CROX - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Crocs, Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. like today. hand would to conference I speakers your Instructions] to the now over [Operator

Cori Lin

the these diluted with everyone. per you filed earlier this to and common Earlier to would gross these their morning, risk share, but we margin, all the a issued events. the forward-looking found fourth to that future Crocs’ Report of more announced to provisions non-GAAP the are factors. amounts Good accordingly, on uncertainties Thank documents reflect press some latest those the actual our Form to, of is remind other Safe copy call Factors obligated earnings quarter contained impact information to on laws. the in are include, Harbor as related caution COVID-XX A today Adjusted on our margin, call. and Report results XX-K, in information the Annual GAAP subject operating Form the statements at subject this statements income release materially the XXXX refer this for SEC you Crocs’ relating morning. of for XX-K. not Please to risks We is our the the described from are that well the differ of reconciliation section Annual of earnings to and Accordingly, release to to counterparts securities may federal from results, Risk you to forward-looking on website like call. Crocs our is could measures. business as operations, statements quarterly on impacts described of these this press is we update for statements morning, limited provided and joining be pandemic. regarding us These potential We crocs.com. not forward-looking

Mehlman, Anne Andrew and Financial Rees, Executive today Officer. Chief and Chief us Executive Officer; the are call Vice on Joining President

time, prepared the call over Following Andrew. will this to I’ll turn open question. At their the call we remarks, for your

Andrew Rees

Thank you, Cori, and good morning, everyone.

release from revenues our XXXX strong saw and momentum. finished we brand you with achieved As fourth this very issued profitability, quarter record and morning,

forward here highlights as in cash with financial and support exceptional XXXX review about flow. excited strong future to looking we supply are I in to to will never from stronger invest chain growth Crocs our deliver digital, our profitability Anne revenue continue our more I accelerated We growth. best-in-class and China, The am results confident has am ability our an brand XXXX. few been are future. a shortly, but in and detail very to

year. had and to penetration year the margin year. of of growth result than comp basis continues was to the XX% $XXX increase underpins more for consumers to around prior and extraordinary full resonate sales, world expansion of approximately investment points record fourth DTC achieved the share a these enabling as to cash for our operating $XXX iconic the from highest quarter $X.X and revenue products earnings Adjusted basis record and XXX in marketing. profit strongly a strength billion, in share grew Digital diluted business $X.XX, record flow, we points XX%. history. XX% in with nearly up Our results. a Crocs per our XX% to sales adjusted achieved repurchases. revenue operating increased profit X,XXX of and XXXX, XXXX of XX% million The brand while by return of Company over powerful an The doubled brand in shareholders quarter Adjusted We with XX% for of any XXXX of the million, was of

and Post and Vogue, Year a garnered like ranging from a Rare for year, were around top XXXX. continued Esquire. from be launch Footwear more collaborations, the partnership, pipeline Market media in exciting regional tremendous world publications, the of coverage Throughout We Crocs Justin and honored We Korea. Bieber as launches of the to innovative by Malone to to News with like Bazar Brand global recognized

We’re resulted stronger, strong accelerate never brand consideration, in double and our summary, I’m that ability beyond. to and of consecutive and for which desirability, brand pleased relevance comprehensive increased the strategy Crocs marketing digits In fourth the our confident has in XXXX year. been

e-commerce digital double-digit highlights. consecutive our extraordinary, XXth quarter of was priority. perspective, top growth. quarter let’s e-commerce revenues represents From a Now, with up turn growth our Global remains fourth revenue This to channel XX%.

combines quarter fourth and Our grew e-commerce which digital e-tail, XX% sales XX% compared last to of and business, represented XX% year.

expectations, both, Over driven XX believe at by competitive advantage top will improved relative our our on footwear our channel revenues continue quarter, serve sites accounts. our own our sell-through partners, will Performance strong year. in we replenished their brands. a channel term, of to those inventories prior The the brick-and-mortar hand wholesale incredibly our the other on XX% us grew preferred wholesale. With presence allow deliveries consumers exceeded digital be and in to in and long fourth versus wholesale to we

However, at high leaner inventories anticipated than consumer demand year-end. left we

and top of Americas XX% and by with pleased Turning led retail. Korea. increased which to Fourth the outlet profitability shop is remain comp on portfolio, last Company-owned quarter store sales South in We shop. majority makeup and of our the XX% year,

perspective, deliver best-in-class be key target Jibbitz Last with operating had Comfort sandals, but cash XX% the adjusted X,XXX least, product nearly delivered results for revenue in to achieved XX%. a From and Turning billion, our the to our year. increased margin continue incredible product record by operating Company’s highest XX%, double Having pillars: Visible full second of margins expansion we XXXX, grew the points to margin driven to not fur EPS. achieved digits and penetration year we technology. clogs, half. flow double-digit $X.X growing our our Digital history sales particularly basis XXXX strong in over We a results. already digital and

we clogs year-over-year the of in revenues our increasing strong, footwear XX% interrupted receipts as sales the pandemic, the Early canceled XX% several the XXXX, represent particularly season. were store of sandal of to in XX% total peak For closures XXXX. initial versus

As for such, nearly footwear XX% accelerated declined XXXX year year. of versus XXXX. last the doubling and represented Jibbitz XX% sales versus sales by revenues sandal XX%

Turning to XXXX.

more We’re journey our our investing consumer in key Digital our communication growth digital, diverse enabling four In our pillars. China personalize consumer differentiated investing priority. product base. to we’ll drivers, with top and be our is and effective globally, XXXX,

the of of long-term our technology We’re China, the opportunities. the market remains most foreseeable also talent, for as future. largest footwear world, and one supply significant investing infrastructure in levels high in to growth support chain second

