- Earnings call transcript Q3 2022

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Operator

Hello, and welcome to the Crocs, Inc.

Third Quarter 2022 Earnings Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Instructions]. [Operator event today's being is note, recorded. Please would your host now like to to over conference the today, turn I Ms. Cori Lin. Ms. Lin, please go ahead.

Cori Lin

product Risk refer Good statements as section our be anticipated and other to financial XX-K differ different update potential and subject shareholder implied any and provided joining to Form risk us press and risks, uncertainties would statements pandemic. that release from growth on quarter include, with thank the to to report materially described intentions, results of to these and some you the regarding thereof, statements the required value to of counterparts future or chain that our documents achievements our you information the future results benefits not we to latest Safe uncertainties be are which of you ability “non-GAAP” more on or or announced and Earlier supply may inflation, statements on or well call our We third forward-looking of Web and the future strategy, COVID-XX Securities issued copy and these forward-looking Factors financial we call. XXXX that remind law. morning those Crocs SEC annual earnings the HEYDUDE measures. the this the release but unknown and limited found the of risks is quarterly challenges, reconciliation as by site caution filings morning, These our objectives, their the may plans, report events, contained otherwise or and reflect subject and except a XX-K are our in like to Laws. at today press performance to statements. to subsequent Crocs achievements forward-looking accordingly are everyone call. for this performances is for Harbor provisions by These forward-looking cause applicable results, Crocs' expressed Crocs.com. create to, adjusted the on Form the annual information and non-GAAP is portfolio, as morning. the We Federal all other this actual Crocs our of our these impact with obligated results expectations, results, Accordingly, to described from earlier factors, related statements regarding the GAAP for not known actual involve potential, statements amounts to metrics Please factors. Certain cost acquisition as SEC. relating materially deliver impacts in to business could of the this refer we financial filed is A on

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

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

Andrew Rees

and brands credibly and good to everyone. for released strength strong led demand digit morning. our this results with Crocs Consumer and Cori, the you, I'm double HEYDUDE third the the growth. Thank of morning, exceptional, is and quarter revenue brands pleased we both

sustainable executing macro to remain environment, driving our profitable we and share navigate market on As gains growth dynamic growth. long-term continue a our teams for focused strategies

significant all increased a representing HEYDUDE of brand EPS the Adjusted per XX% XX% in XX% XX% were Adjusted Anne quarter XXX Crocs regions growth operating currency but were and of financial net X.Xx. XXX Consolidated at highlights. review revenue share, revenues detail will with brand of of revenues constant million, few best-in-class. XX% results leverage are grew DTC more here on margins year. our diluted revenues with million within XXXX, comparable growth grew basis. versus currency quarter Looking deleveraging constant third the to XX%. of sales shortly, in $X.XX grew a prior

Crocs marketing of quarter, to sales brand in as raise Teens Piper strengthen brand. the also In Stock Retail Moving States. These dollar September begin innovations. ranking and the teens, five brand in of fashion for for Taking product among achieved in we Tracking to from and Crocs within number with number continued The Sandler's continue the up bar in with were NPD favorite the our value Fall XXXX to highlights kids, survey, respectively, number the results the the and footwear the Service brands, of brand Fall number let's activations increased footwear six for brand to four five United XXXX. men's terms with as

Bembury with quarter, colors of Salehe in partnership In partnership released to very new be Cowan Our EMEA, we three Jibbitz all successful, fashion featured designer continues out as custom Christian high and U.S. converted our necklace our sold the which with Fan this hairclip, launch and with collection. elevating customization be accessories, In Crush up ambassadors, such wearable heights. Nana teamed a new global we as can that fashion to China, charms into a Chengcheng to prominent instantly our

how the fan-centric to relaunching request. Marketing demonstrate continue build product X-Eleven with fourth innovations time of our we versatility store our continue one brand brand, partnering and and convenience competencies, our to adult a McQueen we Clog relevance. activations at core Lightning As with is for fans

product a in foam on access specialty the arena, much elevated Slide the Early New Clog height for include that the excitement combining with introductions Miller sellouts, DTC with Clog. app LiteRide that silhouette the as for comfort Crocs him we targets segment In footwear Crush recovery the significant with comfort new is the Echo for retailers. of molded events Echo global, app sandal adding the downloads, as silhouette. now [ph] the our collection with generated strong modern her well

deliver innovation and both brand cross holiday into continued pace perspective, new of From product level an we strong product hit the double sustain and record XXXX. to rapid quarter. East. confident marketing introduction growth We're that penetration sandal this a high September, innovation future, Clogs and and through Sandals, sandals such Our growth in of a and half internationally pillar high see exceptional exhibit XX% in Asia QX. for Southeast all-time as digit the and nearly as will strong Middle experienced to growth plan growth, markets season an in back we important India, the increased

excitement Jibbitz to and year. with double growing digits last create Finally, continues consumers globally, engagement from

