Dive Brief:
- Crocs raised its outlook for the year on Thursday, based in part on a strong Q3 performance from both brands. The company now expects revenue to grow about 3% compared to 2025, up from 1% to 2%, with Crocs expected to grow about 4% and Heydude to be about flat.
- By brand in Q3: Crocs revenues rose 4.4% to $873 million and Heydude rose over 6% to $170 million. Overall company revenue rose 4.6%, topping $1 billion, with direct-to-consumer sales up nearly 7% and wholesale up 1.8%.
- Gross margin expanded by 770 basis points to 66.2%, snapping a streak of four quarters of gross margin declines, according to Needham analysts led by Tom Nikic. Net income grew by nearly 50% to $216.8 million.
Dive Insight:
Namesake Crocs is by far the bigger brand in this portfolio, but signs of life at struggling Heydude were capturing much of the attention Thursday.
“The Heydude brand achieved its long-awaited return to growth in Q3,” Nikic said in a research note.
On a call with analysts, Crocs CEO Andrew Rees said the “quarter marks an important inflection for the Heydude brand” and serves as an endorsement of the company’s three-pillar strategy. He acknowledged that the topline boost is in comparison to weak results a year ago.
The pillars of Heydude’s turnaround include being “laser focused on our core consumer,” thoughtfully diversifying the assortment and pushing more deeply into North America, Rees said. The brand has added sandals, for example, which are outperforming expectations.
The effort to expand in North America won’t likely include opening many more stores, though, as wholesale is a “more cost-effective way to reach our intended consumer,” Rees said. In fact, the brand’s return to growth in North America was driven by wholesale, which was up 14%.
As of the end of March, the company runs 75 Heydude stores, up from 54 a year prior, according to Crocs’ annual report.
“We like the portfolio that we have,” Rees said. “It performs all the roles that we are looking for it to perform, which is some help in terms of building brand awareness and showing the consumers a broader range of Heydude product than they would actually typically see in their local wholesale environment.”
The Crocs brand also had a record Q3, driven by international sales and momentum from efforts to diversify the brand’s product mix, Rees said. A limited edition collaboration with Pendleton, which included “vibrant wool colors from Pendleton's woolen mills,” has sold out at Crocs and Pendleton, he said.