We repositioned product align pillars. to product our have portfolio to four our

proven to We for we’re excited continued playbook focused Actress consumer investment. as to investments year, and collaborations. our to continue ambassador that she drive brand brand the have uses sustained influencers, and and demand awareness celebrities, high-profile second Mi To Yang that marketing are regional to through through will build heat a global and brand confident end, create Chinese signed and we relevance

We’re focused network store on in provinces. optimizing our partners mono upgrading certain by branded selectively

executed of personalization for end as of up this TMall consumer to in experience. store environment Similar our other the investing unique We’re have personalization in elevating playbook, areas ourselves year, improve strong selling world, leveraging and we’ll including by also store renovating digital, setting drive interactive we’re in to By embedding our the our China an growth portfolio to our proposition. XXXX.

full sandal. early confident a very revenue Sell has look Brooklyn, on strong to entire global sandal restoring We growth forward us and by product of in confidence on Slide, successes in Tulum a well lineup new our plastic we’re the basis, XXXX. as as Classic and introducing sandal our Finally, guidance. two-strap been building for giving a in season

innovation to clogs and for in continue We’re excited year. to expect clogs sandals this XXXX to about outpace bringing the we’re

potential. XXXX growth. consecutive incredibly In As Work and Free retail inventory QX, donated Healthcare $XX investment strong our communities feel experience, proud We with Crocs provide even through levels the ago to pairs comfort have our are than we long-term growth for the to communities and generosity with given coming Crocs’ our local global the our We to philanthropic confident our our summary, our frontline Pair fortunate to States. both Feeding healthcare enabling we value of over have to a to the of Cares over to personalization on four nearly outperformed In We in America, July, workers. hunger to the nearly our look Thanks or United shoes have seen partnered we’re year. through $X million on efforts program. about X meals global consumers, Jibbitz, to in and of those Crocs and XXX,XXX anticipate in-store back year based program raised growth a six In we in strong improved in relief now need. consumer online. in months in product, months, double-digit at organization in the million forward in strength more million brand continuing commitment

our optimistic incredibly XXXX We’re trajectory. growth about and

key engagement. strategy on years will channel digital-first Our focus consumer perspective, and growth China, From creating our a region drive pillars social and to come. long-term four are and clearly exceptional our for digital marketing product Asia, our powerful and our particularly

for a call the delivering for stakeholders. our all year their results was With the to results Anne have everyone. incredibly detail. team the Crocs challenging express best-in-class Before have our as now work to And entire will It to I’m want I we proud and review we of results. over more for I gratitude commitment in my delivered how financial Anne, turn executed and organization hard that, an to

Anne Mehlman

of quarter results. morning, good recap and Andrew, you, I’ll Thank fourth begin a our with short everyone.

amounts please For GAAP their our refer non-GAAP a press equivalent reconciliation to of the to amounts, mentioned release.

profit XX.X compared shoes, results We quarter levered a in cash an increase at fourth revenue the basis. increasing was spite a XXXX, and came we revenues year’s as of constant record EMEA, $XXX Fourth $XXX.X the global quarter. XX.X% pandemic. Profitability of in were SG&A, million exceptional. million operating by and or million income grew operating and currency and gross to of we XX.X% margins fourth a and pairs of on delivered XX.X% fourth sold quarter last Americas increase quarter over record profitability. best-in-class in generated Fueled flow Our

promotions Our as as attributable to greater average of the per to selling shoe. price during QX well XX.X% and $XX.XX, increased fewer discounts with charms sales increase

average an over with pairs of X.X%. in strength. selling XXXX, For We the up sold price XX.X $XX.XX, indicator we believe of X% an ASP of is up shoes, brand XXXX increase million

by review our results region. Now, let’s

doubling As Growth XX increased Americas global quarter, another XXX% Andrew to traffic higher brick-and-mortar by strong conversion. stronger-than-anticipated top in the XXX.X%, revenues Retail comps phenomenal up in increases was e-tail had partners. million. e-commerce, in and led up $XXX.X and mentioned on wholesale, our with earlier, and XX.X%

COVID-XX our iconic the In XX.X% commitment India fourth quarter. to Our distributor and to by e-commerce wholesale offset disrupted growth last U.S. performance million, India but India we relevance to in XX.X% $XX.X growth innovative the result through Strong marketing. product were are direct our revenue. in revenues was optimistic returning down XXXX. of due is was consumer QX driving with lockdowns, about in heavily Asia, of in from year’s the declines

to growth and in wholesale, nicely quarter. fourth revenues continues XX.X% store retail the COVID-related were declines by year’s Korea during XX.X%, million. to quarter closures. grew to up last due XX.X%; EMEA up outperform revenue South over e-commerce, $XX.X slightly and offset in increased Strong

relevance by in this quarter. EMEA innovation a revenue focus represented brand to not Europe do anticipate this well digital is impact our Western today, which remain beginning on nearly While stores expectations. of from continued created our and material we and product closed XX% commerce, as as to EMEA marketing XXXX be improved our benefit our consideration, to retail

points and quarter favorable mix margin XX.X%. Gross from margin adjusted and all leverage. regions fourth XXX driven all discounts, last gross and product improved XX%, fewer basis promotions channels, was Our up operating by in year’s

a of in on SG&A as onetime Street XX.X% result and is support year’s operating strong taken growth. in we growth to XX.X% improvement XXX our The a of leverage, versus adjusted points SG&A brand in Our additional impairments, quarter. excludes marketing including million $XX.X expenses XXth revenue fourth last sales SG&A incurred even in rate of noncash impairment an $XX noncash significant fell New decrease invested revenues, to and million basis Adjusted to variable location related York in City. future growth

last to to onetime gross operations. QX, added a SG&A leverage tax on sales strong growth increased X,XXX of fourth as Adjusted operating margin income operating Our and points of expansion. the operating points In XX.X%. million basis margin million benefit changes X,XXX to the $XXX approximately basis to tax million quarter over $X.X increased versus margin $XX.X over recorded to XX.X% in increased year, structure Company our related