China. purchasing We digital drive capabilities increases driven more to saw personalization enable in launched most of marketplaces, existing We customers. to XX.X% by important growth XX% with to all continue repeat we We robust customers expanded new combined digital strong penetration regions, selling initiatives. [indiscernible] and in one new currency constant technical growth across growth, our enhanced increased from with including and

the brand in Teens year favorite one mindshare it early growing the our consideration Shoe to And number South article and Piper that rebrand excited and in number previously footwear a even regions excited the brand footwear was eight our We're fans In We're survey, America. increased study up past The seeing HEYDUDE XXXX, HEYDUDE, Across from Out of in the the of seen is success full Beer from casual Wall marketing in the of partners. to to to brands began in we've We're committed. in Web of to Selling purchase among exceed by the U.S. site. for Fall points study. Is also X market with easier HEYDUDE Sandler's HEYDUDE entitled, also nine rights States. a today. of Journal revenues United our $X this HEYDUDE.com the Turning Koozie-Like fastest Stock That about featured campaigns, in should with live Spring expect recent the have XXXX. earlier teens, strategy evidence portfolio which to as Northeast number seven And The influencer in went noted make July. the The directly billion increase of acquired its ascended brand now the Piper we than with Taking brand our the percentage recently Fall XXXX quarter, Street

we playbook HEYDUDE colder as Britt, for From with the implement Scott Going forward, brand a brand. continue as Denny product successful products is to such boots. we'll the perspective, the cases, enter to the a and HEYDUDE wearing continuing expand seasons marketing

of testing sneaker introduction HEYDUDE of brand in relevance Axel the category. the the the Additionally, the is

as silhouettes iconic clog Wendy introduce include to to new demand, Our products prints elevated Wally we colors, and and in and grow continue be to [indiscernible].

diversified With product the addition portfolio. HEYDUDE, our we of have

HEYDUDE total overall revenue For QX, confidence brands. growth of clear The we In approximately constitute for enterprise underlying clog silhouettes evidence XX% and the HEYDUDE sandals to potential base penetration and half the and just our were casual diversified both and to tremendous have as total of over of revenues Crocs X% summary, was strength our revenues. revenues.

what call Before the and I turning China's update in strategy U.S. want we're and Anne, the in zero provide rates dollar, widespread the interest from macro Pressures an war environment. COVID remain to seeing strong inflation, to Ukraine. the over elevated on

operating During in we've United levels, promotions In margins these and inventory closures. more levels response the recent making The the months, high States. historically and of factory levels difficult factors are elevated Vietnam combination to lean were delays by inventories pressuring pandemic, caused chain supply particularly performance of at seen near-term to predict. in

revenue market best-in-class XXXX an call targets detail. our continuing the uncertain third in share both profitability. I financial will our turn facing quarter confident more over even for while significant remain generating our guidance gain environment, achieving and raising review we're in However, will long-term Anne brands macro for to who and results to now

Anne Mehlman

begin quarter on growth unless revenue currency everyone. All with third Thank you, of basis, morning, results. otherwise short be will Andrew, and rates recap I a our constant will good a stated. cited

press of to to release. GAAP the non-GAAP mentioned this morning's equivalent amounts, please For a their refer amounts reconciliation

another industry As EPS in Crocs representing with Andrew consolidated highlights adjusted now beginning to XX.X%. margins, will of of $XXX revenues, with million growth. I adjusted had exceptional several an of we of spite margins we XX.X% by quarter brand. the our revenue In and third delivered growth XX% brand, outlined, operating headwinds detail leading quarter

over was Crocs we FX. X.X% unfavorable brand XXXX. $XX.XX, primarily basis XX.X shoes, a million during of currency the on which to is flat and increase XX.X% average reported basis constant pairs due sold third a QX on an of QX During price declined selling quarter, of The

brand review gained few and brand Let's highlights region. Crocs a now North In share. Crocs strong America, the remains by

for with to of X.X% XX% The $XXX up XX%. DTC in of DTC was increased Wholesale the selling indicator down brand, XX% was key revenues growth quarter comparable underlying growth consumer channel North Crocs demand, million. on America sales top the Third sales comparable an XXXX. driver

