Earnings call transcript Q4 2022

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Operator

Good day, and welcome to the Crocs, Inc. Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

to Corporate conference Finance. like Lin, to now President, Vice would turn over the Cori I Please ahead. go

Cori Lin

Good morning, Year website on everyone, latest of today Earlier for the and morning, at quarterly thank you Crocs this may and Quarter crocs.com. for and Fourth press annual and a announced release our Full we XXXX results Call. the Earnings our joining copy us found be

and and this accordingly you that subject some thereof, the and call potential We is portfolio, Harbor like on financial plans, forward-looking statements product include, to Safe Federal otherwise to and growth remind our Crocs' the ability limited expectations, pandemic. but to results our would shareholder the are acquisition to objectives, the regarding potential, the strategy, statements Securities is of regarding the COVID-XX These information value and to of of not provided create anticipated and provisions benefits related or business deliver impacts statements HEYDUDE to, financial Laws. intentions, future

implied performances statements. These forward-looking achievements unknown except to statements different and may impact which future from required factors, the be results, of risks, future these achievements our statements events, Crocs' as actual any is results, and not other applicable cause performance or materially forward-looking uncertainties expressed or known by update involve the to or law. obligated to reflect by

call. Accordingly, on to XX-K actual are SEC. materially forward-looking of all subject We uncertainties filings report statements that Factors on those and described differ subsequent could with and the Form caution section this from described you risks our results annual our the in Risk

documents are profit, and release the income well the Report and XX-K gross as common adjusted filed for diluted their and gross margin, counterparts information Adjusted this tax selling, these risk in reconciliation earlier of from these basic Crocs amounts on Please more issued adjusted administrative adjusted operations to benefit refer rate, share and earnings press expenses, as non-GAAP the to Annual relating operating with margin, adjusted we measures. general to adjusted factors. SEC per Form GAAP effective contained morning. income A is tax other

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

Following the will prepared their remarks, open for call questions. we your

At turn this over time, I'll call Andrew. to the

Andrew Rees

everyone. Thank morning, you, and Cori, good

saw issued this press morning, delivered you As industry-leading sales $X.X record in operating of adjusted in release results, XXXX extraordinary billion we XX.X%. margins our including and

brand, growing results HEYDUDE high while the These the underscore globally the to deliver consistently momentum brand the and of consumer our investing the Crocs ability profitability for demand future. for strong

XXXX, robust forward to we another margins flow revenue and growth, significant expect year of cash Looking top-tier generation.

XX% currency basis. on was both and a brand accelerating for at a as a me Total fast-growing brand XX% highlights HEYDUDE. added International and EMEALA. growth few Crocs Asia were XXXX revenues of Crocs share currency in QX brand, Now grew we exceptional from constant constant full let to constant for year XXXX. XX% billion, growth revenues currency the $X.X second increasing XX%

initial gross delivered and represent to exceeded freight grew and basis of a forma even million $X inflationary pro revenues. over XX.X% reached billion expectations and XXXX revenues XX% of significant operating pressures. revenues brand adjusted nearly Exceptional HEYDUDE digital Consolidated in with XX% adjusted income. $XXX on margins

nearly X.X share upon leverage $X cash per to flow from diluted nearly Adjusted year income XX%. margins earnings increased HEYDUDE adjusted and from gross operations billion increased of allowed reduce XX% times at strong to $XX.XX Adjusted acquisition times and of to the us operating XX% X.XX to end.

HEYDUDE. as growth three innovation drivers our international Crocs in product well marketing you additional long-term give to of an into want and and I both on update brand, as XXXX, to transition the we for As insights sandals, provide

go-to-market important an we allowing accessible adjacent us relatively fragmented believe points, initiative to molded our in $XX category, market. strong a compete sandal growth allow technologies, Crocs, where price into us billion extend for will global the to Sandals, effectively

additional consumers engage point with have provides who And million with on business. sizable to Crocs entry choose also of already We sandals brand that to consumers sandal sandal not for consideration the may category the our with know an par is we since now a The resonate $XXX clog. clogs.

classics sandals, for four personalizable two flips. and subcategories; includes Everyday, Street/Sport our offers category refined Everyday focus Style, our The slides, straps everyone Within on and we Adventure. and broad-reaching

