Crocs, Inc. reported sales catapulted 64 percent in the first quarter and said it now expects sales for 2021 to climb between 40 percent and 50 percent. Earnings in the first quarter increased over six-fold.
Andrew Rees, chief executive officer, said, “Demand for the Crocs brand is stronger than ever with expected 2021 revenue growth of 40 percent to 50 percent. In the first quarter, we achieved record revenues and profitability, with growth in all regions and all channels. We have raised full-year guidance as we continue to see consumer demand for our product accelerate globally.”
First Quarter 2021 Highlights
- Record first-quarter revenues of $460.1 million increased 63.6 percent, or 60.5 percent on a constant currency basis, with growth in all regions and channels.
- Digital sales grew 75.3 percent to represent 32.3 percent of revenue versus 30.1 percent last year.
- Asia achieved strong double-digit growth of 26.2 percent, or 20.1 percent on a constant currency basis.
- Sandals revenues increased 17.1 percent to represent 17.3 percent of footwear sales.
- Operating income increased to $124.7 million from $20.8 million last year and operating margins expanded significantly to 27.1 percent versus 7.4 percent in 2020.
- Diluted earnings per share were $1.47 compared to $0.16 for the same period last year.
First Quarter 2021 Operating Results
- Revenues were $460.1 million, an increase of 63.6 percent from the same period last year, or 60.5 percent on a constant currency basis. Direct-to-consumer (“DTC”) grew 93.3 percent and wholesale revenues grew 50.1 percent.
- Gross margin of 55.0 percent increased 730 basis points compared to 47.7 percent in the same period last year. Adjusted gross margin of 55.2 percent rose 720 basis points from the same period last year.
- SG&A expenses of $128.5 million increased from $113.4 million in the same period last year and SG&A as a percent of revenues improved to 27.9 percent from 40.3 percent. Adjusted SG&A improved to 27.9 percent of revenues versus 38.7 percent for the same period last year.
- Income from operations grew to $124.7 million from $20.8 million for the same period last year, while operating margin expanded to 27.1 percent from 7.4 percent. Adjusted income from operations rose 376.9 percent to $125.7 million and adjusted operating margin was 27.3 percent compared to 9.4 percent for the same period last year.
- Diluted earnings per share increased 818.8 percent to a quarterly record of $1.47, as compared to $0.16 for the same period last year. Adjusted diluted earnings per share were $1.49, or 577.3 percent above the $0.22 for the same period last year.
- Net earnings reached $98.4 million, up from earnings of $11.1 million a year ago. Adjusted earnings were $99.5 million against $15.2 million a year ago.
Results were well above Crocs’ guidance that called for revenue growth in the quarter to be between 40 percent and 50 percent and adjusted operating margin to be between 17 percent and 18 percent. Non-GAAP adjustments of approximately $3 million related to distribution center investments were expected to impact gross margin. Wall Street’s consensus estimate had called for earnings of 88 cents on revenue of $416.0 million.
First Quarter 2021 Geographic Summary
- Americas: Revenues of $276.4 million increased 87.5 percent on a constant currency basis.
- Asia Pacific: Revenues of $82.6 million increased 20.1 percent on a constant currency basis.
- EMEA: Revenues of $101.1 million increased 41.0 percent on a constant currency basis.
First Quarter 2021 Channel Summary
- DTC: Revenues increased 93.3 percent to $170.1 million compared to $88.0 million for the same period last year.
- Wholesale: Revenues increased 50.1 percent to $290.0 million compared to $193.2 million for the same period last year.
Balance Sheet and Cash Flow
- Cash and cash equivalents were $255.9 million as of March 31, 2021, compared to $135.8 million as of December 31, 2020.
- Inventories increased to $196.5 million as of March 31, 2021, compared to $175.1 million as of December 31,
2020 and $195.8 million as of March 31, 2020.
- Capital expenditures during the three months ended March 31, 2021 were $8.0 million, compared to $16.1 million for the same period last year.
- Borrowings at March 31, 2021 were $341.1 million. During the first quarter, we issued $350.0 million of 4.250 percent senior notes due 2029 and repaid the balance on our senior revolving credit facility with a portion of the proceeds. The senior notes are reported on our balance sheet at face value, less unamortized issuance costs. Our liquidity position remains strong with $499.7 million in available borrowing capacity.
Share Repurchase Activity
During the first quarter and excluding the impact of the fourth quarter 2020 final accelerated share repurchase settlement in January 2021, we repurchased approximately 0.6 million shares of our common stock for $50.0 million at an average price of $76.95 per share.
As of March 31, 2021, $287.8 million of our $1.0 billion share repurchase authorization remained available for future repurchases. In April 2021, the Board approved an increase to our repurchase authorization such that $1.0 billion remains available today for future common stock repurchases.
Financial Outlook | Second Quarter 2021
With respect to the second quarter of 2021, Croc’s expects:
- Revenue growth to be between 60 percent and 70 percent compared to second quarter 2020 revenues of $331.5 million.
- Non-GAAP adjustments of approximately $3 million related to distribution center investments that will impact gross margin.
- Non-GAAP operating margin to be between 21 percent and 23 percent.
Full Year 2021
With respect to 2021, Crocs expects:
- Revenue growth to be between 40 percent and 50 percent compared to 2020 revenues of $1,386.0 million.
- Non-GAAP adjustments of approximately $12 to $15 million related to distribution center investments that will impact gross margin.
- Non-GAAP operating margin to be between 22 percent and 24 percent.
- GAAP tax rate and the non-GAAP effective tax rate of approximately 20 percent.
- Capital expenditures of approximately $100 to $130 million for supply chain investments to support growth.
Previously, Crocs had expected revenue growth to be between 20 percent and 25 percent and adjusted operating margin to be between 18 percent and 19 percent. Crocs had also an expected GAAP tax rate of approximately 25 percent and the non-GAAP effective tax rate of approximately 16 percent to 18 percent. The expectations for non-GAAP adjustments and capital expenditures remain the same as previous guidance.
Photo courtesy Crocs