Crocs was market Crocs the for partner digits brand with our plan single International on as of million major revenues XX% revenues. nearly sell-out quarter. manage we high represents accounts inventories. net XX.X% was growth grew International QX, Japan Crocs wholesale at Asia in EMEALA. The to and wholesale brand South brand continue long-term during Southeast $XXX Korea. level Asia, across Asia execute in growth driver broad brand to to largest was However, based the and we growth the carefully ignite to in India, the strong as

revenues China and with and the from to XX% our Additionally, for the the continued markets, brand despite strong increasing UK distributors, in were from in Momentum year. and lockdowns green growing more partners COVID the Crocs with QX revenues than direct shoots with XX.X% wholesale Germany. top growth growth. EMEALA $XXX continued e-commerce headwinds driving continued million brick last mortar compared

been contributing our has momentum exceptional, growing QX on confident brand. exceed XXXX HEYDUDE. about have to we and The will the Crocs XX% $XXX remain Revenues of the playbook continue full revenues. expectations portfolio to and the million HEYDUDE the for from brand potential realizing Turning

compression on handling basis costs, to cost As basis XXXX, to of margin Currency points year from quarter only. in for points brand. Consolidated XXX Beginning gross to consolidated points margin basis freight impacted down for margins gross basis a of the transitory. points remainder or Adjusted providing points be for adjusted will which higher related gross margins XXX prior basis last we of impact the XXX the we Approximately of margin driven the basis half brand estimate of the to basis the of gross brand by approximately XXX by and continue addition HEYDUDE a will reported XXX XXXX. pressures XX.X%. reminder, XXX be were the inflationary and points. of year, was visibility XX.X% negatively Crocs is inventory lower by

work roll and our In addition, in although we higher environment the signed we legacy we a as adjusted business. and was North in P&L This gross Las promotional lease XXXX of term, gross To on to short the by growth facility normalized have Asia saw from significantly that offset freight margin anticipate continued larger in support to business, Vegas, America a our the expand support in to to a also costs DC QX represents storage effect were inventory come XX.X%. higher that new time mostly more open end, to stream larger through that capabilities of HEYDUDE will contracts a cost in aspirations. we take ASPs which EMEALA. margins efficiently

and structure. while for During SG&A basis investing the in will improvement growth $X quarter HEYDUDE XX.X% of million, consolidated year. XXXX, primarily last and talent to was Nonrecurring the million. leveraged To in achieved marketing in approximately were our our marketing of XX.X% adjusted $X integration while we continue XXX revenues costs expenses as third the HEYDUDE areas to related portfolio, This support third we to points brand. well efficient to still improving SG&A SG&A maintaining talent quarter invest marketing of like related as the Crocs key versus long-term of

base, allows flexible the fluid operating a to ability leverage remain SG&A environment. our across to dynamic in Our with services coupled shared us portfolio,

Our from XX.X% third margin operating basis increased XX.X% year. quarter declined to last attributable to XX.X% adjusted year, $XXX including million $XX from XXX last to adjusted operating Consolidated HEYDUDE. million points income

quarter non-GAAP per earnings diluted share $X.XX $X.XX. or to increased third Our XX.X%

and billion and cash to X.Xx by the million leverage our remains position approximately reducing a making quarter QX. the fully liquidity on loan due of cash the XXXX. focused end Through of repayment, and the our Through debt B, $X.XX and equivalents. the term under we with to growth Our at EBITDA the we debt net flow million first total strong to of remain strong quarter, ended borrowings as $XXX cash of prepayment repaid on deleveraging middle repaying balance we generation, Xx of third in revolver on $XXX

of last XX, inclusive in over of with inventory Crocs XXXX of HEYDUDE. at in brand an $XXX of The transit. million inventory year, addition year. XX.X% increase added million of balance inventory an September versus of approximately million, HEYDUDE half $XXX The increase Our was million $XXX $XXX had the inventory, prior

inventory a with related reflects limited due and year times closures inventory cost higher growth, very elongated factory level higher Our of the to to inventory the last revenue availability low and and pandemic. transit

unless be stated. to we Looking representing the XXXX our year are for numbers the year, to revenue constant reported a Crocs brand current close between of and would approximately full outperforming our outlook I After All on share be like will QX, currency to out basis, guidance $X.XXX for XXXX. otherwise billion growth in XX%. billion, raising $X.XX

$X.XX to are on strongest continue We growth expect to our approximately billion. a $XXX between million million $XXX continue This guide high reported to HEYDUDE, basis. revenue experience growing occur million to expectations With forma $XXX we are basis, billion consumer EMEALA on respect XX% to in translates $XXX of to and demand. million to implying to year to in $X.XXX consolidated pro a Asia XX% and revenues confident regions the and maintaining our full to the growth as

profitability we best-in-class and adjusted for be operating always, our are focused are the raising As to full therefore XX% approximately margins year. on

growth, remain After of bottom be diluted our non-GAAP repaying the raising per outlook $X.XX the now tax This year. back finishing earnings rates of lower are tax turn to summary, impact and over using for a Xx to between we will At adjusted repay share another million of record XX%. forward consistent $XX.XX. leverage end committed to time, year year-to-date, this I'll Through gross strong repayment to with higher his we achieve delivered QX final expected rate be approximately Andrew excess and look and out the rate interest by setting debt We thoughts. call In full includes to our flow mid $XXX to cash XXXX. to debt debt. EBITDA we

Andrew Rees

Thank you, Anne.

