Analysts Are Optimistic on Crocs Ahead of Q1 Earnings Amid Leadership Changes, Hey Dude Challenges
Analysts are optimistic about Crocs Inc. ahead of its first quarter earnings report on Tuesday amid recent leadership changes and uncertainty about Hey Dude‘s progress.
For now, most signs point to growth. The clog maker in February delivered revenues of nearly $4 billion in fiscal 2023, marking another record year for the company. Notably, revenues in North America, which has been a challenging region for shoe companies in the last few quarters, held strong in 2023 and increased 8.1 percent in the year.
Looking ahead to the first quarter, analysts say several factors suggest that Crocs will beat its outlook for the period. Crocs said in February it expects Q1 total revenues to be between down 1.5 percent and up 0.5 percent, with the Crocs brand growing between 6 and 8 percent. Hey Dude revenue is expected to be down between 20 and 23 percent. Adjusted diluted earnings per share is expected in the range of $2.15 and $2.25.
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“We remain constructive on Crocs brand growth potential for the remainder of 2024,” said Stifel analyst Jim Duffy in an April 28 note to investors. He called out upsides, like Crocs’ release calendar filled with new styles, silhouettes and licensed franchises as well as personalization and social media brand building in international markets. “Recent evidence of improving wholesale conditions add to this confidence,” he added.
Another potential positive for the Crocs brand: a refresh in its executive team. As of last week, Michelle Poole had stepped down from her role as Crocs brand president and was replaced by the company’s chief financial officer Anne Mehlman, a move met with praise from analysts when it was announced in March.
Meanwhile, Crocs has yet to see major results from its plan to revamp its Hey Dude brand, though analysts say progress is likely around the corner. After a few rough quarters, Crocs unveiled a retail strategy for Hey Dude in November based off of the current one in place for the Crocs brand, which involves strengthening strategic wholesale partnerships in the family channel, sporting goods sector, mall-based specialty channel and larger regional chains. It also means exiting accounts with smaller and less essential wholesale partners.
“Based on our checks, it still feels as though HeyDude has yet to regain their mojo, with wholesale partners not giving the brand prime floor space and continuing to discount the brand at a higher rate than we’d expect,” Wedbush analyst Tom Nikic said in a Friday note to investors, describing the brand as a “work-in-progress.”
“Going forward, we see reasons for the brand to reaccelerate,” he added. Among these reasons: easier compares to the prior year, higher selling prices, better inventories, product innovation and new store openings.
Hey Dude is also benefiting from a hot new hire in the brand president role. Terence Reilly rejoined Crocs Inc. last month as Hey Dude’s new president, marking his return to the company after he left his role as Crocs Inc.’s chief marketing officer to join the Stanley brand in 2020 as its president.
“Adding Terence Reilly as brand president — while a clear intermediate-to-longer-term positive — has raised investors’ near-term anxiety level during a pivotal time for Hey Dude to show stabilization,” wrote Baird Equity Research analyst Jonathan Komp in an April 29 note to investors. Looking ahead, Komp expects improved wholesale, product offerings and store openings to contribute to Hey Dude’s improvement in the second half of 2024.
Williams Trading analyst Sam Poser was a little more critical of Hey Dude’s near term growth potential and said that planned wholesale order increases in the second quarter will not offset expected weakness in the first half of the year.
“Hey Dude continues to pay the price for over-saturating the marketplace in early 2023,” Poser wrote in a mid-April note to investors. “We continue to believe that Hey Dude has significant revenue growth opportunities, but it’s going to take more time.”
For the full year of 2024, Crocs Inc. expects total revenues to grow between 3 and 5 percent growth.
