Crocs, Inc. delivered stellar results for the fourth quarter and year ended December 31 but warned that $40 million of orders would shift from the first into the second quarter of the current year due to pandemic-related transit delays.

As a result, Crocs expects revenues in the first quarter to be approximately $605 million to $630 million. The guidance implies growth in the range of 31 percent to 37 percent compared to first quarter 2021 revenues of $460.1 million but below Wall Street’s consensus estimate of $639.4 million. The guidance assumes its HeyDude acquisition closes in February 2022.

Revenues for the Crocs brand in the first quarter are expected to expand in the range of 13 percent to 16 percent in the first quarter.

Adjusted operating margin for the first quarter is expected to reach approximately 22 percent, including a roughly $30 million impact from air freight. The adjusted operating margin was 27.3 percent in the year-ago quarter.

Crocs had warned at the 2022 ICR Investor Conference in mid-January that the factory shutdowns in Vietnam last year, combined with the continued extended transit times, would impact supply and new product introductions for the first half of 2022. On Wednesday, the company reiterated its expectation that revenue growth for the Crocs brand would exceed 20 percent in 2022. However, shares were trading down $5.64, or 5.6 percent, to $95.59 in mid-day trading Wednesday due to first-quarter guidance coming in below expectations. Investors are also concerned about its ability to meet the brand’s 20 percent growth target for the full year as it faces difficult comparisons for the remaining three quarters.

On a conference call with analysts, Andrew Rees, Crocs’ CEO, said the shift in orders has the biggest impact in the EMEA region. He said the primary supply chain hurdle is transit disruptions.

Transit Disruptions Impact Crocs’ Supply
“The factories are back up and running,” said Rees. “They have been for some time, and we’re relatively pleased with their ramp up post-Chinese New Year. They’ve come back up to speed quickly. The delays that we see from Q1 into Q2 are transportation-related. And I would say it’s a combination of delays in loading, delays in transit and delays unloading. So that was a longer delay than we expected.”

He added, “As we look at our overall business, I think we’re confident in the amount of supply that we have and the ability to grow our supply base to meet our overall annual guidance. And it’s really due to transportation delays that continue to move around.”

Rees added that Crocs had not experienced cancellations due to the late shipments. He added, “The majority of retail partners have been incredibly understanding. I think they’re seeing this from lots of people right now, and we would not anticipate cancellations at this time.”

Crocs’ officials also said that the first quarter’s slower growth is not tied to the softening of demand for the Crocs brand. Anne Mehlman, EVP and CFO, said on the call, “It’s all related to timing. We’re not seeing any changes in underlying consumer demand for the brand.”

Fourth-Quarter Revenue Jumps 43 Percent
In the fourth quarter, revenues jumped 42.6 percent to $586.6 million. The results were in line with a forecast update provided on January 10. Before the update, implied guidance for the quarter was in the range of $519 million to $560 million.

Sales surged 43.5 percent hike on a constant-currency basis. On a two-year basis, compared for the pre-pandemic 2019 fourth quarter, revenues grew 123.1 percent.

Crocs sold 22.6 million pairs of shoes in the quarter, increasing from 19.7 percent over last year. Croc’s average selling price rose 18.9 percent to $25.71 due to price increases taken during the year, coupled with fewer promotions and discounts.

Direct-to-consumer (DTC), including retail and e-commerce, grew 44.5 percent and wholesale revenues grew 40.3 percent.

Americas Paces Regional Performance
By region, revenues in the Americas reached $469 million, up 51.2 percent from 2020 and 86.1 percent from the 2019 fourth quarter. The growth was led by digital, up 55.2 percent from 2020 and 244.5 percent on a two-year basis. DTC and wholesale increased 49.3 percent and 52.6 percent, respectively, year-over-year. Mehlman said Crocs’ broad-based performance in the Americas is “the direct result of meeting the consumer where they shop and driving relevance for innovative marketing.”

EMEA revenue in the quarter increased 22.5 percent to $60.5 million and gained 46.2 percent versus the 2019 fourth quarter. The region outperformed expectations as Crocs could secure more inventory than initially planned. By channel, DTC revenue increased 18.5 percent and wholesale grew 24.6 percent compared to 2020. DTC benefited from strong growth in e-commerce and retail, while wholesale benefited from a strong performance in brick-and-mortar. Mehlman said EMEA has benefitted from “improved brand relevance and consideration.”