continues growth, management flow. we and to and As team we in year out the our of brands profitability that and look incredibly strong strength cash Crocs and the HEYDUDE confident the drive close remain forward,

navigating creating open uncertainties remains squarely on value. the long-term focus shareholder questions. for and Our Operator, call tremendous please current

Operator

the begin the Instructions]. question time, [Operator thank comes with At Baird. And will session. question-and-answer Jonathan from Komp this Yes, you. we first

Jonathan Komp

you. Good ask inventory. morning. Hi. want Thank I to about Yes.

total if looked have Crocs like I the Sorry been missed it inventory sequentially. But this. down might

to you clarify safe in could And gross about inventory assumption margin, for if then wanted the partners hand Anne, I do on is of I'm of that well a have embedding Crocs range quarter? here. kind a wondering in you the talk both promotional that, just that where in the outlook And level you're XX% fourth So as your wholesale terms today? as related to sense sit if

Andrew Rees

partners, Jon, give details talk don't, you wholesale about I kind and our will Why the inventory the Anne on margin. then of tackle and gross

actually over wholesale want healthy been the inventories us So a it's We channel, believe our in on. focused perspective, that something maintain from partner gives to we've super control brand. greatest

we environment. our America saw North brand to wholesale important period a their Therefore, was wholesale the And very continue year. over partners work down our was think major perspective, we distributors remarks, and closely to same U.S. sell-out health. manage probably from with super up destocked last North in the wholesale global inventory our maintaining You closely. America to that's We but in prepared in levels

me Now Anne. up to pass it let

Anne Mehlman

you. Good Jon. Yes. morning, Thank

was Our of was million about XXX, consolidated inventory of about and that $XXX included from up balance that $XXX was HEYDUDE. HEYDUDE year. inclusive inventory. last million -- That's

had reflects pandemic. year to we've of brand And standpoint, maintaining bit and sorry, still a pretty are in down Crocs revenue the sequentially, The Crocs gross close from brand year $XXX a higher to that our little very a gross So margins. The margin we're you not margins. standpoint. inventory flat had inventory. had a if million a inventory Crocs QX. watermark Yes, inventory year, then due And out, low from actually over take then Last that quite the gross high we're really inventory was from growth level in last obviously obviously best-in-class we costs for we last --

out we're see starting are come And to building infrastructure We down. brands. freight rates both for

So costs be going year, guided we year. our -- will term XX%. but then in long-term probably points to guided a continue out especially in operating margins we that transitory dissipate, to until less happen called basis to QX that's XXX give And to where promotional This relatively in didn't the we XX%. QX. QX will Long next be we than not start was promotions margins. greater do into of promotional, we and the lot gross for we a environment But guide anticipate year saw last compared We and market. there think

Jonathan Komp

really follow Crocs brand, the you're or potential then performance North gains that's international well understanding things through forward America, in continue outlook uncertainty. Okay, some the as helpful. hold thinking point? you've current you're question, recent one at look the might for getting your you broader feedback Any influence And amid just feedback macro XXXX the directionally as not that terms as the Just up, that to strength? this to any color to guiding that had, of of

Andrew Rees

Yes.

strong for innovation we And wholesale on I say, new I pipeline a innovation think a positive the accelerate marketing Crocs seen of product that's HEYDUDE a to side of side, able be through product and We customers pace on major of the important, think right? is accelerate to very things of next what couple we'd Crocs We our both and is showed We've side. have, super quarter. effect. a innovation year. lot very say the us innovation had the would

Crocs the both We good seen So we our the sell the really we've is them. And customers, are And at to positioned, on macroeconomic points. continue years growth in we're this customers. very to well the as them, to important lot price for at communicate brands really health. in those approachable They're environment, benefits selling environment. continue are with think that's of we've analytics, several our think a given retain acquired strong we -- of new last of to we look able

prospects for very So about and next we're positive the year. bullish

Jonathan Komp

great. Thanks of luck. and best That's

Operator

comes question from Zvejnieks Thank Abbie you. And the with Sandler. Piper next

Abbie Zvejnieks

Thanks margin The it's and taking on headwinds, the like promotion, industry really like quarter for question. impressive. this my guys. quarter. the all Hi, FX Congrats EBIT control despite of

America to can And So have to of the manage wholesale, in the intentional about flexibility wholesale you much allows you from talk selling versus how profitability? this SG&A that any you demand partners? on Thanks. reduced then just of level was the changes on North your

Anne Mehlman

Andrew talk to talk SG&A to I'll let So and then wholesale. I'll

really yes, with we're contribution. EBIT pleased So the

best-in-class to especially costs. service we brand, generate SG&A From SG&A quarter. able our addition really to continue able and But the the of with HEYDUDE dollars standpoint, talent in the margins. We're in continue also did We shared operating to, we enterprise an to leverage and overall marketing digital. leverage invest

important. really that's think I

connect to the strategically SG&A growth consumers. efficient So in investing maintaining we so continue while we'll our brands rate that marketing can of and with continue support that to both

