Crocs (CROX, Financial) surprised investors with a third-quarter beat, posting an EPS of $3.60 and revenue of $1.06 billion. Despite these strong numbers, shares took a tumble, dropping nearly 18.5% on weak Q4 guidance. CEO Andrew Rees pointed to the Crocs brand's 8% growth, largely driven by international markets and direct-to-consumer channels, as proof of the brand's strength and resilience. Meanwhile, the HEYDUDE brand remains a challenge, as Crocs works to revitalize its relevance amid a tougher retail environment.
Rees admitted HEYDUDE's turnaround has been slower than expected, with the brand seeing a 17.4% drop in revenue and a revised forecast projecting a full-year decline of about 14.5%. While HEYDUDE's path forward is being recalibrated, Crocs is focused on bolstering its core brand, leveraging the Crocs brand's performance to maintain the lower end of its 3-5% annual growth target. This strategy lets Crocs tap into its cash flow and operational efficiencies to keep margins solid.
Looking ahead, Crocs expects modest Q4 growth from its core brand (around 2%), partially offsetting projected declines in HEYDUDE (down 4-6%). With its adjusted EPS guidance reaffirmed at $12.82 to $12.90 and a hefty $549 million share buyback authorization, Crocs is doubling down on shareholder value. Balancing two brands with different trajectories, Crocs is betting on a measured approach to build sustainable returns, eyeing an increasingly global footprint in casual footwear.
