Crocs, Inc. (CROX) CEO Andrew Rees attempted to balance the strength of the company’s second-quarter results with an outlook and a marketplace reality check that acknowledged clear warning signs ahead for the company’s two brands, Crocs and HeyDude. But that balance tipped to the dark side on Thursday, August 7, as the market focused heavily on the risks ahead for the company.

CROX shares fell more than 29 percent to close at $74.39 on Thursday, August 7.

As reported by SGB Media earlier on Thursday morning, CROX has chosen to focus on managing expenses, including the $50 million in cost savings already implemented, reducing inventory receipts, and pulling back on promotional activity to protect brand health in the marketplace going forward. The implication in the company’s initial earnings release is that CROX is willing to forgo top-line growth in the short term in favor of managing expenses and inventories, while limiting the negative effects that promotional activity has on brand heat.

During the company’s quarterly conference call with analysts, Rees also focused on some key headwinds ahead, including a consumer shift to athletic footwear silhouettes and the pullback in discounting in the U.S. market, which was defined as a revenue headwind but a gross margin and, ultimately, an EBIT potential [tailwind].

Rees said they do see that athletic trend in the marketplace while suggesting the company can combat that shift in the long term.

“We know that is a cyclical trend. And as we look at some key athletic events coming up, we do think that will persist for a while,” the CEO noted. “You’ve got the World Cup next year. You have the L.A. Olympics in a couple of years. And I think the athletic brands are building innovation into that, which they typically do. So, that’s a little bit of a headwind. I think we can fight that headwind in the long term.”

Rees said the CROX team also knows that the [Crocs] brand is well-positioned against pre- and post-sport. “So I think athletic headwind is providing some pressure on open-to-buy, combined with the consumer uncertainty of that very broad consumer base,” he added.

On the discounting pullback, Rees commented, “We think that’s important to do that because as we looked at the trajectory and the discounting over time, we saw it increasing, and we think that is detrimental to the long-term health of the brand. So that’s really, I think, when you kind of look at the North American market.”

Looking at the current operating environment, Rees said they see the U.S. consumer behaving cautiously when it comes to discretionary spending.

“They are faced with current and implied future price increases, which we think have the potential to be a further drag on an already “choiceful” consumer,” he explained. “Against this backdrop, our retail partners are acting more carefully and reducing their open-to-buy dollars in future seasons.”

However, the CEO stated that they are not trying to manage their business quarter-to-quarter, reminding participants on the call that the company had a solid first half of the year, with its brands driving strong gross profit and cash flow.

But he also acknowledged that the path ahead may present roadblocks or headwinds for the business.

“The current environment in the second half is concerning, and we see that clearly reflected in retail order books,” Rees shared. “We strongly believe this is a time to make bold decisions for the future to sustain and advance our durable cash flow model. As a result, we have chosen to amplify certain measures in the second half of the year to protect brand health and profitability.”

For the Crocs Brand, in addition to adjusting forward receipts, he said they pulled back on promotional activity across the Direct channels starting in May.

“While this has and will continue to impact our top line, we see this as an opportunity to drive margin dollars over time, support continued cash flow generation and tighten brand control,” he explained.

For the HeyDude Brand, he said they accelerated actions in the channel to support a clean and refreshed marketplace. This resulted in the company making the decision to take back additional aged inventory and ensure more of the brand’s [retail] partners are reset with current product lines.

“This will create further headwinds to sales volume over the next several quarters,” Rees suggested.

“From an expense perspective, we’ve already actioned $50 million of cost savings and are identifying further cost savings opportunities,” he outlined. “As it relates to inventory, we’ve opted to plan our business conservatively, proactively pulling back on receipts across both brands for the second half, primarily in the U.S.”

Rees reminded the call participants that over the last three years, CROX has made “significant progress” in diversifying the business, which he said will serve as “a strong foundation” to enable long-term sustainable growth.

“One, we’ve moved from one brand to a two-brand enterprise, fortifying our leadership within the casual footwear segment,” he detailed. “Two, we’ve diversified our clog offering and have six major franchises that make up the majority of our clogs’ business.” Additionally, he said the company has developed strong sandals and personalization pillars that offer unique wearing occasions and enable self-expression.

“Three, we’ve accelerated our international growth business, which has grown from 38 percent of Crocs Brand sales in 2022 to 52 percent in the second quarter. Collectively, this diversification should fuel durable long-term growth for years to come,” Rees suggested.

Second Quarter 2025 Revenues
Consolidated revenues were $1.15 billion in the second quarter, an increase of 3.4 percent, or 2.7 percent on a constant-currency (cc) basis.

  • DTC (direct-to-consumer) revenues grew 4.0 percent, or 3.4 percent cc, year-over-year (y/y).
  • Wholesale revenues increased 2.8 percent (+2.0 percent cc) year-over-year.

Brand Summary

Crocs Brand
Crocs brand revenues increased 5.0 percent year-over-year (y/y) to $960 million, or +4.2 percent y/y on a constant-currency (cc) basis.

