The Consumer Discretionary sector, comprising companies that sell non-essential goods and services, demonstrated notable resilience in 2024. Despite challenges stemming from persistent inflation and elevated interest rates, U.S. consumers continued to spend, propelling the sector. However, not all stocks in the sector kept pace with the sector’s performance. One such stock is Crocs, Inc. (CROX Quick QuoteCROX - Free Report) , which has a prominent position in the Textile - Apparel industry.

Crocs, known for its innovative and versatile footwear offerings, has faced unique challenges in an increasingly competitive and dynamic market environment.

Why CROX Struggled to Maintain its Rally?

Crocs has been facing significant challenges that make it a less compelling investment opportunity in the near term. Despite strong third-quarter 2024 results, Crocs' HEYDUDE brand underperformed and weighed on overall revenues. HEYDUDE revenues declined 17.4% year over year due to a 22.9% drop in wholesale revenues, a 9.3% decrease in direct-to-consumer (DTC) revenues and a 22.2% decline in comparable DTC sales.

While the decline in wholesale revenues aligned with the company’s guidance, the unexpected drop in DTC revenues was attributed to a strategic shift from performance marketing to brand marketing. Although Crocs is making progress on initiatives to revitalize the HEYDUDE brand, the company acknowledged that its recent performance and the current operating environment suggest a longer-than-anticipated timeline for a turnaround.

Looking ahead, Crocs anticipates a relatively subdued consumer environment in the United States. It noted that the industry saw heightened promotional activities in China during the mid-season festival, reflecting a more conservative approach by China consumers. As a result, the company expects to see a greater pullback in major Tier 1 cities like Shanghai and Beijing.

Due to these factors, management provided a pessimistic outlook for the fourth quarter of 2024. The company anticipates the HEYDUDE brand’s revenues to decline 4-6% in the fourth quarter, while revenues for the Crocs brand are expected to grow 2% year over year. Management anticipates enterprise revenues to remain flat or increase slightly year over year in constant currency. For the fourth quarter, international growth is projected to slow due to regulatory pressures in India, while North America faces challenges from selective consumer behavior and the timing of wholesale shipments.

For 2024, enterprise revenues are projected to increase 3% year over year in constant currency, which is at the lower end of the previously mentioned 3-5%. Revenues for the Crocs brand are expected to grow 8%, while HEYDUDE brand revenues are anticipated to decline 14.5% due to weaker-than-expected sellouts in both wholesale and digital channels.

Shares of this Zacks Rank #4 (Sell) company have declined 17.3% in the past three months against the Consumer Discretionary sector’s gain of 8.7%.

How Crox is Setting Up for Future Success

Despite facing challenges, Crocs remains committed to its long-term growth strategy, focusing on enhancing brand awareness through iconic product lines, strategic investments in key markets and expanding its product range to attract more consumers. The company has seen success in boosting global brand desirability through high-profile collaborations, including with Bath & Body Works, Batman and McDonald's.

Crocs is also focusing on its Echo and in-motion product franchises with affordable, fashion-forward items, as well as launching innovative products like Pet Crocs. For the HEYDUDE brand, Crocs is addressing challenges by refining its brand perception, reducing excess inventory and narrowing its retail focus to premium markets while also increasing average selling prices to improve margins.

Three Months Stock Price Performance of UAA, CROX, RL, VFC & HBI

Image Source: Zacks Investment Research

4 Better Consumer Discretionary Picks

For investors seeking growth and resilience, there are better options in the Consumer Discretionary space. Companies with established global brands, strategic expansions and innovative product lines are well-equipped to outperform. Let’s explore four compelling stocks that offer stronger growth prospects and a more balanced approach than Crocs.

Under Armour, Inc. (UAA Quick QuoteUAA - Free Report) emerges as a compelling investment choice with its strategic focus on several key areas to drive long-term success. By enhancing brand strength, the company is looking to strengthen its market identity and appeal to a broader, more engaged consumer base. A major focus for Under Armour is refining product development to create a more athlete-focused lineup, aligning products with global and regional market demands.

Under Armour is one of the leading designers, marketers and distributors of authentic athletic footwear, apparel and accessories for a wide variety of sports and fitness activities in the United States and internationally. UAA has a trailing four-quarter earnings surprise of 75.1%, on average. The Zacks Consensus Estimate for Under Armour’s current fiscal-year sales and EPS implies declines of 10.6% and 50%, respectively, from the prior-year actuals. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

V.F. Corporation (VFC Quick QuoteVFC - Free Report) has seen strong performance, benefiting from its ongoing strategic initiatives, particularly the Reinvent transformation program. The company's efforts to strengthen brands like Vans and The North Face, reduce costs and enhance its balance sheet are promising.

V.F. Corp designs, manufactures and markets branded apparel and related products in the United States and internationally. This Zacks Rank #1 has a trailing four-quarter earnings surprise of 9.4%, on average. The Zacks Consensus Estimate for V.F. Corp’s current fiscal-year sales and EPS implies declines of 8.4% and 34.1%, respectively, from the prior-year actuals.

Ralph Lauren Corporation (RL Quick QuoteRL - Free Report) focuses on strong brand equity, a diversified growth strategy and strength in the direct-to-consumer channel. Known for its premium lifestyle products, Ralph Lauren thrives in luxury and mid-tier markets, driven by its heritage and aspirational image. The company’s solid price momentum reflects its resilience, supported by financial health, digital innovation and operational efficiency, positioning it well for continued growth.

Ralph Lauren, which designs, markets and distributes lifestyle products, currently carries a Zacks Rank #2 (Buy). RL has a trailing four-quarter earnings surprise of 9.1%, on average. The Zacks Consensus Estimate for Ralph Lauren’s current fiscal-year sales and earnings indicates growth of 3.6% and 13.9%, respectively, from the prior-year reported levels.

Hanesbrands Inc. (HBI Quick QuoteHBI - Free Report) focuses on resilience in a challenging macroeconomic environment, driven by a significant transformation strategy. These efforts are positively impacting its results, with a clear path to continued margin improvement, cash generation, and debt reduction through 2025 and beyond. This transformation is key to enhancing financial stability, streamlining operations and boosting profitability. HBI’s global, consumer-centric approach has led to market share gains, supported by innovations targeting younger consumers and expanding into permanent retail spaces.

Hanesbrands engages in the design, manufacture, sourcing and sale of apparel essentials for men, women and children in the United States and internationally. It has a Zacks Rank #2 at present. The Zacks Consensus Estimate for Hanesbrands’ current fiscal-year earnings indicates growth of 550% from the year-ago period’s reported figure. HBI has a trailing four-quarter average earnings surprise of 21.6%.