For XXX% position share long-term capacity underlying to credits reflects is XX%, adjusted approximately be $X.XX Fourth $X.XX tax to rate rate, XXXX over to our of to underlying of cash borrowings taxes per quarterly to ago. earnings strong onetime XX% next XX%. for of and the liquidity $XXX.X years, non-GAAP borrowing flow, adjusted we our approximately paid record which With a cash GAAP our $XXX expect non-GAAP tax and million diluted increased quarter tax fourth and cash addition and quarter equivalents of compared in on record a million million year our cash revolver. $XXX.X to with be

expect interest our low add this, pursue If we revolver to to and the permanent purposes. to rates, we down existing use our Given general pay seek capital opportunistically may historically we balance capital corporate structure. for to proceeds

we share accelerated quarter, engaged or and in ASR, the program. restarted we additional generation, received flow X.X XXX,XXX fourth repurchase, the share fourth and a XXXX. in In cash shares record January our million of million shares quarter in our $XXX Given repurchase

of repurchased December January including shares last XXXX per average per at was $XXX.X was XXXX. Inventory million, up XXXX, slightly For the The XXXX, XX, in million we price $XXX.X a from fourth million X.X for of total $XX.XX the repurchases delivery share year. in quarter in final million, ASR $XXX share share. the impact

We mentioned, XXXX degree in strong that do remains given sell-through. constraints the XXXX. had expect in As same inventory the Andrew of we lean, channel inventory in not

year QX to the current like to our and future, Turning full outlook would I share for XXXX.

center adjusted approximately brand operating all we in we $XX quarter some COVID-related XX%. Barring continued expect growth XX% for we first to impact to improve expect regions COVID-related and to XX% XX%, anticipate of onetime charges closures, began our expected grow see to QX, and million $XX XX%. gross and approximately additional revenue Strong million between margin approximately to and XX% We is For as closures in to we anniversary XXXX. investments revenue distribution grow the significant that in momentum margin. XXXX between

profit we grows, XX% revenue SG&A, XXXX. margins of As leading expect be leverage operating adjusted to able to approximately XX% for to to

As we million growth, to $XXX to approximately invest digital our we capital year. chain supply to million expenditures this be in $XXX expect support

we reflects XXXX, underlying paid, non-GAAP For which expect XX%. be our tax rate, cash to XX% tax approximately to

fourth growth, quarter approximately and cash an tax and GAAP In be will flow. Our rate full XX%. year revenue summary, delivered we profitability incredible

cash time, for Andrew profitable I’ll We are sustained confident we have for back over generation positioned the ourselves call turn this future. strong for growth the At and flow thoughts. to his final

Andrew Rees

The has Despite challenging had Anne. never you, Company our we Crocs an in extremely brand stronger. XXXX. year in acceleration environment, an and expect extraordinary Thank been XXXX,

Operator, future, to best-in-class ability our for Looking please deliver call questions. I’m open continue the to confident in results. to the

Operator

Piper Thank [Operator Sandler. Instructions] question you. Murphy from first of comes Your Erinn

Erinn Murphy

a banner Great. And truly Thanks. Good year. morning.

e-com pieces question about that what strategy. bit you the feel So, fourth congratulations And customers biggest a the perspective entire focused Andrew share about from a up incremental on for of to little digital their you team. my XXXX. bit digital-first I the then, is you’re more and you I’d to guess, just XX%. versus hear quarter, on love was customer a more little about you purchases? with for seeing just basket Could bullish existing the specifically new spend

Andrew Rees

buckets. yes, perspective, the spend a Great. the of Thanks, appreciative three I Erinn. I know in kind I’ll team digital-first be will that. the put appreciate From remarks. And probably big

base first that’s broad think, our consumer we so bucket very -- of speak the communication. have I a sophistication can And we base. that about personalizing communication about is all customer

speak et they because they cetera, them intent to base. more personally, speak that we have return consumers consumer we buy is incredibly broad often, the the more, differentially. can we more really there So, to obviously, And that

say communication, personalization intent. I and that So, requires people, technology, would that of requires requires that and

back only So, business, saw banner I United of realm, And able That in is allowed meet Europe It’s were generally Asia. a last do scale, successful out right? the at chain the but chain, here scaling was not very us digital in U.S. really of have out us think, perspective that we really is the quarter as capability. and kind build the scaling it’s just our of supply to which demand. that you the that piece then, of from to talent second and had talent. digital right? piece digital supply in kind big technology, is the scaling of end it’s to So, to across our third building that of year’s States, we we globe. need But, kind of across

investment. little the and bringing three absolutely digital customers, really would we’re of new right? a bucket say, are first brand. existing and buckets I of buckets, of those customers, So, kind being to From all the the QX So, a three new bit customers new it’s

million had X new I our e-commerce customers on through basis. about businesses think, last we year global a

So, that’s customers kind a more key existing up. very buying we also see existing lifetime terms customers And is occasions. also of value It significant of trends returning number. in at some can shopping ticking

we’ve thing our lifetime important. Jibbitz of When one online, Xx value is that incremental a through is Jibbitz this penetration buys think, seeing And are increased customer we channels. I really the online their average highlighted before, customer.