Andrew Rees

and leverage Yes, both that services, us I add particularly gives to think one thing brands is I'd of benefit the which over is important. other shared

the better from intentional, versus Abbie. discipline I think a perspective, wholesale word is So probably

approach kind seeing making disciplined what and try wholesale we really they partner sell-throughs. and that our management, they're terms we hold in As be inventory that strong sure of of

U.S. high digits. As was sell-out I up mentioned, wholesale single

same the over period year. that's So last

But We business not we have them think overall terms overstocked. wholesale is And play they inventory in our game our actually managing prudent I demand inventory managing getting levels. strong terms we're sell-out. brand to really going their our their manage consumer believe and inventory them over had greatest in the customers by seeing we're into we of of control forcing ourselves. what and of strong So how being are

Abbie Zvejnieks

That sense. Thank Great. makes you.

Operator

you. Thank Nikic the next comes Securities. Tom And question Wedbush with from

Tom Nikic

little is you In into as long kind bit persist America of take? But that's that regards why channel, to you of which assuming well? the slower think destocking to have any versus Crocs in it the QX, have do rest wholesale the do will growth QX question. going inventory coming as how XXXX thoughts everyone. brand there's that taking in Hi. to for Good more year. the morning, Thanks my a of the I'm North is in expected to

Andrew Rees

to say in said sell-in than We're it. probably going QX? continue I'd sell in likely And similar be out the way disciplined. in what to Abbie's at wholesale That's super to Tom, result we're I Probably. question. will more Yes. that from pretty looking response to

year, of sure. I'm next not terms In

inventory I brands, aggressive the industry, range in lot holiday that from they're that clear people season. the been customers a environment the promotional into be pretty most glut our heavy inventories think the wholesale a going I think of guidance. to in of have see that our And we've factored

So a will people deal I with lot of this year. think it

continue think to and as we innovative year And I I can So to focus marketing, control that will of brand very what to And us for sell if think for profitable it convinced the for we're the partners. brand. what's we have and next wholesale we'll can for driving to we we control. know drive our they take on innovation, control comes. pace brand, But can of we is continue is pace we purchase. out sell-out And know important our incredibly

Tom Nikic

thus, And got in in we should you've it third pipeline to a kind was relative had of in innovation sandal if we a kind little assume tough the like business the you business, of more get the good quarter. sounds XXXX? spring/summer the inflection first had of 'XX? in see to when just bit could know on that And sandal a year-over-year Understood. what better up year. And XH XXXX, pretty we I maybe a you follow sandal half there Should the I in business

Andrew Rees

is should. introducing That has Yes, XX% largely you short, QX. out, driven you sandal In answer pointed been growth to products. seen innovation, yes. We've business the by that Tom, inflect, the new in as

also commented, strong very strong have very also parts seeing we're in penetration. that world the growth of We sandal

Asia So call out we're penetration the They Middle strong higher sandal I parts much and would East. seeing and growth. have India, of Southeast

very feedback earlier regional So next we we weren't we've we anticipate of would strong good continuing bringing part we're areas. some And those And to of say growth. year, on I in saw the was gotten innovation to look the to seeing support those growth strong sandal market. weakness we as impacts that

Tom Nikic

team, and the Andrew good. season. Thanks, Sounds holiday and luck for of best

Andrew Rees

you. Thank

Operator

comes the And next you. question Thank Williams Trading. with Sam from Poser

Sam Poser

good than Good that I've handful more on morning. follow up taking may would lot into the to half I be pushed more you've be than disciplined more the of it year And going want you that to and XXXX, here. being a you -- spring, just past questions. -- newness innovation hindsight look first then. be got the you wanted I would spring. pushed for we generally there's since this would have Thanks to next become a when assume and spring. was you more next then say The than okay my at now destocking to a little there

assessment So from it's not at accurate an that really apples-to-apples a product perspective. all? Is

Andrew Rees

an a a lot is coming. personalization. part within lot our innovation second within the spectrum, of assessment, what products and new across said, of of clogs, you accurate We've think Sam, shown customers sandals, within I the

excited think about I that. they're pretty So

comparable completely an to fact think innovation that the last be So it will yes. accurate, cadence that's perspective, I spring not from

on sell-in and the I we're the focused sell-out this but in managing our also inventories on commented think we're year, forward across effectively, through of making kind of right-sized of are looking globe. the that sure terms kind In and brand country that and both

Sam Poser

on HEYDUDE, you HEYDUDE expect working that the Crocs -- personalization the on are of but you the don't I road, few working got brand sense? is is with personalization one things personalization about down with any Jibbitz? Okay, Are Jibbitz coming cool. to great there I've more. because any the a in

Andrew Rees

Yes.

