Dive Brief:
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Crocs’ troubles with Heydude continued in Q1, as overall revenues rose 6.2% year over year to $938.6 million. Crocs brand revenue rose 14.6% to $744 million and Heydude fell 17.2% to $195 million.
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Direct-to-consumer revenues rose 18.3%, while wholesale revenues rose 12.5%, according to a filing with the Securities and Exchange Commission. Gross margin expanded to 55.6% from 53.9% last year. Net income rose 1.9% to $152.5 million.
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The company tapped a former Ulta Beauty executive to be chief financial officer, replacing Anne Mehlman, who as of last month is Crocs’ brand chief. Susan Healy, most recently CFO at auto marketplace IAA, Inc., takes the CFO post June 3, per another company filing.
Dive Insight:
The Crocs brand continues to flourish, with a series of well-performing designs, expansions into categories like sandals, slides, wedges and platforms, and room to grow abroad, according to a research note from Jane Hali & Associates. The flagship brand drives some 75% of revenues, per that research.
But Heydude continues to struggle, to the point where the company on Tuesday lowered its expectation for the brand this year. Heydude sales are now expected to fall 8% to 10%, worse than the previous guidance released in February for its sales to be flat or slightly up.
Bank of America analysts Christopher Nardone and Lorraine Hutchinson last week had warned that “a cut to guidance out of the gate would be disappointing and could curtail credibility despite [Heydude] representing only 18% of combined brand EBIT.”
Still, in a statement Tuesday, Crocs CEO Andrew Rees said the company remains “confident in the long-term opportunity for the Heydude brand and are excited to welcome a new Heydude president to fully unlock its future potential."
Terence Reilly, who once served a stint as Crocs chief marketing officer, rejoined the company in April to lead the troubled brand. He arrived from Stanley, where he was brand president amid a viral resurgence of the century-old brand.
Bank of America analysts said they are encouraged by Reilly’s return, noting that “his prior success at both Crocs and Stanley sets the brand up well over the medium term.” But they and other analysts remain concerned about the brand, which continues to weigh down Crocs’ results.
“We have reservations regarding the long-term growth potential of Heydude,” Jane Hali & Associates analysts said. “Presently, we perceive the footwear as lacking competitive edge against prevailing trends and established brands in the market.”
The brand, which Crocs acquired a little over two years ago for $2.5 billion, has expanded its number of stores, many of them outlets, and plans another 30 outlet stores this year, according to the Jane Hali note. The positioning in outlets “says a lot about the company’s view of the brand,” those analysts said.