Erinn Murphy

some I the have if on the have then, order book. visibility for And guys the you second are way to could sloped like strong. helpful. marry the But, that year. the that with just That’s trying half follow-up early ask sounds It guys I’m reads on you’re just seeing comment that guidance a Great. you

budged. year to $XX So, million QX $XX being million full the at hasn’t

lot seem credit yourself the half. giving a you’re So, like for it back doesn’t of

any be of two marrying kind on those help would great. So, comments

Andrew Rees

can give half the I maybe order think, a little just I’ll you you would still a Anne bit early book. general it’s more I Look, back -- little to a look, Yes. give detail. say comment,

there’s QX, booking long way to with a the but into go of back-to-school strength and holidays. We’re certainly

feel we’re lineup So, on to the feel that it in that where is. market, early. lineup about we terms great getting we’re great what about and really bringing We feedback but our it’s of

Anne Mehlman

our I last early start we obviously Asia QX, of we in if through much QX seeking anniversarying year, Yes. fleet then was in worldwide. March and just, remember partners you shipments. China retail the And and QX go then later and where closures in weren’t Erinn, then and in quarter QX, And in our think closed kind in that COVID-related of and

our So, and on we the that’s looks year, some are last strong, very it why business guidance is re-anniversarying based COVID weakness but like does.

Erinn Murphy

it. Got

one, you We’ve may, Jibbitz. higher to performing Just physical one just I’m so last really and see if how on something if much. would roll out I Thank points testing that’s price you’ve stores. noticed that’s been curious online. to you

Andrew Rees

introduced Great. the put -- our your think, online it’s but of on Thanks, price basket, you’re aids still offer. also really more of their out U.S. there the Obviously, in on of transacting economics. kind ongoing. a if stuff singles, it Look, I our package We’ve Yes. kind Erinn. U.S. Obviously, digitally, when raised multi-buy site. is test people

we is the It’s where feel say heading. test. We about good concrete we have like conclusions, go. it’s to way still So, ongoing. this but the think right we I wouldn’t

Operator

Your Jonathan Komp comes next with from Baird. question

Jonathan Komp

I’m fourth the understand XX% well. And it still the something could ask you’re sounds just and looks maybe I growth than as of clogs sandals to in difference then, half in more want clogs just that second given willing, clarify to if the like the quarter? maybe total like less little follow-up, And kind I’m for revenue. interested you’re I you if expect in one Could for embedding bit separately, sandals XXXX, that curious, which a in, just maybe comparisons? just Anne. It clarify and the you growth outpace

Andrew Rees

clarify Jonathan, QX sandals clogs can kind I numbers plays start, don’t the the Why sort and of versus and how Yes. guidance of with Anne out.

‘XX, as continuing we see look and through that I growing been have ‘XX, clogs think, at in through tremendously ‘XX ‘XX. we

have silhouette receptivity tremendous innovation et the that our in allows that and also to of we the color, utility partly But, that silhouette it’s cetera, that’s lineup. product print, think, in I that consumers consumer have. to terms to hike,

kind we strong of So, to bookings. obviously, -- got visibility and we’ve

that will sandal ‘XX. trajectory, a we growth going see So, clogs multiyear we definitely perform in clog expect strong would past well are over I as can growth look time, to return through growth. to to And in accelerate Sandals ‘XX.

Anne Mehlman

And then, Jonathan. on the guidance,

lot of QX some out think of things. couple interesting year So the -- with a with timing we ,I of much of Again, last QX had coming closure. a

So, we had revenue shifted that in wholesale QX. a of lot

So, we’re still guiding growth for the year. full

make to trying have sure still we’re good think, we that I visibility.

quite you year, we we year, giving in get we’re as transparent. half think, better guidance. will keep back be we the we trending how as actually bit And insight things of certainly obviously, into And move of will I through a the are the updated.

-- changing our the of we I visibility year. trending the have best strong, are we trends way don’t like in certainly we think half And the from of but extremely see all feel the underlying was obviously in anything and QX. business first the

Jonathan Komp

That to Maybe then XX% one just expectations SG&A close you’re the XX% operating year, Yes. mentioned in adjusted for believe the margin on for perfect I XXXX. think leverage. to you And Guiding margin I follow-up sense. XX%, makes an outlook.

you’re versus for So, implied margin? I about drivers first gross And ask color gross to margin that outlook full you have, embedding? just year other quarter any want the

Anne Mehlman

sure. Yes,

XX%. revenue our obviously, guidance, year full our growth to is XX% So,

distributors regions channel they’re we back. From out expect do Americas growth, of to as to continued We a really also coming with growth strong all wholesale grow digital expect expected growth and strongest have we from but the LED see perspective, EMEA.

