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Here's Why You Must Add Crocs (CROX) Stock to Your Portfolio
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Crocs Inc. (CROX - Free Report) has been resilient in a challenging environment, owing to gains from sturdy consumer demand and brand strength. The company’s focus on product innovation and marketing, digital capabilities, and tapping growth opportunities in Asia bodes well. Moreover, Crocs’ immediate action to shift production, enhance factory throughput, leverage air freight, and strategically allocate units helped mitigate the impact of factory closures in Vietnam and the global supply-chain issues. The factors led the company to put up a robust performance in third-quarter 2021.
In third-quarter 2021, Crocs retained its earnings beat streak in all of the last four quarters, the average being 41.6%. The top line also surpassed estimates in the last four quarters. This underlines the company’s operational excellence.
Crocs’ revenues skyrocketed 73% (or 72.2% on a constant currency basis) year over year in third-quarter 2021, reflecting solid revenue growth across all regions. Adjusted earnings of $2.47 per share surged significantly from earnings of 94 cents in the year-ago period, owing to gross margin expansion and SG&A leverage.
In the past 30 days, estimates for the company’s 2021 and 2022 earnings per share have moved up 10.2% and 10%, respectively. For 2021, its earnings estimates stand at $7.59 per share, suggesting a rise of 135.7% from the year-ago reported figure.
The Zacks Rank #1 (Strong Buy) stock has rallied 181.8% in the year-to-date period compared with the industry’s growth of 25.2%. The stock also comfortably outpaced the S&P 500’s growth of 26.4% and the Consumer Staples sector’s decline of 4.4% in the same period.
Image Source: Zacks Investment Research
Factors Supporting Growth
Crocs looks well-poised for growth, given its timely actions that helped mitigate the impacts of factory closures in Vietnam (the company’s major manufacturing hub) and the global supply-chain bottlenecks in the third quarter. It took immediate action to shift production, enhance factory throughput, leverage air freight, and strategically allocate units. The company remains optimistic about navigating through these tough times. It is shifting production capacity to countries, namely China, Indonesia and Bosnia.
Management notified that the company could ramp up factory production due to the limited inputs and simple configuration of products. Crocs is also planning to lower its dependency on West Coast ports by adding East Coast transshipment capabilities to reach key customers in the United States.
Despite the temporary disruptions, Crocs anticipates revenues growth of more than 20% for 2022, fueled by brand strength and consumer demand globally. Wholesale orders for the first half of 2022 have been exceptionally strong. To strengthen inventory positions across all its regions for the first half of 2022, Crocs plans to invest approximately $75 million in air freight.
The better-than-expected third-quarter results also prompted management to raise the 2021 view. Crocs now estimates 2021 revenue growth between 62% and 65% versus the previously mentioned 60-65% increase.
Crocs is also making significant progress in expanding digital and omnichannel capabilities. We note that digital sales advanced 68.9% and accounted for 36.8% of revenues in the third quarter. Within digital, all regions witnessed double-digit increases from the year-ago period. Digital sales surged an impressive 129% from third-quarter 2019. Digital penetration represents 32.8%, 38.1% and 56.9% of revenues for the Americas, the Asia Pacific and EMEA regions, respectively, in the quarter. Robust traffic, higher pricing and fewer promotions benefited the company. Gains from collaborations, influencer campaigns, and digital and social marketing efforts remained upsides.
In its Investor Day presentation (dated Sep 14, 2021), Crocs outlined its long-term strategy and key initiatives to deliver sustainable growth. It expects to generate revenues of more than $5 billion by 2026, indicating a compounded annual growth rate (CAGR) of more than 17% in the next five years. It expects to attain the revenue target, driven by strong digital sales, improved market share for sandals, growth in Asia, and innovative product and marketing.
Management expects four times revenue growth in sandals by 2026. The company sees long-term opportunities in Asia, primarily in China, the second-largest footwear market in the world. Management expects revenue growth of 25%, on a CAGR basis in 2026, representing about 24% of total revenues. The company targets at least 50% of total revenues from digital channels by the end of 2026. Driven by solid revenue growth, it anticipates improved profitability and cash flows through 2026. It expects an adjusted operating margin of more than 26% and an annual free cash flow of $1 billion by the end of 2026.
Conclusion
Crocs has been encountering operational headwinds related to the ongoing supply-chain challenges and factory closures in Vietnam, the company’s major manufacturing hub, due to the COVID-19 pandemic. However, the company remains optimistic about navigating through these tough times by actions taken up recently. It also looks poised for growth on continued digital momentum and long-term initiatives.
