Crocs(CROX) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated enterprise revenues reached $1.1 billion, growing 2% year-over-year, with DTC growth of 5% [6][25] - Adjusted diluted EPS increased 11% to$ 3.60 per share [6][32] - Adjusted gross margin for the third quarter was 59.6%, up 220 basis points from the previous year [29] - Adjusted SG&A dollars increased 19% year-over-year, with an adjusted SG&A rate of 34.2%, up 510 basis points [31] Business Line Data and Key Metrics Changes - Crocs brand revenues were $858 million, growing 8% year-over-year, with DTC and wholesale each growing 8% [25] - HEYDUDE revenues declined 17% to$ 204 million, with wholesale down 23% and DTC down 9% [28] - Crocs sold 32.1 million pairs of shoes, an increase of 11% year-over-year, while brand ASPs decreased 3% to $26.48 [26] Market Data and Key Metrics Changes - North American revenues grew 2% to$ 491 million, with DTC up 4% and wholesale down 2% [27] - International revenues grew 17% to $367 million, with DTC growth of 18% and wholesale growth of 15% [27] - China business grew over 20%, following a 90% growth last year, with growth driven by mono-brand partner stores [15][27] Company Strategy and Development Direction - The company is focusing on three primary levers for long-term growth: driving awareness and relevance, gaining market share in Tier-1 markets, and diversifying product range [46] - HEYDUDE is prioritizing brand health and building a community, with a focus on female youth culture and strategic partnerships [19][20] - The company is adjusting its investment strategy, shifting from performance marketing to brand marketing for HEYDUDE [57] Management's Comments on Operating Environment and Future Outlook - Management noted a cautious consumer environment in North America, expecting muted conditions until the holiday season [14] - The company anticipates continued growth in China despite a slowdown, supported by mono-brand store openings [16][75] - For 2024, the company adjusted its revenue growth outlook to approximately 3%, with Crocs brand growth expected at around 8% and HEYDUDE down approximately 14.5% [35][36] Other Important Information - The company repurchased$ 151 million of shares during the quarter, with $549 million remaining on its share repurchase authorization [34] - The company is maintaining a strong liquidity position with$ 186 million in cash and $559 million in borrowing capacity [33] Q&A Session Summary Question: Details on Crocs North America DTC business and 2025 outlook - Management expects North America to grow about 2.5% for the year, with a stable and profitable business model [50][51] Question: HEYDUDE distribution actions and profitability - The company streamlined its account base, focusing on larger strategic accounts while maintaining some smaller, regional customers [54] - Management is confident in HEYDUDE's long-term growth potential despite current performance challenges [57] Question: Crocs North America growth expectations for 2025 - Management anticipates modest growth for North America Crocs in 2025, with international growth being a key driver [73] Question: HEYDUDE marketing strategy changes and KPIs - The company shifted from performance marketing to brand marketing, impacting short-term revenue but aiming for long-term brand health [57] Question: International growth potential in 2025 - Management remains confident in growth in China, India, and key European markets, despite recent challenges [75]