Some we XXXX, that talked of back we a strong half. wholesale will much, then And margin bit. about, see and as of pressure as at is growth it gross a lot the little ship because return we didn’t

it lower. bit little SG&A doesn’t much it associated Obviously, it. because Just with have a is

thinking little margins. the really our mix, to that do wholesale gross expect underlying a strong with on gross we that of especially we’re the how return is our remains margin But, put about of So, bit strong. distributors pressure

leverage it to allows us However, invest. continuing while to SG&A drive

Jonathan Komp

opportunity and that’s And currency maybe would from clarify, to me. just it favorable you pricing not have Thanks. offsets? And

Anne Mehlman

good a question. That’s Yes.

tailwinds the me let currency Right do first. for a in some while. currency now, have time tackle first we So,

takes. I are So, in gross that’s just puts several overall would to from say and nice see. margin, there

We’re also say, would -- everybody on to pressure trying largely get in now right little product chain COVID. globally clogged great inbound offset just messed up are just seeing to as and lanes But, slow is are and things a bit, the is I are we due seeing freight. the shipping lane inbound from supply just currency the really

So, bit that’s I neutral. currency Obviously, will perspective, end would probably -- a my ASPs. support there’s always little say, your pricing And a then, end pricing to from question, opportunities.

work a year culminate at saw this look we’ve basis continue think, to and be unit-led XXXX, and see. expect done improvement margin points in I of led. lot expect you little of more XXXX, to ASP do than I that to we that But, I a our we’ll XXX bit do in in gross

Operator

Your Sole next question comes of from Jay UBS.

Jay Sole

of kids’ like about Great. quarter, It boots. seems good want the in boots maybe the to rain pretty so the some was you signals Thank women’s Andrew, the well. much. there and some ask you and rain I did that men’s

product. the the what quarter in You saw fit you that key you product just drivers your mention it of didn’t And in? talk about from do boots four can in -- category? Where

Andrew Rees

Jay, would I product us. that’s say, huge not for Yes. a category

key And following mums. kind lot amongst and been that’s a the rain. premium and product. I easy looking time, frankly very kids’ some it for. on a we It’s category have a very on products low-end for somewhat and of loyal manufacturers for that’s We been of for period I long too. attributes line us. There’s And lot in for historically they’re do boot good has rain It’s of the a not has think, is make category would the not a low-margin also of bifurcated. think, and been off significant I say retailers there’s a

of stuck in We’re the of kind middle both.

really stage. easy don’t interesting full looking and some on I do we off really from boot and say, really partners. good been interesting, It’s holiday really comfort more boot, ‘XX our as at that’s have wholesale to but ‘XX, we into for would development see So, to this showing getting that as not weather of we’re boot, that a we’ve a feedback been retailers. rain of warm and us it’s

Jay Sole

interesting. it, Got

Okay. Thank on -- just just the follow-up. you. maybe And margins, a and

the the look between you focus and second XXXX. and of can we think help us if were where of the If in the maybe margins, sort on XXXX in Could difference margins think and should factor. to But, the other you talked -- level probably drive something move where like third really margins about general, this wholesale that quarter a normalized to margin year are about back a understand or what the which XXXX just quarter margins versa, is obviously, based XXXX you obviously distributor sort about the drivers were improvement, in rebounding there the should to you the more vice more that like on level? how

Anne Mehlman

gross don’t generally, margins that mix And haven’t guided very impact. and retail shut feel was which But obviously, Yes. obviously, quarter margin. We gross does sustainable strange good margins a talk QX. because think There as think, we little our a don’t year pretty very back I I our last as was QX QX I a implied guidance. carry to and of moving is to down, XXXX gross is retail will going in -- largely levels. I’m are XXXX a say, lot I high we see our

retail offset. So, can the and wholesale the

time. certainly at abnormal you about in you this So, concerned I think to don’t anything point We’ll there’s that need keep posted. be quarter any in particularly

margins back think been pricing we’ve that are the and remember, sustainable. drivers we’re are have -- done. think, gross I we really margins which discounts major of And on, and really our overall, good, the gross work our proud all of we margin pulled

Jay Sole

it. then, last me. And one one from Got maybe

driving million SG&A, lot to CapEx for A like investments for Would going what $XXX time, China possible little You digital the the be be lot it go in in talked that’s sounds what CapEx. allocated is about a the elaborate to happening going to at of really and that money business? of on to products. a same bit

Anne Mehlman

distribution Yes, sure. It’s centers.

network really it’s building as business mostly to differently. digital -- is little distribution does So, serviced our support that our that a out

mentioned then, we’ve looking our distributor distribution that. as and so, to U.S. center. around globe Niwot And automating we’re center. And And our continuing we’re at before, moving the -- our other we’re expand distribution distribution Niwot center investments just

Operator

question Kummetz of comes Pivotal from Research. Mitch next Your

Mitch Kummetz

I have couple. guess I a

quarter? with can strong through up you’ve was part Let business. performance line business. start it seen was any quarter? of continued And that the what clog in the you Maybe like Is how sales in of QX there the way the if percent that in fourth me I’m say, much early curious

Andrew Rees

Yes. don’t But, can it in clog was right? in extremely Look, out, U.S., performance Asia. Mitch. extremely break in well performed of line here Northern I you, strong, parts and the Europe So, tell we the

So, important business. it’s our fourth quarter obviously part of a very

terms in out essentially continued well come continued performance its as absolutely. it In QX, of to be stock in into we QX, We QX. to of perform plan

this So, period we then because obviously inventories don’t at next to year. have time want reintroduced out huge stock we of and be

We for sites we basis kind see ongoing silhouette. that of an demand will on because our actually carry e-comm year-round do on year-round

say, been the yet. it’s really So, we found good. And would haven’t I top

to way long is online clogs. I think, there go a

Mitch Kummetz

can on the metrics on you you and Is of Got the collabs, any them? think anything collabs, XXXX, maybe of it. you around when that of are XXXX can sort terms type offer those there of And about then, in there metrics? timing versus give number the

Andrew Rees

Yes.

give a little I’d color. you So,

strong as a more executed even be a potentially did bit will some Europe last were the They distributed key than collabs evenly in already will in think little be well year. -- this year, through collabs already I they one month. We’ve stronger ‘XX. particularly So,

evenly be regional obviously will There year. of last be spread more more be they the than them will the be than COVID year. they were there were throughout There year. they will last So, impact, without will -- collabs more

