"We reported third quarter results which exceeded our Enterprise guidance on sales and profitability. Our overall performance including strong gross margin gains allowed us to accelerate our strategic investments... Strength was led by our Crocs brand fueled by 17% international and 8% direct-to-consumer growth ", stated Andrew Rees, Chief Executive Officer at Crocs.

Third Quarter Operating Results

Crocs reported an increase of 1.6%, or 2% on a constant currency basis, in consolidated revenue for the third quarter of 2024, reaching 1.062 billion US dollars, as compared to the same period in 2023. Direct-to-consumer (DTC) channels were crucial to this result. DTC revenue rose by 4.4%, or 4.6% at constant currency, despite a 1.4% decline in wholesale revenue on a comparable basis.

The company also reported rising operating costs in the third quarter, with selling, general, and administrative expenses increasing by 18.1% year-over-year to 364 million US dollars, or 34.2% of total revenue. Crocs cited increased demand creation and general administrative costs as the drivers of this expense growth,  which resulted in the decline of the operating margin to 25.4%, down from 26.2% in the same quarter last year.

Despite these higher costs, Crocs’ gross margin improved to 59.6%, compared to 55.6% in the prior year. This margin increase was supported by favourable pricing and product mix adjustments, which partially offset the impact of lower average selling prices in DTC channels. Meanwhile, adjusted income from operations decreased by 8.8%, as compared to the third quarter in 2023, landing at 270 million US dollars.

On the balance sheet, Crocs reported cash and cash equivalents of 186 million US dollars, an increase from 127 million US dollars in the previous year, while inventory levels decreased from 390 million to 367 million US dollars. Total borrowings were reduced from 1.939 billion to 1.422 billion US dollars year-over-year.

Third Quarter Brand Results

The Crocs brand saw a solid revenue increase of 7.4%, as compared to the same quarter in 2023, reaching 858 million US dollars. In contrast, the Heydude brand experienced a challenging quarter, with a 17.4% revenue decline, on a comparable basis to 204 million US dollars. Revenue from international markets for the Crocs brand increased by 15.5%, while North American revenue increased by a modest rate of 2.1%, as compared to the previous year.

The Crocs brand performed well across all channels, with DTC  and wholesale sales increasing by 7.7% and 7.1% year-over-year, respectively. The Heydude brand experienced a decline in its DTC and wholesale channels, with DTC  sales down by 9.3% and wholesale sales dropping by 22.9%, as compared to the same period in 2023.

Rees also commented on the challenging environment in which the Heydude brand operates: “We have sharpened our strategy around Heydude as we work to create higher brand relevance through our product and marketing initiatives. While we are seeing early green shoots from these actions, Heydude's recent performance and the current operating environment are signalling it will take longer than we had initially planned for the brand to turn a corner”.

Outlook

For the fourth quarter of 2024, Crocs anticipates flat to modest revenue growth, as compared to the same period in 2023, with Crocs brand revenue expected to rise by about 2%, while HEYDUDE revenue is expected to decline between 4% and 6%. For the full year, Crocs forecasts a revenue increase of roughly 3%, in line with the low end of its previous guidance. Crocs brand revenue is expected to grow by about 8%, while Heydude is projected to decline by 14.5%, an adjustment from previous guidance.