Shares of Crocs Inc. got a lift on Tuesday after the shoe company beat expectations for the first quarter.
Altogether, the Broomfield, Colo.-based footwear company reported better-than-expected results for the first quarter, which included a 6 percent revenue increase from the prior year to a record $939 million. This was ahead of the $881.71 million expected by analysts surveyed by Yahoo Finance. Q1 adjusted diluted EPS was up 16 percent to $3.02, also ahead of the $2.23 expected by analysts.
The strong performance was driven by the Crocs brand, where revenues increased 14.6 percent to $744 million in the quarter. However, the Hey Dude brand continued to lag in Q1, with revenues down 17.2 percent to $195 million. The slowdown was present in both wholesale, which decreased 19.7 percent, and direct-to-consumer, which decreased 11 percent.
Given the slowdown in Hey Dude, Crocs Inc. now expects Hey Dude revenues to decline between 10 and 8 percent for the full year, down from its prior outlook of between flat and slightly up for the year.
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Crocs Inc. shares were down more than 1 percent before markets opened on Tuesday on the news of the diminished Hey Dude outlook, though they picked up through the course of the day.
“We are confident in the long-term opportunity for the Hey Dude brand and are excited to welcome a new Hey Dude President to fully unlock its future potential,” said Crocs Inc. chief executive officer Andrew Rees in a statement.
Crocs in November unveiled a retail strategy for Hey Dude 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. Results thus far have been slow to come, but there have been some good signs: The brand recently bolstered its leadership team with the hiring of Terence Reilly as Hey Dude’s president last month, a move lauded by analysts.
Despite weakness in Hey Dude, strong performance from the Crocs brand prompted the company to raise its full-year adjusted diluted earnings per share outlook to between $12.25 and $12.73, up from its prior guidance of between $12.05 and $12.50. Crocs Inc. reaffirmed its revenue guidance of between 3 and 5 percent for the year. Crocs brand revenues are now expected to grow between 7 and 9 percent.
Rees attributed the Crocs brand’s strong quarterly performance to “robust consumer demand both in North America and in international markets.” Crocs also recently underwent an executive shift when brand president Michelle Poole officially stepped down last week and was replaced by the company’s chief financial officer Anne Mehlman. This move was also met with praise from analysts when it was announced in March. And on Tuesday, the company named Susan Healy as its new CFO.
By geography, North America revenues for Crocs Inc. increased 9 percent to $383 million and international revenues increased 21.3% to $361 million.
Looking ahead to Q2, Crocs Inc. expects to see revenues grow between 1 and 3 percent over the prior year. The Crocs brand is expected to grow between 7 and 9 percent and Hey Dude sales are expected to be down between 19 and 17 percent. Adjusted diluted earnings per share is expected to be in the range of $3.40 and $3.55.
