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Crocs, Inc. (CROX - Free Report) has posted impressive results for second-quarter 2023, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. Solid consumer demand for new clogs and sandals, as well as Crocs and HEYDUDE, has helped the company experience impressive growth. This resulted in a 26% increase in direct-to-consumer sales in the second quarter.
The company’s focus on comfortable offerings has resonated with consumers, driving brand expansion and attracting customers to its products.
We note that the Zacks Rank #3 (Hold) stock has lost 13.1% in the past three months compared with the industry’s decline of 2.8%.
Image Source: Zacks Investment Research
Q2 in Detail
Crocs’ adjusted earnings of $3.59 per share surpassed the Zacks Consensus Estimate of $2.98 and advanced 10.8% year over year.
Revenues advanced 11.2% year over year to $1,072.4 million in the reported quarter and beat the Zacks Consensus Estimate of $1,044 million. On a constant-currency basis, revenues improved 12% year over year. The top line witnessed growth across all regions and channels.
Direct-to-consumer revenues rose 26% (or 27.2% on a constant-currency basis) year over year, whereas Wholesale revenues advanced 0.2% (or 0.8% on a constant-currency basis) year over year in the quarter under review. Our model had estimated year-over-year DTC revenue growth of 12.4% and wholesale revenue growth of 4.7%.
The Crocs brand’s revenues grew 13.8% year over year to $833 million, including a 25.3% increase in DTC revenues and a 3.8% rise in wholesale revenues. Direct-to-consumer comparable sales for the Crocs brand rose 19.5% in the second quarter.
The HEYDUDE brand’s revenues advanced 3% year over year to $239.4 million in the second quarter. The increase was driven by a 29.7% increase in DTC revenues, offset by an 8.4% decline in wholesale revenues.
Total revenues in North America were up 12.2% year over year to $474.6 million. This lagged our estimate of 8.5% year-over-year growth. Revenues in the Asia Pacific rose 33.2% year over year to $198.3 million and surpassed our estimate of $141.6 million. The EMEA region witnessed a revenue decline of 0.2% to $160.1 million but beat our estimate of $155.7 million.
The adjusted gross profit rose 16.9% year over year to $622.9 million. The adjusted gross margin expanded 290 basis points (bps) to 58.1%. Adjusted SG&A expenses, as a percentage of revenues, increased 270 bps year over year to 27.8%.
Adjusted operating income grew 11.7% year over year to $324.6 million. The adjusted operating margin expanded 20 bps to 30.3% from the prior-year quarter’s 30.1%. Our model had estimated the adjusted operating margin to expand 410 bps to 26% in the second quarter of 2023.
Financial Details
The company ended the quarter with cash and cash equivalents of $166.2 million, long-term borrowings of $2,007.5 million, and stockholders’ equity of $1,189.7 million. The company’s liquidity position remains strong, with $563.7 million in available borrowing capacity as of Jun 30, 2023.
Management incurred a capital expenditure of $51.6 million for the six months ended Jun 30, 2023. The company anticipates a capital expenditure of $165-$180 million in 2023 related to the expansion of its distribution capabilities, including the new HEYDUDE distribution center in Las Vegas, the implementation of new technology systems for HEYDUDE and the expansion of its corporate facilities to support growth.
Outlook
Management has raised its guidance for 2023. For the year, the company anticipates year-over-year revenue growth of 12.5-14.5%. This will result in revenues of $4,000-$4,065 million for 2023 at existing currency rates. The revised revenue guidance marks an increase from the earlier mentioned 11-14% to $4-$4.07 billion.
The adjusted operating margin is envisioned to be 27.5% compared with the previously communicated 26-27%. The GAAP tax rate is expected to be 23%, whereas the adjusted tax rate is likely to be 20%. Adjusted earnings are envisioned to be $11.83-$12.22 per share, up from the prior stated $11.17-$11.73 per share.
For third-quarter 2023, the company expects revenues to increase 3-5% year over year to $1,013-$1,034 million. Adjusted earnings are forecast to be $3.07-$3.15 per share, with the adjusted operating margin likely to be 27%.
Stocks to Consider
Here we have highlighted three better-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , Urban Outfitters, Inc. (URBN - Free Report) and lululemon athletica (LULU - Free Report) .
GIII Apparel, a manufacturer, designer and distributor of apparel and accessories, sports a Zacks Rank #1 (Strong Buy) at present. The company had a significant EPS surprise in the first quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 1.9% and 0.4% from the year-ago period’s actuals. GIII has a trailing four-quarter earnings surprise of 47.4%, on average.
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, carries a Zacks Rank #2 (Buy) at present. The company’s expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings suggests growth of 5.1% and 57.1% from the year-ago period’s reported figure. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
lululemon, a yoga-inspired athletic apparel company, currently carries a Zacks Rank #2. The company has an expected EPS growth rate of 20% for three to five years.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17.1% and 18.4%, respectively, from the year-ago period’s reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.
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Crocs (CROX) Q2 Earnings & Revenues Beat Estimates, Rise Y/Y
Crocs, Inc. (CROX - Free Report) has posted impressive results for second-quarter 2023, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. Solid consumer demand for new clogs and sandals, as well as Crocs and HEYDUDE, has helped the company experience impressive growth. This resulted in a 26% increase in direct-to-consumer sales in the second quarter.
