sales for the Crocs brand rose 15.3% in the third quarter. The Crocs brand’s revenues fared better than our estimate of $746.5 million.
The HEYDUDE brand’s revenues fell 8.3% year over year to $246.9 million in the third quarter. The decline was due to a 19.4% decline in wholesale revenues, partially offset by a 14.6% increase in DTC revenues.
Total revenues in North America were up 8% year over year to $480.7 million. This fared better than our estimate of $451.6 million. Revenues in the Asia Pacific rose 26.5% year over year to $175.2 million and surpassed our estimate of $146.2 million. The EMEALA region witnessed revenue growth of 8.3% to $142.8 million but missed our estimate of $148.7 million.
The adjusted gross profit rose 10.7% year over year to $600.4 million. The adjusted gross margin expanded 230 basis points (bps) to 57.4%. Adjusted SG&A expenses, as a percentage of revenues, increased 190 bps year over year to 29.1%.
Adjusted operating income grew 7.8% year over year to $295.9 million. The adjusted operating margin expanded 40 bps to 28.3% from the prior-year quarter’s 27.9%. Our model estimated an adjusted operating margin of 27% for the third quarter of 2023.
The company ended the quarter with cash and cash equivalents of $127.3 million, long-term borrowings of $1,918.7 million and stockholders’ equity of $1,200.3 million. The company’s liquidity position remains strong, with $563.7 million in available borrowing capacity as of Sep 30, 2023.
Management incurred a capital expenditure of $86.4 million for the nine months ended Sep 30, 2023. The company anticipates a capital expenditure of $125-$135 million in 2023 related to the expansion of its distribution capabilities, including the new HEYDUDE distribution center in Las Vegas, the implementation of new technology systems for HEYDUDE and the expansion of its corporate facilities to support growth.
Outlook
Management has updated its guidance for 2023. For the year, the company anticipates year-over-year revenue growth of 10-11%. This will result in revenues of $3,905-$3,940 million for 2023 at existing currency rates. The revised revenue guidance marks a decrease from the earlier mentioned 12.5-14.5% to $4,000-$4,065 million.
The adjusted operating margin is envisioned to be 27% compared with the previously communicated 27.5%. The GAAP tax rate is expected to be 23%, whereas the adjusted tax rate is likely to be 20%. Adjusted earnings are envisioned to be $11.55-$11.85 per share, down from the prior stated $11.83-$12.22 per share.
For fourth-quarter 2023, the company expects revenues to decrease 1-4% year over year to $903-$938 million. Adjusted earnings are forecast to be $2.05-$2.35 per share, with the adjusted operating margin likely to be 21%.
Bet Your Bucks on These 3 Hot Stocks
Here, we have highlighted three better-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , Guess?, Inc. (GES - Free Report) and lululemon athletica (LULU - Free Report) .
The Zacks Consensus Estimate for GIII Apparel’s current fiscal-year sales and earnings suggests growth of 2.4% and 14.7% from the year-ago period’s actuals. GIII has a trailing four-quarter earnings surprise of 526.6%, on average.
Guess? designs, markets, distributes and licenses casual apparel and accessories. The company flaunts a Zacks Rank #1 at present. The Zacks Consensus Estimate for Guess’ current fiscal-year sales and earnings suggests growth of 3.4% and 9.9% from the year-ago period’s reported figures. GES has a trailing four-quarter earnings surprise of 43.4%, on average.
lululemon, a yoga-inspired athletic apparel company, currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for lululemon’s current fiscal-year sales and earnings suggests growth of 18.1% and 20.5%, respectively, from the year-ago period’s reported figures. LULU has a trailing four-quarter earnings surprise of 6.8%, on average.
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Crocs (CROX) Q3 Earnings & Revenues Beat on Solid Demand
Crocs, Inc. (CROX - Free Report) posted impressive results for third-quarter 2023, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. Solid consumer demand for Crocs and HEYDUDE brands, supported by effective pricing actions, has helped the company experience impressive growth.
Both brands experienced market share gains during the back-to-school season. This resulted in a 17.8% increase in direct-to-consumer (“DTC”) sales in the third quarter.
We note that this Zacks Rank #3 (Hold) stock has gained 1.7% in the past month compared with the industry’s growth of 2.6%.
Image Source: Zacks Investment Research
Q3 in Detail
Crocs’ adjusted earnings of $3.25 per share surpassed the Zacks Consensus Estimate of $3.09 and advanced 9.4% year over year.