Mega category trend-driven and Style is styles female-centric, includes Our Crush. the Brooklyn, Crush and as such

with Echo and street is inclusive includes Street/Sport but franchises. of Our style in her category and Mellow a him, on focus new rooted our

category our Terrain family and functional Swiftwater our and design Adventure All the whole includes Finally, franchises. has for

was marketing. strong XXXX a first XX% two year brand as following sandal-specific XXXX. newness the such factory of we due sandals lack Crocs XXXX, the halves. supported shutdowns as effective and for the revenues by and sandal declined half Sandals cadence second of to grew Vietnam of introduced Crush, by the half, in a the In Mellow of Echo the In newness

in incredibly in sandals strong Crocs the to and important given We're as markets and such trajectory sandal brand growth newness and Southeast allocated sandal XXXX, planned marketing in confident India in Asia. increase a significant

and use new category, continue franchise, our and Mellow technology our Street/Sport our to height in year. in launch Brooklyn during newness innovative planning flip to In our uppers in popular respect the Style new we're franchise. we'll we category, With additional a

introductions, product expect marketing fastest-growing new sandals brand be reaching regional million to and product approximately momentum, our investments sales. in we XXXX, $XXX in category the With

it seen we outside brand, We anticipate strong North has has here saw this double-digit essence, America. another in our growth growth internationally of to the of brand in that markets, have for of as than even of a are drivers penetration US. approximately greater US. growth drivers same the the Moving one-third of important The growth quarters Crocs the now eight Crocs in growth we consecutive driver international

expanding with relevance personalization and new our always on innovation market driving finally, our to clog consumers. leveraging and social addressable engage continuously and and iconic with sandals; third, our collaborations; consumer on Jibbitz digital existing marketing for engagement; second, focusing First, and and

all in markets. In successful United US currency. been of Europe has and revenues XXX% focus across Crocs for grew by Kingdom the the with key playbook up unique currency EMEALA, Western constant our constant XX% Our

constant having currency. over South In high India an grew Asia, constant currency level already XX% XX% despite Korea of penetration. grew

and Additionally, growth building global of Middle resulting Asia. activities many in America, brand distributor the we in triple-digit a see our markets, halo in East having revenue our Southeast Latin

China case. has been unique a

constrained marketing the relevance. to As invested still brand of in and business lockdowns, COVID we our has our you team build know, in we XXXX. completed China then, China been by yet repositioning Since in

green of constant Revenues seen half second in have grew shoots the We XX% XXXX. currency.

significant brand As consumer the and presence returns to XXXX China more shopping, in Crocs reopens beyond. and normalized about of the building prospect excited we're

smaller While than XXXX. would in a still like, we we base XX% China approximately expect grow to

innovations another brand. the of marketing is driver and Crocs important Products

extremely robust. calendar is marketing Our

As we healthy celebrities, XX% and our a which partnerships expect to always-on discussing look mentioned to as sandals. more new across Product will newness consumers. when we brand a brands critical of Crocs of than introductions, global drumbeat be led. more as be which and put strong mega XX of some will regionally well brand mix licenses In more pipeline of XXXX, record I to product have

Crocs record digital and will by and amplifying digitally engage existing engaging drive will first ambassadors. in brand drops, social achieved dollars our social relevance led and invest maintaining be new over innovation consumers a of $XXX consumers. This marketing and approach We amount through products the to our million brand to first

much we've respect ownership, our HEYDUDE. Today clear for full represents now track, accomplishments, and many. the are to work We've on is plan integration of With is done. and first there recent Turning still developed accomplished the there year bright. to brand be is lot. The to a future a although

and We purpose identity have meaning. and clarified updated the brand its

hired the line We've trialed a team several map, the handle almost needs, expanded stabilize over second expanded amount in Xx in systems leadership expanded XXXX. developed staff and million XXXX, to to manufacturing on icons $XX XXX distribution over footprint, of in nearly the which the an roles, be business alone, international annualized road entire with and spent capabilities spent distributors many and immediate the was basis marketing turned new the half throughput

grew Brand expansion revenues pro were the XXXX exceeding partner approximately by in DTC forma basis, XX% of driven great expectations. wholesale on We've in our also States. initial a United seen results revenues XX% sales.

mix, the margins channel been than to handling unfavorable contracts Gross support and freight brand. and distribution billion $X HEYDUDE costs anticipated expand higher inventory pre-acquisition to to the due have lower we growing work center as

over million a generated income, operating adjusted margin. $XXX in this, with operating HEYDUDE $X.XX Even adjusted

