Crocs Inc. reported a significant hike in earnings in the fourth quarter as sales jumped 56.5 percent. The footwear manufacturer also forecasted first-quarter growth in the range of 40 percent to 50 percent.

Andrew Rees, chief executive officer, said, “We achieved record fourth-quarter revenues and profitability and finished 2020 with very strong brand momentum. We are looking forward to an exceptional 2021 with accelerated revenue growth as we invest in digital, China and our supply chain to support future growth. I am confident in our ability to continue to deliver outstanding profitability and strong cash flow. The Crocs brand has never been stronger, and I am very excited about our future.”

Fourth Quarter 2020 Operating Results

  • Revenues were $411.5 million, an increase of 56.5 percent from the same period last year, or 56.1 percent on a constant currency basis. E-commerce revenues grew 92.0 percent, wholesale revenues rose 52.2 percent, and retail comparable store sales increased 40.9 percent.
  • Gross margin of 55.7 percent increased 770 basis points compared to 48.0 percent in the same period last year. Adjusted gross margin of 56.0 percent rose 670 basis points from the same period last year.
  • SG&A expenses of $164.5 million increased from $117.9 million in the same period last year and SG&A as a percent of revenues improved by 480 basis points to 40.0 percent. Adjusted SG&A improved to 34.9 percent of revenues versus 44.4 percent for the same period last year.
  • Income from operations increased 673.5 percent to $64.6 million from $8.4 million for the same period last year. Operating margin rose to 15.7 percent from 3.2 percent. Adjusted income from operations rose 576.9 percent to $87.0 million and adjusted operating margin was 21.1 percent compared to 4.9 percent for the same period last year.
  • Diluted earnings per share increased to $2.69 compared to $0.29 for the same period last year. Adjusted diluted earnings per share were exceptional at $1.06 compared to $0.12 for the same period last year.

Earnings were well ahead of Wall Street’s consensus estimate of 82 cents. On January 11, Crocs updated guidance to indicated sales in the quarter had risen approximately 55 percent, up from the previous guidance range of 20 percent to 30 percent growth.

2020 Operating Results

  • Revenues were $1,386.0 million, an increase of 12.6 percent from the same period last year, or 13.5 percent on a constant-currency basis. E-commerce revenues grew 58.2 percent, wholesale revenues rose 5.6 percent and retail comparable store sales grew 21.2 percent.
  • Gross margin of 54.1 percent increased 400 basis points compared to 50.1 percent last year. Adjusted gross margin of 54.6 percent rose 350 basis points from last year.
  • SG&A expenses of $535.8 million increased from $488.4 million last year and SG&A as a percent of revenues improved by 100 basis points to 38.7 percent. Adjusted SG&A improved to 35.6 percent of revenues versus 39.5 percent for the same period last year.
  • Income from operations increased 66.4 percent to $214.1 million from $128.6 million last year. Operating margin rose 490 basis points to 15.4 percent. Adjusted income from operations rose 83.6 percent to $262.6 million, and the adjusted operating margin was 18.9 percent compared to 11.6 percent last year.
  • Diluted earnings per share increased 174.7 percent to $4.56 compared to $1.66 last year. Adjusted diluted earnings per share doubled to $3.22 compared to $1.61 for the same period last year.

2020 Geographic Summary

  • Americas: Revenues of $863.6 million increased 35.7 percent on a constant-currency basis.
  • Asia Pacific: Revenues of $278.5 million decreased 19.2 percent on a constant-currency basis.
  • EMEA: Revenues of $243.7 million increased 1.5 percent on a constant-currency basis.

2020 Channel Summary

  • Wholesale: Revenues increased 5.6 percent to $692.9 million compared to $656.2 million for the same period last year.
  • Retail: Revenues decreased 3.8 percent to $334.0 million compared to $347.4 million for the same period last year due to COVID-19 store closures.
  • E-commerce: Revenues increased 58.2 percent to $359.0 million compared to $227.0 million for the same period last year.
  • Digital sales grew 50.2 percent to 41.5 percent of total revenues versus 31.1 percent for the same period last year.
  • Direct-to-consumer comparable sales grew 39.2 percent compared to 16.0 percent for the same period last year.

Balance Sheet and Cash Flow

  • Cash and cash equivalents were $135.8 million as of December 31, 2020, up from $108.3 million as of December 31, 2019.
  • Inventories increased to $175.1 million as of December 31, 2020 compared to $172.0 million as of December 31, 2019.
  • Cash provided by operating activities rose 196.7 percent to $266.9 million during 2020 compared to $90.0 million during 2019.
  • Capital expenditures were $42.0 million during 2020 compared to $36.6 million during 2019.
  • Borrowings at December 31, 2020 were $180.0 million. Our liquidity position remains strong with $319.4 million in available borrowing capacity.

Share Repurchase Activity
During the fourth quarter of 2020, we repurchased 1.7 million shares of our common stock for $131.7 million, which included a $125 million accelerated share repurchase (“ASR”). For the full year, the company repurchased 3.2 million shares of our common stock for $170.8 million. Including the impact of the final ASR share delivery in January 2021, the average price for share repurchase in 2020 was $46.50 per share. At year-end, $337.8 million of its $1.0 billion share repurchase authorization remained available for future repurchases.

Financial Outlook | First Quarter 2021

  • Revenue growth to be between 40 percent and 50 percent compared to first quarter 2020 revenues of $281.2 million;
  • Non-GAAP adjustments of approximately $3 million related to distribution center investments that will impact gross margin; and
  • Adjusted operating margin to be between 17 percent and 18 percent.

Full Year 2021

  • Revenue growth to be between 20 percent and 25 percent compared to 2020 revenues of $1,386.0 million;
  • Non-GAAP adjustments of approximately $12 million to $15 million related to distribution center investments that will impact gross margin;
  • Adjusted operating margins to be between 18 percent and 19 percent;
  • GAAP tax rate of approximately 25 percent and a non-GAAP effective tax rate of approximately 16 percent to 18 percent; and
  • Capital expenditures of approximately $100 million to $130 million for supply chain investments to support growth.

Photo courtesy Crocs