from in a way, differently yes. Sam, think HEYDUDE, shows but it So I up

short getting of through So direct consumer and kind our more personalization wholesale that or for I target for either to particular think SMUs behavior to want around we is special run consumer. product segments customers

create that it kind we styles time think sort that's will discrete the a of over within we work is can lots and will put to the of do cadence opportunities right? will little take then things down collaborations, in bit a on. collaborations HEYDUDE way do product an We There's That for little And have road. a of divot a opportunity time. opportunity So demand segments. we to that, of vehicle to sensible a And the short-term market but fashion that we to use specific laces there's make like I that. But and there's other definitely think not think to and HEYDUDE brand out. with

you're spectrum utilize we can our of playbook the and So with applicable the think is the marketing HEYDUDE starting to brand. promote and we broad to probably extremely of that engage kind way us already consumers, seeing

Sam Poser

last question. you wonder then, margin? And got distribution, are The new some One, store number I my of Anne, depth color? give us could opened XX% product stores want HEYDUDE answer I growth gross color use your differences give down there? in you just Is versus and I can heard I two South some us more. breadth but somewhere there's that? and give regional on two. I'll brand, the good vis-à-vis QX I you either existing for Jon's within know what you to plans this, of expansion to a

Andrew Rees

All right.

there's So a lot there.

actually, was three I think that Sam.

just me try. let So

penetration. about is of distribution, doors I So you're sort asking core growth versus the think wholesale in question

lot makes channel continue sense is, new Crocs, I of we if absolutely we allows the lot there sensible For to and international will that think look, is our a incremental us to U.S. we consumer for doors, of groups, look it a what a and take to our in reach but But incremental we're would market. and places, say on. applies

and Crocs going of growth be shelf, So share the shelf a so more space through. driven faster more by is to sell majority

a of where But that in plus lot last there actually in expanded the places clearly is and the we minimal also a on distribution, share it, shelf there and is months to we've the is quite in greater the Like top HEYDUDE, international shelf six shelf. expanded have more envisage future. distribution since a presence for beyond, we've lot and we presence owned come brand really 'XX already. For we've

warehouses that's the out Very the both. of essentially And clear to over vehicle for industry HEYDUDE stores. from clearance full inventory we aged are taken fashion. opened, stage. the opened help aware it's in release a some inventory brand try we've a small aged footwear and at that yes, much we're this channels The So in clearly we are sensible liquidation the and they that that two looking the to simply store

stores, precursor gross store clearance in So at the margin. for they're to they're And then that HEYDUDE this for a strategy Anne to over stage, a not is still works.

Anne Mehlman

wallet. and margins XX% Thanks, Sam, we really important, talked for we sure gross implies which about actually trying We're like not feel guiding. need for do right. we're is to being to and season. for perform do and and especially holiday We share coy hit operating not have will margin the do make in when year, our QX what consumer All XX% to the confident the QX, we're room approximately like think of for during to able a we've operating approximately the of to we year, trying be that's XX%. our shopping participate that increased morning. good We've we for to margins about keep But to holiday. and we guidance order guide feel With our lot

can leaves So flexibility you in gross margin promotion is us within participate there, to we enough or range environment that think appropriate. that whatever And guides. get of a

Sam Poser

XXXX, accurate is you, these tighter being point much basis look the last to the that a a historical tell Just so that. follow than between If about Anne, last QX that? lower. been changed to years that's and things quarters, two just XXX much the given or we that one it's you differences back at In on in hard gap very the margins gross had one QX between gross for margins up

Anne Mehlman

we read products was a hard I of including should think your to Yes, it's necessarily place, at really the mix Sam, to different make. we sell. and time much ago. XXXX look product think the point, performance going I that seasonality indicator line a a forward. think brand our really is in how and I long key that's a don't And of

Sam Poser

Thanks success. All and continued right. much very

Anne Mehlman

Thanks, Sam.

Andrew Rees

you, Thank Sam.

Operator

with Thank Loop Laura Capital comes from next you. The Champine question Markets.

Laura Champine

can taking the that. also meaningful and a with the And part little the hoping bit in really you to was I'm when EMEA drivers become my for we I question. quarter. expect to growth of Thanks Hi. the more of story? talk impressed during a can growth international APAC HEYDUDE

Andrew Rees

international a were perspective, as important plan Obviously, driver growth really as Thank plan. know about range particularly of well. a the is thrilled Yes, from you long long you, Laura. very growth we range APAC that

all So strengthening the those brand drivers brand. We were and of saw brand pretty of that broad perception the with markets. major based start in continued really

good you Google from look see kind really trajectory. stuff you if an internal external of of Our brand and if kind can studies follow And of perspective. market, that own by externally, that kind you Trends show

if our inventories strong great the brand lean continuing they're in through we really then and specifically, distributors really I strengthen. strong growth. think anticipating on is growth starting to kept again, very So the very And their and inventory. you remember shape And pandemic, build seeing to

also we and from were growth partners strong major wholesale distributors saw digital So important. But growth. strong

across very Asia and really across So broad it's both based EMEA.

