2023-11-02 15:14:05 ET
Shares of Crocs ( NASDAQ: CROX ) on Thursday tumbled as much as 15.3% , after the footwear company cut its full year revenue outlook primarily due to significant weakness in its HeyDude brand.
CROX stock was last down 6.7% to $81.57 in late afternoon trade, amid a broader market that was rallying .
CROX delivered Q3 adjusted earnings per share of $3.25, which beat estimates by 11 cents. Revenue rose 6.6% Y/Y to $1.05B, also beating expectations by $20M. CROX said it was helped by the back-to-school season.
The company's flagship Crocs footwear division brought in sales of $798.8M in Q3, an increase of 11.6% Y/Y. The brand saw solid Asia revenue growth of 26.5% Y/Y, while North America direct-to-consumer (DTC) comparable sales were up 10.2%. However, the performance was a slowdown from Q2.
"In September, trends softened across the footwear industry, and we are seeing consumers pull back in-between peak shopping events," Crocs ( CROX ) top boss Andrew Rees said on the earnings conference call .
But the main story of the quarter was HeyDude. The brand saw a Q3 revenue decline of 8.3% to $246.9M. Furthermore, CROX now sees HeyDude revenue growth of about 4% to 6% for the full year - a massive reduction from its prior forecast of 14% to 18% growth.
Rees on the call said that awareness of the HeyDude brand in North America had improved in Q3.
"That said, we recognize the need to be better around driving effective segmentation alongside new product introductions to sustain this broader customer base. There was also more carryover inventory in our legacy customers than we had expected, which further diluted our offerings," the CEO said.
Additionally, Rees noted that the post back-to-school wholesale market had been soft, especially for HeyDude "which has limited history with retailers."
"While we are not guiding to 2024, we would expect HeyDude wholesale revenues in North America to remain negative through Q2," the chief executive said.
Moreover, Rees highlighted a change to HeyDude's digital pricing strategy in September.
"Specifically, we made a decision to stop price matching with the gray market goods that are selling on Amazon ( AMZN ), forfeiting near-term sales to prioritize long-term market health," the CEO said, adding that this would hinder sales growth in Q4.
Crocs ( CROX ) cut its overall full year revenue growth guidance to about 10% to 11% from a previous range of 12.5% to 14.5%. The updated outlook implied sales of $3.905B to $3.94B, compared to the consensus estimate of $4B.
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Crocs stock falters after co cuts revenue guidance on weak Q3 results for HeyDude