In Asia, Q4 revenues were $57.1 million, up 10.3 percent from last year. The growth was driven equally by DTC and wholesale. South Korea and India continue to outperform. China’s COVID lockdowns impacted Q4 results but grew double-digits for the year, “and we remain confident in our long term plan,” said Mehlman.

Gross margin in the quarter of 63.4 percent and adjusted gross margin of 63.7 percent increased 770 basis points compared to the same period last year. Margins improved in all regions and channels, driven by increased prices, fewer promotions and discounts and a favorable product mix.

SG&A expenses climbed 28.9 percent year-over-year but were down as a percent of sales by 390 basis points to 36.1 percent. Adjusted SG&A was relatively flat compared to the prior year at 35.1 percent of revenues.

Income from operations surged 147.5 percent to $160.0 million, and operating margin rose to 27.3 percent from 15.7 percent for the same period last year. Adjusted income from operations rose 93.1 percent to $168.1 million, and the adjusted operating margin was 28.6 percent compared to 21.1 percent for the same period last year. Before the update provided on January 10, the adjusted operating margin had been guided to between 18.1 percent to 21.8 percent.

Net earnings fell to $154.9 million, or $2.57, from $183.3 million, or $2.69, a year ago due to a lower tax benefit in the latest period. Adjusted diluted earnings per share doubled to $2.15 compared to $1.06 for the same period last year.

2021 Revenues Vault 67 Percent
The fourth quarter capped off another impressive year that saw revenue expand 66.9 percent, or 65.2 percent on a constant-currency basis, to $2.31 billion. Adjusted EPS in 2021 more than doubled to $8.32 from $3.22.

“These exceptional results demonstrate the strength of the cross-brand and its resonance with consumers globally,” said Rees.

Calling out some highlights for the year, Rees said digital revenues, which combine e-commerce from owned and third-party sites, grew 48 percent over 2020 and 122 percent over 2019. Digital penetration increased on a two-year basis to 37 percent from 31 percent in 2019.

Adjusted operating margins expanded to 30 percent in 2021 from 19 percent in 2020.

Clogs sales were “particularly strong” in 2021, increasing to 80 percent of total footwear revenues versus 72 percent in 2020. Sales of the classic clog franchise increased triple-digits, driven by graphics and Lined, Hike and Adventure iterations.

Rees said the Classic Clog and Classic Lined Clog ranked as the #1 and #2 spots for U.S. holiday sales, according to data compiled by The NPD Group.

“We continued to deliver brand heat throughout the year with a pipeline of innovative collaborations, including a high-heel Crocs Madame with leading fashion house Balenciaga and a nature-inspired clog with Salehe Bembury,” said Rees. “We entered the metaverse with our first NFT, partnering with Parisian Label, Egonlab (in photos). In addition to global collaboration launches with Justin Bieber, Pleasures, Palace, and more, we saw great momentum with regional collaborations such as influencers Never family in China, iconic footwear retailer Atmos Pink in Japan, and Vladimir Cauchemar in Europe.”

Sandals grew nearly 30 percent, driven by strong performance in the personalizable classic slide and classic sandal, particularly in the Americas. Strong growth in sandals was also seen across other core items, including the Crocsband, Kandee flips, and the Brooklyn franchise.

Jibbitz delivered “another outstanding year,” with sales up almost 150 percent. Global penetration reached 7 percent versus 5 percent the prior year.

“Our product strategy continues to resonate with consumers globally, giving us confidence in our $5 billion revenue target for the Crocs brand we outlined at our investor day in September,” said Rees.

For Full Year 2022, Crocs Expects:

  • Revenue growth for the Crocs brand, excluding HeyDude, to exceed 20 percent compared to 2021;
  • Revenues for HeyDude to be approximately $700 million to $750 million, including the period before the closing of the acquisition and $620 million to $670 million on a reported basis;
  • Gross margin to include an incremental $75 million of air freight in the first half of 2022;
  • Adjusted operating margin to be approximately 26 percent;
  • Non-GAAP adjustments of $60 million in SG&A costs, primarily associated with the HeyDude acquisition and an additional $75 million of non-cash costs in the cost of sales, primarily related to the writeup of HeyDude inventory costs to fair market value at the close of the acquisition; and
  • Adjusted diluted earnings per share of $9.70 to $10.25.

Photos courtesy Crocs x Egonlab