So, think Europe, cetera. Korea, Japan, China, et

And about. so, that names but as tend niche some have of reaching be we’re we’re kind bit blockbuster those a more of to of little excited we kind also our to a do audience, smaller really

pipeline into say, obviously significant this So, this also at interest, getting I point, obviously tiering that over still would at the point. And super ‘XX inbound full. is we’re and is

Anne Mehlman

an something those our the don’t aren’t to a halo add, on just could about brand financially I strategy, important if us for their great -- significant part Obviously, worry remember you anniversarying financial are and to just own. a Mitch, from but marketing they need Yes. of perspective. create

Operator

Williams Poser question Trading. next comes from Sam Your of

Sam Poser

one. just a -- do right have anticipate now? share get what I’m to be just the count What going I you to is few. for ‘XX

Anne Mehlman

We didn’t guide share count, Sam.

So, I I which think we release, in million. would use -- just was what yes, around $XX our gave

Andrew Rees

$XX million.

Anne Mehlman

I think…

Sam Poser

it. Got

why and it -- you’re what longer. U.S., a to one, lesson market, then, I a to sort was Andrew, more that what taking us the about long? and you you to as turned the Europe, Okay. why can as by mean, -- little everybody you give doing give in what any get I like of can in can -- happened as bit. to some over what China know, want taking any taking Because, on negatively it happened details China long taken other impacted as happened, history And around? on But, it’s some years give based it’s history Number past, -- I so things it’s everybody hence China talk various

Andrew Rees

Yes.

Sam, So, absolutely, it taking -- the I history than look, I’m of I hoped of a some agree. have we kind would. issues, of for And lesson, sure think couple call can longer but complete give we not had key this I a right? on things. It’s time

that’s think the of I past. COVID. It’s and not some issues unwind longer just taken us of -- just the to

than partners it. equipped network is transitioned partners. with know They strategy historically, more And them. the I the different were the think as that, that to other emphasized we they’ve I it. a At basis. with China, of the in We’ve number grow branded would been that our transitioning, would brand have right? prepared province that through that emphasized has kind wrong product future that reset We’ve we core some operated by the And partners to point, we branded mail, a we a few on globe. and the the were largely The loafers, And the of We of bit not China transition that reset, historically canvas the we a that got one, and pillars grow people frankly to this globe. network uphold emphasized go. think, say I were we province single we had loafers. not real think, are number largely product the say, issue in but complete. partners. And with evolve to we’re in the have of thick So, throughout the way on that’s in I wanted been right? stores a four stores I work It use. around single remarks, more through indicated we reset is that been brands making of it strategy China, little that wrestling We’ve was in in progress right? operate been in we’ve So, was inconsistent of the rest the the

of thick that, of think be So, we’re the we complete in and that ‘XX. will end the by

us have a put right At partners. Tmall. digital we’ve the also business product the the with Mi resonance and our in So, significant brand Yang built the awareness investing that strategy, through same and in we and investment, have right will we brand marketing place time, the a where we’re

have strategy. we the very So, would really tunnel taking kind the have right at just of we we of It’s and feel But, than the end hoped. today. would confident light longer see liked we have can the

Sam Poser

How as the What Europe compare there us China. and U.S.? does pricing give lastly, in pricing, And that in pricing sort is versus the you then, could China of... to differential on

Andrew Rees

price? the to We price How price So, think Yes. market. -- local market, about we the pricing we to about think yes.

premium globe. in we icon we to in at relative the price today local the product brands sell and our moved would So, a don’t the times. clog try China is, price different a a as at we’ve Europe a to question Europe. our a to, as U.S. of now of bit discount something relative market that your sustain right little at in to we and little at. think taking rest to is a bear in that the And What other They what as do. look slight We sell in is they marketplaces. price, that was same can frankly that say, embedded sell-out competition. bit I world the many premium that it we’re translates price everywhere the competitive and Then, that differentially keep in it

Operator

comes from of question Loop next Laura Your Capital. Champine

Laura Champine

my question term for It’s on really this Thanks CapEx. taking longer morning.

lot year that catch-up sales with this just level CapEx a demand, Is of So, a makes is is years? higher as of elevated to sense. the this much out the spend CapEx continue budget likely of or that percentage for

Anne Mehlman

Yes.

business. with we’re I certainly investing think elevated guide I term. prepared long think, we’re it’s yet the don’t this year to as along

about CapEx -- million. of in will maintenance business. to we’ve is talked the replenishment run around But, which around continue And Our is is we what $XX rate that’s in depreciation, invest the past CapEx.

of year. proud really lot are We of flow. to from million We a operations over $XXX free cash cash generate our well this

So, feel the really we in like is important. investing business

the continue we opportunities. see to support that as we do will So, to the growth

Laura Champine

is this year EMEA your CapEx distribution of moving repeat? center in that not and budget spend about of much likely How does therefore the

Anne Mehlman

it of it the distribution as centers. as all CapEx say any I is majority distribution wouldn’t of -- I far the this will to that well, of recurring related year vast is say, centers. is

in it’s automate. investing centers distribution to So, our or EMEA upsize either to other or

call, So, that to to is because basis. continuing guide to ongoing past I I want want have opportunity as an I’m invest, make -- of I The sure think reason to we on the we repetitive necessarily, any see don’t it what revenue that don’t growth. I is hesitant would

Operator

Marotta question comes of from next Steven CL Your King.

