Crocs (CROX -0.14%), known for its foam clogs and casual footwear, recently reported its fourth-quarter earnings for 2024 on February 13. The company exceeded expectations, with revenue reaching $990 million against a forecast of $961 million. Adjusted earnings per share (EPS) came in at $2.52, surpassing the anticipated $2.26. Despite this positive showing, operating margins faced pressure due to increased selling, general, and administrative (SG&A) expenses. Overall, this quarter was solid, showcasing strong international sales and digital channels.
| Metric | Q4 2024 | Q4 Estimate | Q4 2023 | Y/Y Change |
|---|---|---|---|---|
| Adjusted EPS | $2.52 | $2.26 | $2.58 | -2.3% |
| Revenue | $990M | $961M | $960M | +3.1% |
| Adjusted Operating Margin | 20.2% | N/A | 24.1% | -3.9 pp |
| Gross Margin | 57.9% | N/A | 55.3% | +2.6 pp |
Source: Analyst estimates for the quarter provided by FactSet.
Crocs specializes in innovative casual footwear, boasting a distinctive brand image. Its flagship product, the iconic clog, has driven it to widespread recognition. The company emphasizes digital and direct-to-consumer (DTC) sales, alongside international expansion. It successfully engages consumers through multiple digital platforms, aligning with industry trends toward online shopping. Moreover, international sales are pivotal, expanding rapidly and contributing significantly to their revenue.
The company focuses on product and marketing innovation, such as new footwear designs, collaborations, and partnerships, enhancing its market position. Success is driven by these critical areas: maintaining strong DTC sales, broadening international markets, and continuously differentiating its product offering.
This quarter, Crocs achieved strong revenue growth, outstripping estimates with $990 million. This reflected a year-over-year increase of 3.1%, driven by a remarkable 17% growth in international markets for its Crocs brand. The digital channels continued to shape performance, reflecting a strategic alignment with consumer preferences.
Margins revealed a mixed picture. While gross margin improved from 55.3% to 57.9% thanks to increased volumes and favorable product mix, adjusted operating margin dipped from 24.1% to 20.2% due to escalating SG&A costs. The latter climbed 16.1% in the quarter, marking ongoing challenges in cost management even as revenue targets were met.
The HEYDUDE Brand encountered headwinds, with revenues dropping 13.2% over the year. Wholesale channel declines especially affected performance, contrasting with a mild drop in DTC sales. Nonetheless, the parent company is optimistic about addressing these challenges with revised strategies.
No one-time significant events affected the quarter's results. However, changes in SG&A expenses highlight a need for careful cost analysis moving forward. Currency fluctuations and broader geopolitical factors also remain areas of potential concern for Crocs' international segments.
Crocs enters 2025 with cautious optimism. Management forecasts a mid-single-digit increase in Crocs Brand revenue but expects HEYDUDE to contract by 7% to 9%. An adjusted operating margin target of 24% will be a focus, considering recent fluctuations in currency and tariffs. Adjusted EPS is projected to land between $12.70 and $13.15.
Investors should closely watch the digital push and international market penetration as key drivers of future growth. Additionally, fluctuations in SG&A expenses merit attention, as their impact on operating margins are significant. As Crocs navigates global trade dynamics, maintaining strong execution across its strategic plans will be crucial for sustained momentum.
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