Yahoo Finance Crocs (CROX) Beats Q2 Earnings & Revenue Estimates, Cuts View
Crocs, Inc. CROX continued with its impressive performance in second-quarter 2022, wherein the top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Solid consumer demand, as well as strength in the Crocs and HEYDUDE brands, contributed to the quarterly results.
Management remains optimistic about the HEYDUDE brand. Notably, the HEYDUDE brand is expected to attain $1 billion of revenues pro forma this year.
Driven by the solid quarterly results, the stock has gained 13.5% in the past three months against the industry’s decline of 3%. However, shares of CROX plunged more than 10% at the close of the trading session on Aug 4 due to a slashed 2022 view.
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Q2 in Detail
Crocs’ adjusted earnings were $3.24 per share, surpassing the Zacks Consensus Estimate of $2.72. The figure also advanced 45.3% significantly from earnings of $2.23 in the year-ago period.
Revenues advanced 50.5% (or 55.6% on a constant-currency basis) year over year to $964.6 million in the reported quarter and beat the Zacks Consensus Estimate of $953 million. The top line witnessed growth across all regions and channels.
Direct-to-consumer revenues rose 22.8% year over year to $409.6 million, while Wholesale revenues surged 80.6% to $555 million in the quarter under review. This was mainly driven by higher pricing, positive product mix and reduced promotions.
The Crocs brand’s revenues grew 14.3% year over year to $732.2 million, while the HEYDUDE brand’s revenues surged 96% year over year to $232.4 million in the reported quarter. Both metrics surpassed our estimate of $731.8 million and $220 million, respectively.
Total revenues in the Americas were up 7.6% (7.8% at constant currency) to $422.9 million. This lagged our estimate of $481.8 million. Revenues in the Asia Pacific amounted to $148.9 million and surpassed our estimate of $146.9 million, reflecting a year-over-year increase of 17.4% (27.6% at constant currency). The EMEA region witnessed revenue growth of 32.8% (48.4% at constant currency) to $160.4 million and beat our estimate of $126.5 million.
The adjusted gross profit rose 34.5% to $532.9 million. However, the adjusted gross margin contracted 660 basis points (bps) to 55.2% due to inflation, higher air freight and logistics costs, the addition of HEYDUDE, unfavorable channel mix, and the adverse impacts of currency. Meanwhile, adjusted SG&A expenses, as a percentage of revenues, declined 610 bps to 25.1%.
Adjusted operating income grew 48% year over year to $290.6 million. The adjusted operating margin contracted 60 bps to 30.1% from the prior-year quarter’s 30.7%. The downside can be attributable to unfavorable currency, inflation and supply-chain headwinds. Also, incremental air freight costs affected the metric by 240 bps and negative currency impacted it by 80 bps.
Financial Details
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $187.4 million, long-term borrowings of $2,743.5 million, and stockholders’ equity of $492 million. The company’s liquidity position remains strong, with $475.8 million in available borrowing capacity.
Management incurred a capital expenditure of $56.7 million in the six months ending Jun 30, 2022. The company anticipates a capital expenditure of $170-$200 million for supply-chain investments in 2022.
Crocs, Inc. Price, Consensus and EPS Surprise
Crocs, Inc. price-consensus-eps-surprise-chart | Crocs, Inc. Quote
Outlook
Management slashed its guidance for 2022 and issued the third-quarter 2022 view. Consolidated revenues are projected to be $3.4-$3.5 billion, suggesting year-over-year growth of 47-52%. This compares unfavorably with the prior view of $3.5 billion, which suggested year-over-year growth of 52-55%.
Revenues related to the HEYDUDE buyout are likely to be $850-$890 million, up from $750-$800 million stated earlier. The company expects the Crocs brand’s revenues to be $2.5-$2.6 billion, indicating year-over-year growth of 14-17% on a constant-currency basis and 10-13% on a reported basis. HEYDUDE Brand revenues is likely to be roughly $850-$890 million.
Adjusted earnings are envisioned to be $9.50-$10.30, down from the earlier stated $10.05-$10.65. The adjusted operating margin is anticipated to be 26-27% compared with the aforementioned 26%. However, air freight costs of $75 million are likely to hurt the gross margin in 2022.
For third-quarter 2022, revenues are projected to grow 46-53% to $915-$955 million. In the prior-year quarter, it reported revenues of $626 million. The adjusted operating margin is estimated to be 25-26%, including air freight expenses of $15 million. The company expects the Crocs brand’s revenues to be $680-$700 million, indicating year-over-year growth of 15-18% on a constant-currency basis and 9-12% on a reported basis. HEYDUDE Brand revenues is likely to be roughly $235-$255 million.
Stocks to Consider
Here are three better-ranked stocks to consider — Designer Brands DBI, GIII Apparel GIII and Capri Holdings CPRI.
Designer Brands, which designs, produces and retails footwear and accessories, currently sports a Zacks Rank #1 (Strong Buy). DBI has a trailing four-quarter earnings surprise of 102.5%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Designer Brands’ current financial-year sales and EPS suggests growth of 6.9% and 16.5%, respectively, from the year-ago period’s reported figures.
G-III Apparel designs, sources and markets apparel and accessories under owned, licensed and private label brands. The company currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for G-III Apparel’s current financial year’s revenues and EPS suggests growth of 13.8% and 8.2%, respectively, from the year-ago reported figure. G-III Apparel has a trailing four-quarter earnings surprise of 97.5%, on average.
Capri Holdings, which provides women’s and men’s accessories, footwear and ready-to-wear, and wearable technology, watches, jewelry, eyewear, and a full line of fragrance products, currently carries a Zacks Rank #2 (Buy). CPRI has a trailing four-quarter earnings surprise of 49.3%, on average.
The Zacks Consensus Estimate for Capri Holdings’ current financial-year sales suggests growth of 3.8% from the year-ago period’s reported figure, while the same for EPS indicates a decline of 4.9%. CPRI has an expected EPS growth rate of 11.3% for three-five years.
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