sort out and of start environment I lockdowns UK really will HEYDUDE. China, see the despite where difficult Europe. to and a also fact distributors market, an on with And of a out think our remarks, China in think XX% plus toe the European And growth growth with terms then the year prepared very and to green have wholesalers. start we're Germany. for a in we to a we're be in international, in mortar brick long-term of presence focus important continue Those in to of that some number operate will put base. going going part we'll direct also to called shoots major HEYDUDE We two in going in we COVID of in we in of We're of international. it's But market perspective major next countries, the from our direct to two our trajectory markets major small headquarters. water go and kind QX

been about up We're optimistic brand cetera. toe the a we some very doing So research, international. and success. fashion. et we in for sure our to the make We've that's groundwork preparing that the water sequential for that very do really in that. And disciplined But set want we

Laura Champine

Got it.

of impact the much the much distributors, your of understanding is in and portion my specifically business, margin significant the QX? came that's Crocs growth lower somewhat gross did from a how brand that negatively channel shift margin Given

Anne Mehlman

growth. very to great our Yes, Laura. very, see that's also distributor a did we But question, direct strong. market growth growth. consumer We strong saw And strong direct was

was flat actually, direct consumer strong mix So to quarter. in shift because the was overall, pretty the so just

Laura Champine

you. Thank Awesome.

Anne Mehlman

Thank you.

Operator

comes next with question Duffy the Jim from And you. Stifel. Thank

Jim Duffy

challenges, taking quarter, for respect of Thanks results on couple questions. quick morning. third surprised product A was good then the your HEYDUDE guide, flow selling guide that momentum. the average the you Good question increase quarter brand. in HEYDUDE other in we're you. my clearly Thank fourth is seeing to questions typical the that seasonality it for I With inventory Is guide? HEYDUDE, conservatism, didn't the on a strong or prices. very implied

Andrew Rees

couple Yes, Jim. I things that, think of I'd about say a

next pretty was everybody by think that scale in be did This I of $X think we make will sure that bought one business. a we out year, the And wanted could initially it's fact when achieve obvious than next to of we brand we the when that things said, billion understood. XXXX, look we call we the year. we as look, into brand, more sort

$X So you of zero of brands XXXX. it'd the terms $X across to faster by And of be of we'll footwear one billion of billion. time think achieve I that if kind look historically, mark from sort kind brands, in

it's brand. obviously So high growth very a

different fourth back the through we it historical then. this a the quarter look, how We before. quarter, from never specifically look As fourth can but performance, owned is business we've at lot at was look the

performs quarter. the a we'll So a And have it's intelligence. I fourth see And believe to consumer conservative. just environment. say, great it's We don't prudent, shopping sensible bit we versus of obviously, brand be different would through how the

of we're the terms prudent Their in be quarter we how open took that I infrastructure But out area from lease on the HEYDUDE We've little to warehouse I think over in But we much are a have So grow will that term. area, of facilities being there that facility, infrastructure. just are I we expand next in Las call done it. the that is will or restricted terms thing in Vegas a how best and very our a manage bought constrained them bigger we bit in also and which be business Las And think perspective. third likely year. will in the we small. fourth of a substantively the short can for Vegas signed based the

the also the we that got have. manage we've business So to make kind just constraints of we within sure

Jim Duffy

overlap? get of a you data questions DTC HEYDUDE from overlap I share Andy, of files. in and HEYDUDE customer around then, And your Crocs customer and you. you terms Thank Can brand what Crocs see lot between

Andrew Rees

Yes.

I think bit this about quarter. little maybe I talked a last

distinct. customer But you As clearly for occasions we Crocs right? the look the purpose, buying definitely closet, look if see at are consumer, HEYDUDE they right? a wearing different the they as So a have at there They -- shoes overlap. is in their

purchasing. today of higher consumer. do Crocs. don't customers customers closet we They own lot HEYDUDE -- the have So share the consumer average But see than own a their and of between a do brands the tradeoff the

is for price taking from a we you athletic is share little $XX because end in there we share that. And is lower look it's of there then at look think the a an consumers' perspective, think we we marketplace, just at of from, bit kind in are a which we of that brands discrete really can obviously where share we're when share. the are think As that lot of see taking also athletic casual that HEYDUDE clearly shoe, sort taking the point shoe losing

for but different overlap So the occasions. purchasing consumer is wearing yes, there is

Jim Duffy

And Okay. average may, prices. about I thinking last if then one, selling

amount average spring you XXXX to expected prices, can give influence into or ASP? simplified in timing maybe the and then product the to selling to And related increases speak looking and drivers price us First, product to way a markets? of about think tidy mix key international

Anne Mehlman

Hi, Jim. Yes.