“For the Crocs Brand, all of our key product pillars, clogs, sandals and Jibbitz Charms grew in the second quarter,” Rees expanded. “Clog iterations and emerging franchises drove growth within the clog category, including Echo, Bae, and InMotion. These results exemplify that when we deliver new innovation with clear storytelling through our marketing channels, the consumer responds with strong engagement.”

Rees said the Crocs brand saw notable strength in Q2 across its style franchises, which include the Brooklyn, Getaway and Miami. “As we moved into the summer season, the Miami went viral on TikTok, and we were chasing demand. Our consumer is responding well to neutrals and new materialization, including glitter and patent finishes,” he added. “As we look forward, the success of these three franchises is translating into shelf space gains and we’re adding new collections such as a Soho sandal next spring.”

Within personalization, Rees said Jibbitz Charms’ growth continues to be driven by distribution expansion in the company’s international markets, improved in-store presentation, and success around elevated Charms.

“We remain laser-focused on our digitally led social-first marketing playbook, as this is a key ingredient in sustaining brand heat. In addition to bringing back franchise favorites like Cars, Pokémon and Minecraft, partnerships were also standouts in the quarter,” he continued.

Rees said the plan is to continue to expand social commerce and live streaming platforms globally, driving new growth opportunities.

“We continue to lean into social commerce as consumers more frequently start and end their shopping journeys on social platforms. During the quarter, Crocs remained the No. 1 footwear brand on TikTok Shop in the U.S., and we recently launched on this platform in the U.K., where results have been strong out of the gate,” the CEO said.

“In Asia, clog personalization and hype continue to resonate well,” Rees added. “Outside of clogs, sandals continue to yield strong results, providing new first versatile wearing occasions for our consumer.”

Brand Channel Trends

  • Crocs brand DTC revenues increased 3.4 percent (+2.7 percent cc) y/y to $495 million.
  • Crocs brand Wholesale revenues increased 6.8 percent (+5.9 percent cc) y/y to $465 million.

Crocs Brand Geography Trends
Crocs brand North America revenues decreased 6.5 percent (-6.4 percent cc) y/y to $457 million. Rees pointed to the pull-back on discounting in the DTC channels, most notably on clog, as the primary reason for the decline.

“We continue to see sandals as a growth vehicle increasing double digits in the quarter as we further diversify our business,” he continued.

“Last week, we held the grand opening of our newest retail concept in SoHo, New York,” Rees said. “This store houses our largest personalization experience to date, with expanded and upgraded Jibbitz Charms opportunities. In addition to our mainline product, consumers can find New York exclusive products as well, as a dedicated assortment of elevated EXP product line with dynamic digital storytelling.”

Crocs brand International revenues increased 18.1 percent (+16.4 percent cc) y/y to $502 million.

Brand growth in the quarter was attributed to the International business, which was led by the DTC channel. The International business represented more than half of Crocs’ brand revenue in the second quarter.

“In China, we reported another quarter of strong revenue growth in excess of 30 percent, Rees continued. “During the quarter, [the] Crocs Brand outperformed during mid-season festival, placing Crocs among the leading women’s footwear brands on both Tmall and Douyin. We’re deepening our connections with consumers through our roster of locally relevant celebrities and KOLs, including brand ambassador and actress, Bai Lu and actor TJC.”

Rees said India experienced double-digit revenue growth in the quarter, driven by outsized consumer demand across the classic clog and sandal franchises. “We welcomed Rashmika Mandanna as our first brand ambassador in India, and her inaugural Instagram post garnered over 400 million views,” he added.

Japan reportedly “grew nicely” during the quarter, and Western Europe continued to “perform strongly,” led by France and Germany.

HeyDude Brand
At HeyDude, where Rees is currently serving as brand president in addition to his full-time duties, brand revenues decreased 3.9 percent (-4.2 percent cc) y/y to $190 million.

HeyDude brand DTC revenues increased 7.6 percent (+7.5 percent cc) to $90 million. Wholesale revenues decreased 12.4 percent y/y to $100 million, or 12.8 percent on a constant-currency basis.

Rees said the brand has been focused on three core pillars of its strategy: One, ignite the HeyDude community. Two, drive the core and add more. And three, prioritize brand health as they stabilize the North America market.

“First, we’ve continued to ignite the HeyDude community. Over the past 12 months, we’ve been focused on speaking to a new female consumer while not losing sight of our core consumer,” he explained. “The cumulative impact of our marketing efforts over this period has resulted in an increase in HeyDude awareness to 35 percent in North America.”

In addition to an uptick in awareness, he said they have also seen improvement in consideration and purchase intent.

“With these advancements, HeyDude is now poised to further engage our core consumer,” Rees said.

He talked about the June launch of the HeyDude Country marketing campaign.

“This campaign is rooted in authenticity and plays into several of our brand affinities, including music, pre- and post-sport and travel,” he offered. “We’re excited about the future of this campaign and its broad appeal to our existing core consumer as well as new HeyDude fans, both him and her.”

Second, he said they are building the core and adding more.

