Crocs Inc. reported earnings improved significantly in the second quarter as revenues grew 93 percent and 88 percent on a currency-neutral basis. The company raised its sales growth outlook for the year to 60 to 65 percent, up from 40 to 50 percent previously.
“We continue to see strong consumer demand for the Crocs brand globally. On the back of record second-quarter results and continued momentum, we are raising our full-year 2021 guidance,” said Andrew Rees, Chief Executive Officer. “We are also committing to net zero emissions by 2030, enabling us to provide ‘comfort without carbon’ to our customers worldwide. I believe we can deliver sustained, highly profitable growth while having a positive impact on our planet and our communities.”
Second Quarter 2021 Highlights
- Record revenues of $640.8 million increased 93.3 percent or 88.4 percent on a constant-currency basis as compared to 2020.
- Revenue growth was strong in all regions, with the Americas up 135.6 percent, Asia Pacific up 27.1 percent, and Europe, Middle East, and Africa (“EMEA”) up 52.6 percent on a constant-currency basis versus prior year.
- Digital sales grew 25.4 percent to represent 36.4 percent of revenue versus 56.1 percent and 32.6 percent of revenue in 2020 and 2019, respectively.
- Direct-to-consumer (DTC) sales grew 78.6 percent compared to 2020 and 86.4 percent compared to 2019, to represent 52.0 percent of second-quarter revenues.
- Operating income more than tripled to $195.3 million as compared to 2020 and operating margins expanded to 30.5 percent.
Second Quarter 2021 Operating Results
- Revenues were $640.8 million, an increase of 93.3 percent from the same period last year, or 88.4 percent on a constant-currency basis. DTC revenues grew 78.6 percent and wholesale revenues grew 112.1 percent.
- Gross margin of 61.7 percent increased 740 basis points compared to 54.3 percent in the same period last year. Adjusted gross margin of 61.8 percent rose 660 basis points compared to the same period last year.
- SG&A expenses of $199.9 million increased from $123.3 million in the same period last year and SG&A as a percent of revenues improved to 31.2 percent from 37.2 percent. Adjusted SG&A improved to 31.2 percent of revenues versus 33.0 percent for the same period last year.
- Income from operations grew to $195.3 million from $56.6 million for the same period last year, while the operating margin expanded to 30.5 percent from 17.1 percent. Adjusted income from operations rose 166.1 percent to $196.4 million and the adjusted operating margin was 30.7 percent compared to 22.3 percent for the same period last year.
- Diluted earnings per share were $4.93, as compared to $0.83 for the same period last year. Adjusted diluted earnings per share were $2.23, up $1.22 compared to $1.01 for the same period last year.
In reporting first-quarter results, Crocs had expected second-quarter revenue growth to be between 60 percent and 70 percent and non-GAAP operating margin to be between 21 percent and 23 percent. Wall Street’s consensus estimates had called for earnings on an adjusted basis of $1.60 on revenue of $539 million,
Second Quarter 2021 Geographic Summary
- Americas: Revenues of $405.7 million increased 135.6 percent on a constant-currency basis.
- Asia Pacific: Revenues of $126.8 million increased 27.1 percent on a constant-currency basis.
- EMEA: Revenues of $108.3 million increased 52.6 percent on a constant-currency basis.
Second Quarter 2021 Channel Summary
- DTC: Revenues increased 78.6 percent to $333.4 million compared to $186.7 million for the same period last year.
- Wholesale: Revenues increased 112.1 percent to $307.3 million compared to $144.9 million for the same period last year.
Balance Sheet and Cash Flow
- Cash and cash equivalents were $197.9 million as of June 30, 2021, compared to $135.8 million as of December 31, 2020.
- Inventories increased to $209.1 million as of June 30, 2021, compared to $175.1 million as of December 31,
2020 and $146.8 million as of June 30, 2020.
- Capital expenditures during the six months ended June 30, 2021 were $21.3 million, compared to $24.3 million for the same period last year.
- Borrowings at June 30, 2021 were $386.4 million, including $350.0 million of senior notes issued in March 2021. Crocs’ liquidity position remains strong with $454.7 million in available borrowing capacity.
Share Repurchase Activity
- During the second quarter, Crocs executed a $300.0 million accelerated share repurchase whereby Crocs repurchased approximately 2.9 million shares of Crocs common stock at an average price of $103.79 per share.
Financial Outlook | Third Quarter 2021
- Revenue growth to be between 60 percent and 70 percent compared to third quarter 2020 revenues of $361.7 million.
- Non-GAAP adjustments of approximately $3 million related to distribution center investments will negatively impact gross margin.
- Non-GAAP operating margin to be between 24 percent and 26 percent.
Full Year 2021
- Revenue growth to be between 60 percent and 65 percent compared to 2020 revenues of $1,386.0 million.
- Non-GAAP adjustments of approximately $8 to $10 million related to distribution center investments that will negatively impact gross margin.
- Non-GAAP operating margin of approximately 25 percent.
- Non-GAAP effective tax rate of approximately 23 percent, excluding a GAAP tax credit of $175.7 million.
- Capital expenditures of $80 to $100 million for supply chain investments to support growth.
In reporting first-quarter results, Crocs said it expected revenue growth for the year between 40 percent and 50 percent and non-GAAP operating margin to be between 22 percent and 24 percent.
Photo courtesy Crocs