ASPs our that with So within the basically the were and down of decrease. majority quarter, currency, right, that was

we by was was up, talked U.S., overseas as ago. little America years also that we've a about We increases in forcing there previously promotions down taken that in North offset in as back the to similar markets. really bit in to we continue and as saw well traction in gained And that America the especially price were North few discounts, see ASPs what pull remarks just prepared a that brand Asia,

don't are Crocs dynamics standpoint. increases -- those we've we think announced price from a have that any I large

and talk overall, then So I understand market, both and mix from at I'll really compelling that next offer would we feel the say, perspective, domestically we're pricing to what right But where the look Andrew try a at for let going. about now points like he internationally we we year. anticipates And is value consumer we a at. price

Andrew Rees

Yes.

penetration, right? puts and price we range price of think probably So clogs are to that are We've a higher are point. flat, essentially takes got higher there's netting that a hopefully number point. I introducing at a We products point. slightly But introduced of Echo, also DTC a And that's channels. in well is a extremely also our performing as that's increase which recently specialty price higher point. lower sandal price the at channels and on at we

I a and puts in So position. like and takes there's kind we good of that us feel puts think

Jim Duffy

you. Thank

Operator

from comes with Thank Seaport. Kummetz Mitch you. And the next question

Mitch Kummetz

taking for my questions. Thanks Hi.

Anne, is margins, down the want commit from what year, a for quite But through to the also down margin, you of it's first what be jumps a to op guess me at lot that's know been don't XX% your is basis year-over-year on gross trending to out more. the expected I QX. bit margin I part really On the a XX% to

So way. such a big if less this let be SG&A more create me the op thinking -- we about that that gross should the anything would side it there ask difference in margin? leverage, on spending margin Is

Anne Mehlman

to full term. and year at long is better it think I Yes, look

with far still is pleased that. and XX best-in-class rate And plus. rate really long-term We're away XX. Our full is our year adjusted

we're going long-term take to continue to So one that dynamic. confident I wrapped and up I really think wouldn't those we're margins. in deliver too QX plus in operating share get XX% And quarter's

Mitch Kummetz

pro Okay. XXX million, quick I'd appreciate the QX your was know back how quarter, and that And QX. into I I then is million Do of am fourth range curious. forma that is QX this for QX But questions for XXX year? know up on first just you much that up a business. the couple I HEYDUDE. owning year-over-year XX%. versus last That implied

Anne Mehlman

our decelerates. a definitely with mentioned, sell But those we I where to with say logistics it's from have will forma directly direct to a pro especially holiday, to want constraints it offhand, perspective. we DC. consumer, and I Yes, Andrew out, very we XX% right, as ranges around mentioned, point just XX% consumer. that's as between big the And

next So ready we announced that we're opening new in Las that until won't year. be up QX but a center distribution Vegas,

So kind for QX. are we fighting through of logistics as well

Mitch Kummetz

And some lastly bit a you that seemed the kids in know don't to year Andrew, kids, talked versus HEYDUDE, talk adding later could on retailers the men's Okay. in didn't And performance be about then I if doing? that that's how seeing women's? have also difference already it. difference I you're to much in

could that's you developing? talk little how So bit a

Andrew Rees

part I your question, last couldn't Mitch. get the of

talked you some retailers to -- said, You

Mitch Kummetz

have seemed be kids half before. or in for the that of this seem adding holiday That to it didn't to year back

that bit feels about development? to little So on like you it that's newer a Could HEYDUDE. me talk a business maybe

Andrew Rees

Yes.

we've to it's around resonance has some enhance they kind bit. the the right? seen the on women's through seen learning tremendous business. the of soft strength So we [indiscernible] need brand of We think with product look, brand about couple that business seeing amount tremendous spots along, think and to are a women, this we the greatest go go as the summer. there very a We've of men's also little performance we're We essentially by the we on market. some were the but side of the clearly a and caused textiles product of side probably of what product But good range and

men's is definitely distribution will historically, part expanding merchandizing that kids Kids business. has retailers business and perform be better a always product men's, to will seen are vision women's than a that. brand. little the to adding think the But I Our portfolio. been we we've yes, women's. and we of bit good key and the continue to some generating But achieve kids And be to HEYDUDE brand

will seen that you've continue to So that. and see

Mitch Kummetz

Thanks. right. All luck. Great. Good

Andrew Rees

Thank you.

Operator

concludes the question-and-answer this And you. Thank session.

for to like the to floor turn management any comments. closing I'd Now

Andrew Rees

I'd just our in call continued like to interest us today thank and incredible everybody their brands. joining on for two the

you. So thank

Operator

Thank conference The for now today's has presentation. you. Thank you concluded. attending

may You lines. disconnect not your

Crocs (CROX) 3 Nov 222022 Q3 Earnings call transcript