“During the quarter, we iterated our icons, the Wally and the Wendy for color, materialization and partnerships,” he said. “In June, we leveraged our icon to release the HeyDude x Pabst Blue Ribbon collection, which sold out on our own dot-com. We also partnered with Margaritaville to release a collaboration featuring our Hey2O collection, which speaks to the core HeyDude consumer. Lastly, we launched the Paul Pro, an elevated iteration of our best-selling Paul silhouette at an $80 price point.”

Regarding the third strategic pillar for HeyDude, Rees stated that they continue to prioritize brand health as they stabilize the North American market and lay the groundwork for future international growth.

“We were pleased by the continued growth of our direct-to-consumer channel, up 7 percent in the quarter,” Rees noted. He said this was supported by new store openings and strong performance on TikTok.”

Rees said they have also identified further opportunities to more rapidly reset the North America business.

“We have focused our efforts against two primary actions,” he began. “One, we pulled back on the bottom of the funnel performance marketing investment to enable a more profitable digital business. And two, we’ve initiated incremental returns and marked our allowances to our retailers to improve the health of our inventory in the marketplace.”

He said this will simultaneously elevate the brand’s presentation at wholesale.

“While these measures will have a meaningful impact on the second half performance across both channels, we feel that they will stabilize the business more quickly,” he suggested.

Second Quarter 2025 Operating Results

  • Gross margin, on a reported and adjusted basis, grew 30 basis points to 61.7 percent of sales in Q2, compared to 61.4 percent in Q2 2024.
  • Selling, general, and administrative expenses (SG&A) of $1,136 million increased 219.0 percent from $356 million in Q2 2024, and represented 98.9 percent of revenues compared to 32.0 percent. The increase in SG&A is largely driven by noncash impairment charges related to the indefinite-lived HeyDude trademark and HeyDude Brand reporting unit goodwill of $430 million and $307 million, respectively, during the three months ended June 30, 2025.
    • Adjusted SG&A of $399 million increased 12.1% from $356 million and represented 34.7 percent of revenues compared to 32.0 percent.
  • Loss from operations of $428 million decreased 231.2 percent from income from operations of $326 million, resulting in operating margin loss of 37.2 percent compared to 29.3 percent. The loss from operations is driven by asset impairments.
    • Adjusted income from operations of $309 million decreased 5.0 percent y/y from $326 million in Q2 2024, resulting in Adjusted operating margin of 26.9 percent in Q2, compared to 29.3 percent in Q2 2024.
  • Diluted loss per share of $8.82 in Q2 compared to diluted earnings per share of $3.77 in Q2 2024. The loss per share was said to be driven by asset impairments.
    • Adjusted diluted earnings per share of $4.23 compared to $4.01 per diluted share in Q2 2024.

Balance Sheet and Cash Flow
(June 30, 2025, as compared to June 30, 2024)

  • Cash and cash equivalents were $201 million compared to $168 million.
  • Inventories were $405 million compared to $377 million.
  • Total borrowings were $1,379 million compared to $1,530 million.
  • Capital expenditures were $32 million compared to $33 million.

“Our strong cash flow generation enabled us to return shareholder value through $133 million in share repurchases and $105 million in debt paydown,” Rees noted.

CROX repurchased approximately 1.3 million shares for $133 million at the average share price of $102.24. At quarter-end, approximately $1.1 billion of share repurchase authorization remained available for future repurchases.

Tariffs
Company CFO Susan Healy noted that last week the U.S. extended the pause period on a series of incremental tariffs on countries in which the company source products.

“While we can’t predict future tariff changes, we are planning our business at the current rates,” she noted. “The impact from these incremental rates equates to approximately $40 million in the second half of 2025 and approximately $90 million on an annual basis, based on our current sourcing mix.”

Third Quarter 2025 Outlook
Crocs, Inc. stated in its earnings release that, due to the continued uncertainty surrounding evolving global trade policies and related consumer pressures, the company will only provide third-quarter guidance.

For the third quarter of 2025, CROX expects revenues to be down approximately 11 percent to 9 percent compared to the third quarter of 2024, at currency rates as of August 4, 2025.

“This revenue range is based on the visibility we have to orders from our wholesale partners, a reduction of discounts in our Crocs DTC channels, the pullback of performance marketing for HeyDude, the incremental cleanup actions we have elected to take for HeyDude as well as the potential range of outcomes against a weakening U.S. consumer backdrop,” Healy explained.

“Within this range, we expect the Crocs Brand to be down mid-single digits, led by declines in North America, offset in part by growth in international. This includes our expectation that the second half wholesale environment will be challenging for both brands based on the visibility we have in our current order books,” she continued.

Adjusted operating margin of approximately 18 percent to 19 percent, including an anticipated negative impact of approximately 170 basis points from announced and pending tariffs.

“We plan to continue to buy back stock and pay down debt while remaining within our target net leverage range of 1x to 1.5x,” the CFO said. “Based on the current environment, we are rapidly actioning additional cost-saving measures across the enterprise in Q3.”

Image courtesy Crocs / Crocs, Inc.