While generate thus our about to HEYDUDE excited the for value potential the more are and do, incredibly for we far have the this acquisition will we brand shareholders. results

larger addressable billion global which $XX to has well. HEYDUDE of billion It us now enables to a versus as approximately other on The benefits addition acquisition. access the is brought a basis prior $XXX market,

a silhouettes XX% consolidated with perspective We are COGS casual XXXX pro of revenues. diversified representing now from far product HEYDUDE basis, representing on of revenues forma a XX% more

Finally, operating we industry-leading margins. two further our substantially shared our across leveraged supporting the brands, services

commitment company This that and Crocs, turn profitability. express two as in is call to XXX. Anne, strategy, to five-year for S&P and their team. Inc. gratitude I a exceptional entire the testament Inc. I'm growth Before our of best-performing best-in-class to placed would the annualized XX% number over to the our organization to performance execution talented proud and the incredibly work our our TSR have want Crocs, my I delivering hard

team the deliver brands and value. brands, confident was our with growth, XXXX we integrated a demonstrated HEYDUDE, sustainable ability and in profitability incredible and to year enter HEYDUDE momentum. and Crocs our shareholder I'm XXXX transformational as strength our but

With now in review more results that, our detail. Anne will financial

Anne Mehlman

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

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

million were revenues, $XXX to results outstanding quarter by addition fourth with aided the a HEYDUDE. of prior increase Our XX.X% year, consolidated in

adjusted to enabled tight capital of profitability We to repay on gross fourth quarter in of continue management with XX% B profitability operating our $X.XX, share the Strong XX% of margin per loan up million earnings to facility margin adjusted us $XXX last deliver of XX.X%, and quarter. top-tier adjusted and working term year.

detail brand. beginning with by Crocs now the revenue will I our highlights brand,

the an XX shoes, of pairs of quarter, year. over we million last sold increase During XX.X%

and basis on reported was $XX.XX, constant a average Our currency a price X.X% in on selling basis. decline decline X.X% a a QX

a increases associated constant DTC decline America higher As with promotions, currency offset slight North in internationally. ASP

year markets still North the the American quarter inventories became healthy level, more the was for the channel the second half year pre-pandemic. promotional brand fourth in less while promotional in the of and full helped and than Crocs right-size Importantly, a to

Crocs of driven product of growth be XX% continue Clogs, clogs of our for profitable key outpacing brand Jibbitz. From clog X% of with and other franchise to by product revenues Sales a classic perspective, our quarter, pillars: to the that increased results fourth Sandals become clogs.

of Sandals and grew drive XX% in to engagement Jibbitz to represent X% revenues. brand the grew XX% to of become quarter brand XX% revenues. continued consumer

the clogs and XX% become For XX% full brand X% year, revenues. of of revenues, grew brand to XX% sandals were were Jibbitz

by North largely million Crocs for XXXX region wholesale. as the in DTC was flat highlights indicator relatively let's XX% underlying Now brand of quarter. a from an of were XX%, revenues demand $XXX offset growth by decline review America of consumer strong

DTC by comparable DTC in newness. growth on top XX% XXXX. driven increased the and the North Digital comparable of led strength fourth for quarter XX%, sales sales growth America brand of

very inventory partners in manage channel we down inventory as quarter. levels double-digits prior with to North declined healthy our fourth versus health market year. with Wholesale in continue is Brick-and-mortar proactively America the on-hand

the Crocs quarter. both quarter, was Asia international up EMEALA led by brand in XX% with growth third revenues Similar the to and

XX.X% $XX were million, up revenues QX from last Asia year.

growth all broad-based our of all in As saw Andrew across mentioned, markets. key channels focus we

outperform growth the XX% and quarter, India lockdowns however, and in the double-digits grew quarter continued faced Korea the strong XX% periodic during QX. South year. China to for grew COVID and following

strength and broad-based revenues over an our in been and are over QX direct XX.X% brand Overall, the the of has of resulted XXXX operations. exceptional exit extremely markets. our pleased distributor underlying increased growth EMEALA last internationally. Crocs the in building direct with we Momentum years Russia despite two

growth We growing Turning future. and were holiday to in XX.X% HEYDUDE. remain and the from of QX forward our confident constituted look and $XXX of sales to of million, particularly brand sharing quarter. the strong brand potential XX.X% Digital were the plans in the sales Revenues during strategies XXXX. in