Steven Marotta

leaner again great ended QX inventories on XXXX. morning, than Good that desired you Congrats Andrew. with a mentioned.

little year-to-date inventory about how to year. standpoint? this see Can and remedied your the the throughout demand from that you of mentioned outflow a remedy finally also You meeting is inflow be a going bit you talk

Andrew Rees

Yes. particularly I XXX%. really our the obviously, was I business shipments. we mean, our had wholesale was prepared around in remarks significant our U.S. partners I that the up where U.S. in wholesale comment think in mean,

shipped They them we of a product So, sold of as just a lot right. well, lot product.

that So, they and we the stronger inventories anticipated. didn’t end they with

we’re a bit up from So, perspective. still catching of kind little that

we ‘XX, to look say, significantly. able up we And as would so, into been capacity what have production I ramp very

production getting kind have it kind meet make really and I to in environments, the adequate I have everybody’s And our wholesale -- own that’s now. not with is is customers and -- products anybody really our customers We through importing and in we’re right? ports, and unlike if here of can DTC Beach expectations -- would first quarter say, and of product Asia, too. either, issue logistics. environments stock. our we’re capacity. That’s back get absolutely think logistics challenging, expectations our enough So, shipped don’t I today are doubt our will getting Long meeting right to from production just other And frankly challenging an else global

that going I smooth but little while. to will think out it’s take over time, a

Steven Marotta

wholesale increasing nice gross of gross margin margin. year? a -- mentioned, increase you in gross bit expect you gross year, you Obviously, as And to margin to very it with point Will throughout commentary just consolidated in the will there on That’s little put the possible. current a that regarding very helpful. of as pressure detailed on the finest the the margin be provided percent channel mix, do each

Anne Mehlman

we So, actually about reportable don’t because channel and are segments just -- talked EMEA Asia. that gross by guide our inventory. margin I you What will Americas, is say

of running any strategies core. is One and backwards lean our obviously our perspective in consumer to in of supports don’t our on inventories and expect run channels. we margins, stock keep from good inventory to gross a pricing lean -- go on But

margins. maintaining done the work really high about we’ve level on really focused are gross gross margin, on we excited we’re and So,

Operator

of B. question from next Securities. Anderson Your Riley comes Susan

Susan Anderson

Good Hi. morning.

wholesale doors congratulations Let XXXX shelf me in on for space even, opportunity year. still the new a I front, guess, nice on guess, add there’s wholesale curious feel like or Jibbitz very you door terms then, or the I if I’m gains my doors? adding was did terms quarter, come of of in fourth or that in just to impactful wholesale in or growth, existing from mainly sell-ins that significant doors? growth more the in And

Andrew Rees

Yes.

Okay.

last hit of kind first. me let So, bit the

think, I The particularly impactful real I here our their the of all but mean, in wasn’t was quarter well large significant. really U.S. of door growth So, wasn’t meeting driver with in and as rollout absolutely ones new expectations, some going of fourth growth that sell-through. the in expectations is growth. our terms customers, and accelerated the

And so, that’s the big driver.

we we That sale absolutely. business, particularly of SKUs of to of all major both with sandals online sandal terms clog bricks-and-mortar we be strategy. would and grow customers, say, customers. as will gain SKUs. in shelf our want shelf we believe over a of to time opportunity share add Yes, I as have part of our keep key gains, our our as well In share customers

a the that’s year do believe to significantly so, in opportunity the lot made in I Jibbitz lot I say think wholesale we an easier that increasingly there to is multipacks, wholesale strongest more Jibbitz with I would we and as particularly really which a the a will package nice partners in wholesale had handle yes, better, and but environment. for of do a grow we here can kind and lot Jibbitz make And headway year, them. last think into U.S., we display our

Susan Anderson

or grew work think, be And said go? four last economy it digits as where quarters. that then, that accelerating the category, Is I Great. the in you any then, double just And helpful. big could reopens? That’s it on color the could on category how

Andrew Rees

Oh, didn’t referring yes. Jibbitz. hear to there. what you were I

Steven Marotta

just category. work No, Yes.

So…

Andrew Rees

The Work category, absolutely. work category, yes.

remember on we gave really that of frontline product If earlier lot away year, workers. in a last to you year the healthcare

signal we business we months ourselves very for the And of that’s double-digit see us end very to environments, of growth saw I kind get would year. we’re see the put inventory highlight of interesting replenished our in over four managed said towards on -- in a interesting a aggregate, future. right? back high and in last some So, we we hole. big we controlled So, DTC higher last in continuing. the that We’ve that even so, that an growth, year. the a of very We think that

Operator

Duffy from next Jim Stifel. comes question Your of

Jim Duffy

guys. year, contributions. Thank Terrific you philanthropic morning. Good your you. for Thank

insights on that balance of U.S. million. XXXX to asset? K? be us So, deferred wanted to $XXX lot ahead on you assets, are all Can of start utilize proud I that What the to tax sheet, based? execution. a the reasons the And requirements Is in step-up give some big

Anne Mehlman

Yes.

some Netherlands. rights the the is asset deferred asset. Bermuda took from tax associated that of to IP our Remember, the And So, of we to is movement tax related the that with long over GAAP impact $XXX that’s the And perspective, upfront. actually in million QX. credit you of the of saved term. we that from And saw most the tax cash then, over money a

the So, that��s works. that’s It’s credit that why see you how upfront. big not --

have the obviously is do some against sheet. on DTA we balance So, a But, allowances that. that’s big why there

Jim Duffy

Does in And so accounting treatment cash that of offset million, that that it $XXX to taxes? region for what’s kind the have be certain down? drawing recognized a to profits in

Anne Mehlman

Yes.

