Casual footwear maker Crocs Inc. (NASDAQ: CROX) reported solid Q2 2024 results, but shares initially sold off. The maker of iconic clog-style shoes made from its proprietary Croslite foam material achieved record results, but investors were disappointed by its conservative in-line guidance for the year. The company is focusing on growing its international footprint as its penetration in the United States may be saturated.
Crocs operates in the consumer discretionary sector, competing with footwear makers like Nike Inc. (NYSE: NKE), Skechers U.S.A. Inc. (NYSE: SKX), and Deckers Outdoor Co. (NYSE: DECK).
Crocs Carves Its Own Niche in Casual Footwear
Crocs' unique shoes have often been imitated but never duplicated. Its Croslite foam material is the technology, but its bright, bold, and quirky aesthetic has carved it a niche of its own. Originally used by boaters, the comfortable shoes have been adopted by healthcare workers who are on their feet all day. Crocs enjoys the benefit of viral user-created content that showcases the versatility and quality of its shoes. Crocs has added sandals to its product lineup. HEYDUDE is its woven fabric sandal shoe brand with the goal of opening 30 physical outlet locations in 2024.
Crocs is Using Its Branding Strategy to Grow Internationally
International expansion remains a top priority for Crocs. Using its branding strategy, the company has taken advantage of cultural influences to connect with the younger demographic. Crocs capitalizes on themes like Korean K-Pop (Aespa), Japanese manga (Naruto), and European luxury fashion through collaborations with characters, celebrities, and influencers. Its Q2 2024 results saw international sales grow 22% YoY, with China seeing 70% YoY growth.
CROX Rebounds Back into the Descending Triangle
The daily candlestick chart for CROX illustrates a descending triangle breakdown pattern triggered by its Q2 2024 earnings release. CROX formed a breakdown through its flat-bottom lower trendline support at $123.62 and fell to a low of $112.50. However, buyers swooped up shares vigorously in the following days, driving shares back up into the triangle range and testing the descending upper trendline resistance at $132.27. The daily relative strength index (RSI) is rising to the 48-band.
Crocs Reports a Solid Second Quarter 2024 Earnings Report
On Aug. 1, 2024, Crocs reported record Q2 2024 EPS of $4.01 versus $3.55 consensus estimates, which beat by 46 cents. Revenues rose 3.6% YoY to $1.11 billion, which also beat $1.10 consensus estimates. Direct-to-consumer (DTC) revenues rose 8.9% YoY, while wholesale revenue fell 1.3% YoY. Gross margin improved to 61.4%, up 350 basis points from 57.9%. Selling, general and administrative (SG&A) rose 17.6% to $303 million, representing 32% of revenues. The HEYDUDE brand revenues fell 17.5% YoY to $198 million. DTC channel revenues fell 7.6% to 84 million. Wholesale revenues fell 23.5% YoY to $114 million.
Crocs Continues to Trim Down Debt
Crocs repaid $200 million of debt. The company bought back 1.2 million shares for $175 million. There is still $700 million of stock buyback authorization remaining for future buybacks. The company closed the quarter with $168 million in cash and cash equivalents. Inventories fell to $377 million, down from $436 million. Total borrowings dropped to $1.53 billion, down from $2.027 billion.
Crocs CEO Andrew Rees commented, "Based on the strength of our second quarter, we are lifting our operating margin and earnings per share outlook for the fiscal year while maintaining our revenue guidance. Our terrific cash flow generation provides us the flexibility to reinvest in our business, pay down debt and repurchase shares."
Crocs Issues Mixed Guidance
Crocs has set modest expectations for Q3 2024, projecting revenue changes ranging from a decrease of 1.5% to an increase of 0.5% YoY. Crocs brand revenue is expected to grow 3% to 5% YoY. HEYDUDE brand revenue is expected to fall 15% to 14% YoY. The adjusted operating margin is expected to be around 24.5%. EPS is expected to be between $2.95 and $3.10.
Crocs expects a full-year 2024 EPS of $12.45 to $12.90 versus a consensus estimate of $12.64. Revenues are expected to grow 3% to 5% YoY to $4.08 billion to $4.16 billion versus $4.13 billion consensus estimates.
Crocs analyst ratings and price targets are at MarketBeat. There are 12 analyst ratings on CROX stock, comprised of nine Buys and three Holds. CROX stock trades at 10.39x forward earnings. Its consensus analyst price target is 16.5% higher at $154.09.