consumers perspective, in channel top for us channel. priority remains a our to enables both brands it as preferred From meet digital our their

which e-commerce our XX% of QX During e-tail, grew XX% and growth top XXXX, consolidated on digital combines in of business, XXXX. QX

in from quarter penetration Digital and XXXX. for last XX.X% year the XX.X%, was up XX.X%

and experience additional newness, digital Our activities from refined marketing benefited that traffic. product strong growth user drove

of quarter Consolidated inflation approximately in last and XXX approximately margin the About a gross HEYDUDE basis prior is basis brand in promotions, points of The margin promotions costs. year. XXX price points gross basis which ahead half brand. typical and adjusted adjusted and from higher freight adjusted lack of gross related addition is consolidated took than year had gross decline inflationary the was of lower points the for adjusted XXX an handling compression of attributable points or margin to as XX.X% we basis in margin to costs the to XX.X%, overall Crocs of points XXX inventory of down the was year, X,XXX basis industry. was

freight was legacy to offset brand contract the gross larger Higher gross business expand the impacted the holiday margin we promotional and was for work inventory as effect mix costs positive storage XX.X%, costs. continued center points. negatively to basis support XX of distribution capabilities channel by as activity. quarter Currency margins HEYDUDE by

of Our basis SG&A excludes direct acquisition to shutdown million and at operations XXX primarily by of QX, QX the compared prior improved adjusted year. our $XX HEYDUDE related the integration. and in Russia points to XX.X% revenues of costs This

XXX year leveraged points XXXX, XX.X%. full SG&A basis to adjusted For

quarter in we is and million marketing, services and in leverage SG&A significant support across brands as The to future this invested year $XXX to growth. the decrease given over adjusted full shared for rate infrastructure of the additional both due talent year

as basis share pressures margin same compared XX.X% fourth to margin year offset Our Fourth last points period adjusted XX.X% XX% adjusted $X.XX. quarter per declined SG&A increased the earnings gross operating for quarter leverage. to XXX diluted to

brand at XXXX, full XX% Crocs let top year growth forma a pro XX% highlights. with a basis. the HEYDUDE a International XXXX billion XX% growth in revenues brand Brand increasing XX% For $X constant nearly me currency few billion grew reaching currency. basis recap exceptional on and to Total revenues of Crocs constant $X.XX revenues on on was

increased operations XX% earnings remains to our increased equivalents million from XX.X% million income We and diluted XXXX cash a adjusted industry-leading. of Adjusted XX% million of comprised with of strong of and position on operating share $XXX margin revolver. cash liquidity $XXX and Full borrowing year adjusted $XXX $XX.XX. to per concluded capacity

cash reducing on We and net billion deleveraging and strong during approximately of Through total borrowings flow million capital to to under $X.X leverage Term middle working management, we X.Xx. gross pre-paid on remain B and gross generation to QX, Xx the tight X.XXx by leverage $XXX focused the Loan XXXX. leverage of

at XXXX, X% inclusive million The balance was inventory inventory. HEYDUDE million, December prior Crocs continues balance $XXX XX, third million to over quarter. sequentially, inventory and versus increase XX% of year of $XXX decline down a brand Our $XXX was the

closures. level revenue growth, last reflects availability and inventory higher of due to inventory year very higher and low the costs limited with factory Our inventory a

very While inventory HEYDUDE inventory is is healthy. brand purchases, slightly elevated Crocs from pre-acquisition

team on grow. entire especially Our we extremely is as inventory focused health,

our of was our balance distribution as investment half A over the expenditures offices, invest The in continue little was this investments And capital support our expand information corporate future all of sustain and centers in automate fuel and technology, business we we as growth. million. facilities. to fleet I and investment of $XXX these XXXX, growth. In will the mentioned, were to in retail

would XXXX. turning current then Now and share I future. our like outlook QX for full to year to the

revenues the at to grow Crocs to consolidated XX% expect For we double-digits. currency rates, current with QX, approximately growing XX% brand

and per to diluted adjusted of expect to share margin between earnings We and XX% operating be $X.XX XX% $X.XX. adjusted

this, cautious some growth conservatism our we European Even expect XX%, XXXX, full the we US revenue year assuming currency events, year current impact to on continue as and progresses. the of macroeconomic are the rates. particularly with the XX% about guidance consumer to of as For contemplates

brand revenues, to in growth and For Crocs regions to we X% all all to with and X% channels. currency XX% expect grow in X% constant

revenues, to on For in a basis. growth the expect HEYDUDE brand we be mid-XXs reported

includes freight, Crocs in inbound sandals. growth an of to XX%. and air the associated approximately lower mix channel We by brand profit slightly and benefit with offset clawback freight gross rates margins the expect adjusted operating This margin consolidated anticipated of

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

be tax will GAAP Our approximately rate XX%.

