Dive Brief:
- Crocs Inc. on Tuesday reported third-quarter revenue rose 1.6% year over year to $1.06 billion. Direct-to-consumer revenue grew 4.4%, while wholesale revenue fell 1.4% for the quarter.
- Revenue for the company’s namesake brand rose 7.4% year over year to $858 million, up from $799 million the prior year. DTC revenue for Crocs was up 7.7% to $463 million and wholesale revenue increased 7.1% to $396 million.
- However, revenue for the company’s Heydude brand fell 17.4% year over year to $204 million, from $247 million a year ago. Heydude’s DTC revenue fell 9.3% to $91.1 million, while wholesale revenue fell 23% to $113 million.
Dive Insight:
Investments in product and marketing are enabling the Crocs brand “to win with consumers around the world,” CEO Andrew Rees said during a Tuesday morning earnings call.
Rees outlined several recent initiatives and partnerships that have helped drive Crocs’ growth, including a Crocs costume; the debut of Crocs for dogs through a partnership with Bark; and a collaboration with McDonald’s to place Crocs keychain toys in Happy Meals in 40 countries.
“The Crocs brand continues to resonate with consumers, successfully adapting to trends and incorporating design features into its core clog collection,” analysts with Jane Hali & Associates said in a Sept. 30 note. “We see the price point as an advantage for the brand as consumers continue to be pressured by a tough macroeconomic backdrop.”
Rees described the back-to-school shopping season as solid but said that consumers have pulled back since Labor Day, a slowdown that’s likely to continue until the traditional start of the holiday shopping season in November. “We anticipate the consumer environment being relatively muted in the U.S. until Black Friday [and the] Cyber Monday holiday period,” Rees said.
And while overall third-quarter results exceeded the company’s top- and bottom-line expectations, performance remains soft at Heydude, which the company acquired about two and a half years ago for $2.5 billion. Since last year, Rees said, Heydude has cleaned up channel inventory, right-sized its account base and began building a fleet of premium outlet stores to showcase the brand. As of last quarter, the company had 29 outlet stores. The brand has also elevated average selling prices, accelerated its market investment and invested in talent to drive brand awareness.
“We believe the female youth culture is a key driver of influence, brand connectivity and a catalyst to build community,” Rees said. The company in August announced actress Sydney Sweeney as a global brand ambassador. Rees said that partnership has generated Heydude's best-performing content to date. The brand also announced a long-term global partnership with country singer Jelly Roll earlier this month.
Heydude during the third quarter launched a TikTok shop and the response has been “excellent,” Rees said. The brand’s number of TikTok followers recently surpassed its followers on Instagram, which lends credibility to the brand's strategy to focus on a younger audience, according to Rees.
Jane Hali analysts in its note last month, however, still identify “the Heydude brand as a weakness.”
“Although the footwear may attract a younger audience due to its low entry price, the design of its core assortment (Wendy & Wally) lacks appeal,” the analysts said, adding that the brand “is up against a competitive sneaker market in which many brands are offering design and trend-led assortments with comfort innovation across lifestyle and performance footwear.”
Looking ahead, the company updated its guidance. It now forecasts revenue growth of about 3% versus its prior outlook of 3% to 5%. Revenue for the Crocs brand is expected to rise 8% versus a previous outlook of 7% to 9% growth, while revenue for Heydude is expected to fall 14%, a larger drop from earlier guidance of 10% to 8%.