So, it’s not DTA. the

off. it over roll it will valuation some how and allowances then, time, And there’s think, amortize that’s it. against I will

And it’s -- time. how down. allowance then into it valuation tax draws -- as how that over you have you -- can it draw that, overall overseas, there’s just of then you So, you your better is asset it’s visibility that’s valuation that’s the profit, prove deferred amortizes kind not the as But against down. you as

Jim Duffy

know somewhat spoke How talk unfolds? What’s XXXX? much I deleverage over the Understood. talking as year. the about And should depressed, the budget that? half versus across the whole, you year? about expectations get know believe, the back for ramping the curious, like first in a come SG&A Where shape savings COVID do in this, model artificially SG&A the you I year the marketing year. assuming I are China year model first in spend of be to you and half then, I’m of we in with leverage can for course the the for going you’re of the the leverage SG&A as from Anne, And investments budget SG&A into I’m XXXX. of looking year? you of for given the was year for the

Anne Mehlman

Yes.

and quarter. to some spend But part to leverage. growth, SG&A, think good just growth to SG&A because And accelerated see really support prepared we’re we overall, expect by there’s don’t we guide our question. So, yet timing. and in is as I it of we that

almost excited still SG&A see work we’ve our in structure. and of last in marketing that We’re our half able trends like million invested And to $XX invested the the done SG&A. back and about that we on leverage the year. this we’re we in similar marketing year year, And

while in marketing. that leverage see SG&A we to invest continuing we’ll be So, able to

Jim Duffy

a curious goods? Can question. last are? speak detail more speak specifically what’s cost then, Can why expenses growing are I’m what adjustments about guess, those the to these included in to in business. exclusions for of And you appropriate you related Great. I

Anne Mehlman

their move Yes. They’re costs. related running in to our distribution EMEA and center duplicate

Operator

Your Crespi. of next from Monness comes Chartier Jim question

Jim Chartier

other Andrew, I And Congrats morning. some if and progressing and really curious kind on a Thanks. are desirability, was by compares how region? great ago? could you brand regions the Good taking the thanks U.S. wondering on regions, provide I’m you and similar maybe relevance a quarter to question. my color and of consideration in other year or two for to U.S. what saw

Andrew Rees

of Yes, happy watch actually to, a important set metrics closely. That’s Jim. that really really we

metrics, in is, is, relevance four row a have brand the we double-digit the to increases it’s been the what U.S., of global you’d testament able frankly, years we the one extraordinary. strongest expect, increases have double-digit look for a pretty at a our increase increases. you firstly, in But, sustain most kind desirability, level as that and see seen underlying real as I I’d of And say year trajectory metric dramatic right? would consideration, to you I in business. those in brand it’s now, say, have of and as those think been the So,

strengthen EMEA, them to in take ‘XX, I strongly We’ve Europe, have look of the in in in them clear. Asia, And so be would and we as I some seen strongly positive say, EMEA our last seen China. really over then, key in we’ve and EMEA, India, seen to two like trajectory Korea, Japan markets, very we’ve years. we in in strengthen strong trajectory like Western measure very would We seen and them ‘XX,

at you I say we reason them kind little kind as of closely, we to correlated do gives the So see bit of growth. them, we quite would future look a that of follow them well relativity.

Jim Chartier

the then, those Japan And opportunity level in of Europe of is collaborations, collaborations, aligned? an number terms or helpful. compared more do very there regional That’s mentioned Great. collaborations this collaborations you Thanks. And U.S.? in How regional to to Korea, or increasing the year. in get the

Andrew Rees

future. Yes. into there Look, opportunity the think, I to them is grow an

year, As probably increase it’ll we U.S., the a this here look collaborations, at in be pretty still right. significant those regional will do in but more

of footprint I as well. Asian importance kind at strong see would some the global in -- right? with actually see Asia, of partners that look also those some regional of So, have growth could Frankly, we horizon, really et of those time I rising potential, So, we some two think, to I those and/or see three-year collaboration could regional we particularly rising celebrities collaborations. from a you of if over the with musicians, say a would in cetera key kind in markets, think global

Operator

next from Williams Instructions] question comes [Operator with Sam Poser Your Trading.

Sam Poser

helped how year, and by you. It I have did way equity sort donations have of brand Thank earlier might do the customers you how the read-through business. any sort -- have measure you may by just that to doing the many any have doing Do of good frontline driven new been on grew workers related to have that? quick issues? follow-up. of in the you a The philanthropy, the

Andrew Rees

Yes.

have not the it reason Sam. would did we did first we was insights, was say, the think, the thing I I some reason was So, do. it firstly, been And we very that right to improvements very because it, brand growth with the association been can from read -- would and that’s I it communities. a brand say, lot positive. appreciated. of that’s much We empathy definitely has in right?

effective. it the of customers, terms say, In new would I pretty was

at a top we look time from the was that those the was significant. that a off big a number. during And that was very it time head, activity continued period, customers but you I’m my lot give of number sure we period. acquired seen I’d we’ve customers it of not during customers. we There acquired new As

was that So, perspective. it from effective very

Operator

at time. will the questions call this Mr. return for further Rees no remarks. are closing I There now to

Andrew Rees

in everybody to just for their I wanted my Company. and thanks express interest the

to year. stellar the looking and We’re talk continue a to forward really to ‘XX you through

thank So, you.

Operator

We call. participation. for conference your today’s concludes this gentlemen, and thank Ladies you

You disconnect. may now

Crocs (CROX) 23 Feb 212020 Q4 Earnings call transcript