Revenues advanced 6.2% year over year to $1,045.7 million in the reported quarter and beat the Zacks Consensus Estimate of $1,027 million. On a constant-currency basis, revenues improved 5.8% year over year. The top line witnessed solid growth in the DTC channel and across all regions.
DTC revenues rose 17.8% (or 17.7% on a constant-currency basis) year over year. Wholesale revenues declined 3.6% (or 4.3% on a constant-currency basis) year over year in the quarter under review.
The Crocs brand’s revenues grew 11.6% year over year to $798.8 million, including an 18.5% increase in DTC revenues and a 4.5% rise in wholesale revenues. DTC comparable sales for the Crocs brand rose 15.3% in the third quarter. The Crocs brand’s revenues fared better than our estimate of $746.5 million.
The HEYDUDE brand’s revenues fell 8.3% year over year to $246.9 million in the third quarter. The decline was due to a 19.4% decline in wholesale revenues, partially offset by a 14.6% increase in DTC revenues.
Total revenues in North America were up 8% year over year to $480.7 million. This fared better than our estimate of $451.6 million. Revenues in the Asia Pacific rose 26.5% year over year to $175.2 million and surpassed our estimate of $146.2 million. The EMEALA region witnessed revenue growth of 8.3% to $142.8 million but missed our estimate of $148.7 million.
The adjusted gross profit rose 10.7% year over year to $600.4 million. The adjusted gross margin expanded 230 basis points (bps) to 57.4%. Adjusted SG&A expenses, as a percentage of revenues, increased 190 bps year over year to 29.1%.
Adjusted operating income grew 7.8% year over year to $295.9 million. The adjusted operating margin expanded 40 bps to 28.3% from the prior-year quarter’s 27.9%. Our model estimated an adjusted operating margin of 27% for the third quarter of 2023.
Crocs, Inc. Price, Consensus and EPS Surprise
Crocs, Inc. price-consensus-eps-surprise-chart | Crocs, Inc. Quote
Financial Details
The company ended the quarter with cash and cash equivalents of $127.3 million, long-term borrowings of $1,918.7 million and stockholders’ equity of $1,200.3 million. The company’s liquidity position remains strong, with $563.7 million in available borrowing capacity as of Sep 30, 2023.
Management incurred a capital expenditure of $86.4 million for the nine months ended Sep 30, 2023. The company anticipates a capital expenditure of $125-$135 million in 2023 related to the expansion of its distribution capabilities, including the new HEYDUDE distribution center in Las Vegas, the implementation of new technology systems for HEYDUDE and the expansion of its corporate facilities to support growth.
Outlook
Management has updated its guidance for 2023. For the year, the company anticipates year-over-year revenue growth of 10-11%. This will result in revenues of $3,905-$3,940 million for 2023 at existing currency rates. The revised revenue guidance marks a decrease from the earlier mentioned 12.5-14.5% to $4,000-$4,065 million.
The adjusted operating margin is envisioned to be 27% compared with the previously communicated 27.5%. The GAAP tax rate is expected to be 23%, whereas the adjusted tax rate is likely to be 20%. Adjusted earnings are envisioned to be $11.55-$11.85 per share, down from the prior stated $11.83-$12.22 per share.
For fourth-quarter 2023, the company expects revenues to decrease 1-4% year over year to $903-$938 million. Adjusted earnings are forecast to be $2.05-$2.35 per share, with the adjusted operating margin likely to be 21%.
Bet Your Bucks on These 3 Hot Stocks
Here, we have highlighted three better-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , Guess?, Inc. (GES - Free Report) and lululemon athletica (LULU - Free Report) .
GIII Apparel is a manufacturer, designer and distributor of apparel and accessories. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current fiscal-year sales and earnings suggests growth of 2.4% and 14.7% from the year-ago period’s actuals. GIII has a trailing four-quarter earnings surprise of 526.6%, on average.
Guess? designs, markets, distributes and licenses casual apparel and accessories. The company flaunts a Zacks Rank #1 at present. The Zacks Consensus Estimate for Guess’ current fiscal-year sales and earnings suggests growth of 3.4% and 9.9% from the year-ago period’s reported figures. GES has a trailing four-quarter earnings surprise of 43.4%, on average.
lululemon, a yoga-inspired athletic apparel company, currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for lululemon’s current fiscal-year sales and earnings suggests growth of 18.1% and 20.5%, respectively, from the year-ago period’s reported figures. LULU has a trailing four-quarter earnings surprise of 6.8%, on average.