Image: Shutterstock
Here's Why You Must Add Crocs (CROX) Stock to Your Portfolio
Crocs Inc. (CROX - Free Report) has been resilient in a challenging environment, owing to gains from sturdy consumer demand and brand strength. The company’s focus on product innovation and marketing, digital capabilities, and tapping growth opportunities in Asia bodes well. Moreover, Crocs’ immediate action to shift production, enhance factory throughput, leverage air freight, and strategically allocate units helped mitigate the impact of factory closures in Vietnam and the global supply-chain issues. The factors led the company to put up a robust performance in third-quarter 2021.
In third-quarter 2021, Crocs retained its earnings beat streak in all of the last four quarters, the average being 41.6%. The top line also surpassed estimates in the last four quarters. This underlines the company’s operational excellence.
Crocs’ revenues skyrocketed 73% (or 72.2% on a constant currency basis) year over year in third-quarter 2021, reflecting solid revenue growth across all regions. Adjusted earnings of $2.47 per share surged significantly from earnings of 94 cents in the year-ago period, owing to gross margin expansion and SG&A leverage.
In the past 30 days, estimates for the company’s 2021 and 2022 earnings per share have moved up 10.2% and 10%, respectively. For 2021, its earnings estimates stand at $7.59 per share, suggesting a rise of 135.7% from the year-ago reported figure.
The Zacks Rank #1 (Strong Buy) stock has rallied 181.8% in the year-to-date period compared with the industry’s growth of 25.2%. The stock also comfortably outpaced the S&P 500’s growth of 26.4% and the Consumer Staples sector’s decline of 4.4% in the same period.
Factors Supporting Growth
Crocs looks well-poised for growth, given its timely actions that helped mitigate the impacts of factory closures in Vietnam (the company’s major manufacturing hub) and the global supply-chain bottlenecks in the third quarter. It took immediate action to shift production, enhance factory throughput, leverage air freight, and strategically allocate units. The company remains optimistic about navigating through these tough times. It is shifting production capacity to countries, namely China, Indonesia and Bosnia.
Management notified that the company could ramp up factory production due to the limited inputs and simple configuration of products. Crocs is also planning to lower its dependency on West Coast ports by adding East Coast transshipment capabilities to reach key customers in the United States.
Despite the temporary disruptions, Crocs anticipates revenues growth of more than 20% for 2022, fueled by brand strength and consumer demand globally. Wholesale orders for the first half of 2022 have been exceptionally strong. To strengthen inventory positions across all its regions for the first half of 2022, Crocs plans to invest approximately $75 million in air freight.
The better-than-expected third-quarter results also prompted management to raise the 2021 view. Crocs now estimates 2021 revenue growth between 62% and 65% versus the previously mentioned 60-65% increase.
Crocs is also making significant progress in expanding digital and omnichannel capabilities. We note that digital sales advanced 68.9% and accounted for 36.8% of revenues in the third quarter. Within digital, all regions witnessed double-digit increases from the year-ago period. Digital sales surged an impressive 129% from third-quarter 2019. Digital penetration represents 32.8%, 38.1% and 56.9% of revenues for the Americas, the Asia Pacific and EMEA regions, respectively, in the quarter. Robust traffic, higher pricing and fewer promotions benefited the company. Gains from collaborations, influencer campaigns, and digital and social marketing efforts remained upsides.
In its Investor Day presentation (dated Sep 14, 2021), Crocs outlined its long-term strategy and key initiatives to deliver sustainable growth. It expects to generate revenues of more than $5 billion by 2026, indicating a compounded annual growth rate (CAGR) of more than 17% in the next five years. It expects to attain the revenue target, driven by strong digital sales, improved market share for sandals, growth in Asia, and innovative product and marketing.
Management expects four times revenue growth in sandals by 2026. The company sees long-term opportunities in Asia, primarily in China, the second-largest footwear market in the world. Management expects revenue growth of 25%, on a CAGR basis in 2026, representing about 24% of total revenues. The company targets at least 50% of total revenues from digital channels by the end of 2026. Driven by solid revenue growth, it anticipates improved profitability and cash flows through 2026. It expects an adjusted operating margin of more than 26% and an annual free cash flow of $1 billion by the end of 2026.
Conclusion
Crocs has been encountering operational headwinds related to the ongoing supply-chain challenges and factory closures in Vietnam, the company’s major manufacturing hub, due to the COVID-19 pandemic. However, the company remains optimistic about navigating through these tough times by actions taken up recently. It also looks poised for growth on continued digital momentum and long-term initiatives.
Other Stocks to Bet On
Gildan Activewear (GIL - Free Report) has a long-term earnings growth rate of 28%. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kontoor Brands (KTB - Free Report) , also a Zacks Rank #1 stock at present, has a long-term earnings growth rate of 8%.
lululemon athletica (LULU - Free Report) , with a Zacks Rank #2 (Buy) at present, has a long-term earnings growth rate of 20%.