The company’s focus on comfortable offerings has resonated with consumers, driving brand expansion and attracting customers to its products.
We note that the Zacks Rank #3 (Hold) stock has lost 13.1% in the past three months compared with the industry’s decline of 2.8%.
Image Source: Zacks Investment Research
Q2 in Detail
Crocs’ adjusted earnings of $3.59 per share surpassed the Zacks Consensus Estimate of $2.98 and advanced 10.8% year over year.
Revenues advanced 11.2% year over year to $1,072.4 million in the reported quarter and beat the Zacks Consensus Estimate of $1,044 million. On a constant-currency basis, revenues improved 12% year over year. The top line witnessed growth across all regions and channels.
Direct-to-consumer revenues rose 26% (or 27.2% on a constant-currency basis) year over year, whereas Wholesale revenues advanced 0.2% (or 0.8% on a constant-currency basis) year over year in the quarter under review. Our model had estimated year-over-year DTC revenue growth of 12.4% and wholesale revenue growth of 4.7%.
Crocs, Inc. Price, Consensus and EPS Surprise
Crocs, Inc. price-consensus-eps-surprise-chart | Crocs, Inc. Quote
The Crocs brand’s revenues grew 13.8% year over year to $833 million, including a 25.3% increase in DTC revenues and a 3.8% rise in wholesale revenues. Direct-to-consumer comparable sales for the Crocs brand rose 19.5% in the second quarter.
The HEYDUDE brand’s revenues advanced 3% year over year to $239.4 million in the second quarter. The increase was driven by a 29.7% increase in DTC revenues, offset by an 8.4% decline in wholesale revenues.
Total revenues in North America were up 12.2% year over year to $474.6 million. This lagged our estimate of 8.5% year-over-year growth. Revenues in the Asia Pacific rose 33.2% year over year to $198.3 million and surpassed our estimate of $141.6 million. The EMEA region witnessed a revenue decline of 0.2% to $160.1 million but beat our estimate of $155.7 million.
The adjusted gross profit rose 16.9% year over year to $622.9 million. The adjusted gross margin expanded 290 basis points (bps) to 58.1%. Adjusted SG&A expenses, as a percentage of revenues, increased 270 bps year over year to 27.8%.
Adjusted operating income grew 11.7% year over year to $324.6 million. The adjusted operating margin expanded 20 bps to 30.3% from the prior-year quarter’s 30.1%. Our model had estimated the adjusted operating margin to expand 410 bps to 26% in the second quarter of 2023.
Financial Details
The company ended the quarter with cash and cash equivalents of $166.2 million, long-term borrowings of $2,007.5 million, and stockholders’ equity of $1,189.7 million. The company’s liquidity position remains strong, with $563.7 million in available borrowing capacity as of Jun 30, 2023.
Management incurred a capital expenditure of $51.6 million for the six months ended Jun 30, 2023. The company anticipates a capital expenditure of $165-$180 million in 2023 related to the expansion of its distribution capabilities, including the new HEYDUDE distribution center in Las Vegas, the implementation of new technology systems for HEYDUDE and the expansion of its corporate facilities to support growth.
Outlook
Management has raised its guidance for 2023. For the year, the company anticipates year-over-year revenue growth of 12.5-14.5%. This will result in revenues of $4,000-$4,065 million for 2023 at existing currency rates. The revised revenue guidance marks an increase from the earlier mentioned 11-14% to $4-$4.07 billion.
The adjusted operating margin is envisioned to be 27.5% compared with the previously communicated 26-27%. The GAAP tax rate is expected to be 23%, whereas the adjusted tax rate is likely to be 20%. Adjusted earnings are envisioned to be $11.83-$12.22 per share, up from the prior stated $11.17-$11.73 per share.
For third-quarter 2023, the company expects revenues to increase 3-5% year over year to $1,013-$1,034 million. Adjusted earnings are forecast to be $3.07-$3.15 per share, with the adjusted operating margin likely to be 27%.
Stocks to Consider
Here we have highlighted three better-ranked stocks, namely GIII Apparel Group (GIII - Free Report) , Urban Outfitters, Inc. (URBN - Free Report) and lululemon athletica (LULU - Free Report) .
GIII Apparel, a manufacturer, designer and distributor of apparel and accessories, sports a Zacks Rank #1 (Strong Buy) at present. The company had a significant EPS surprise in the first quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GIII Apparel’s current financial-year sales and earnings suggests growth of 1.9% and 0.4% from the year-ago period’s actuals. GIII has a trailing four-quarter earnings surprise of 47.4%, on average.
Urban Outfitters, which specializes in the retail and wholesale of general consumer products, carries a Zacks Rank #2 (Buy) at present. The company’s expected EPS growth rate for three to five years is 18%.
The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings suggests growth of 5.1% and 57.1% from the year-ago period’s reported figure. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
lululemon, a yoga-inspired athletic apparel company, currently carries a Zacks Rank #2. The company has an expected EPS growth rate of 20% for three to five years.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 17.1% and 18.4%, respectively, from the year-ago period’s reported figures. LULU has a trailing four-quarter earnings surprise of 9.9%, on average.