$XX increased per from any to approximately also rate expense We $XX.XX be associated on our share in future It anticipate does impact potential assume interest non-GAAP share current debt rate repurchases. XXXX, not to earnings the which incorporates environment. floating with

corporate our in implementation To invest capabilities, support support $XXX Investments to new and growth million of both $XXX include DC growth. capital million technology our expansion in expansion Las brands, for Vegas, to systems our of we our expect including new of facilities for HEYDUDE approximately HEYDUDE distribution to expenditures.

estimate aforementioned across are fairly of one-time charges capital million XXXX, and balanced investments COGS SG&A. the $XX In to approximately primarily we related and

achieve We expect times to this the cash the significant or less us combined to gross of by generate flow, allowing brands leverage two middle year.

to Our first program. leverage and our capital in repurchase deleveraging resuming X.X the one historically ultimate balance net invest to are to successful and the of allocation times priorities business goal with reaching second, share

throughout In summary, XXXX, flow. delivered growth, profitability strong and revenue cash we

significant Crocs strength for With we and our flow addition we underlying ourselves value of confident the and sustained growth, business have core cash generation shareholders. the of positioned creation strong the profitable for are HEYDUDE,

turn this to thoughts. Andrew final At over the back for his I'll call time,

Andrew Rees

The Crocs by and led continued world, Anne. had you, brand we're strongly with exceptional throughout in an Thank and growth Inc. in Crocs, confident is year sandals XXXX. consumers the International. resonating

exceeding the more a I the opportunity creation going Integration clear for plan and is be for well, could is expectations. shareholders. future have for value we HEYDUDE excited tremendous growth. The and acquisition not

please for the call open Operator, questions.

Operator

Instructions] [Operator ahead. Komp And begin Thank of Baird. Jonathan will today the come first will you. our go from session. we question Please question-and-answer And now

Jonathan Komp

for Crocs the the you first product are can that the you you you. morning. a grow initiatives should I full brand, I comment on Thank channel Anne, might for to picture on on grow of some geographically? you're the expecting bigger question how Crocs some drivers And a and XXXX double-digits. the said, of guidance? give the across for performance year? more follow-up quarter Hi. believe expecting? And Could North America you could the Good brand ask little color Yeah. a then look

Anne Mehlman

Sure. Jonathan, morning. good

full talk let So I'll start and me then year about QX. with

currency to So the X%, but will international, the going we about X% expect as to by go be which brand constant US shared, year, to to for is growth full powered Crocs grow. is given XX% X% really and

consumer currently especially sandals and the back to we I And newness. think America have we're do last and driven anticipating half, expect be by cautious good driven about the North QX over growth growth well. US, the growth in in really we're in going but is year still as that to

And continue an we the DTC this especially to growth for just then still region channel we overall to is from perspective, North our our side. e-comm on year expect that focus, America lead in

Andrew Rees

or Yes. maybe to just John. tad a about And that, color

flows at excited you'd our performance e-comm as products in new with the social and by that I right? digital styles new fastest, new have think showing able in up supported one extremely we we're sandals pleased bring and newness, the to in store as seeing, of environments, our growth. this we're where we're expect the the of environments our We lot to the wholesale. and marketing in QX, is DTC those are leading and That's QX, faster in both a to were they reasons point DTC DTC

Jonathan Komp

one then XXXX. XXX inventory then higher points you gross in looks just airfreight great. margin. and over basis freight investment for follow-up and the on handling the from a Crocs like little outlook That's And quantified It brand

would you takes level, coming color So back see as into business XX% brand costs expect be about the gross there? on a as you to back could and to think just Thank margin the some or benefit, maybe we Crocs you give the those of some puts you.

Anne Mehlman

Yes.

great me that's question. Let a -- yes,

So minute recap. to let a me just take

we're high from So XXXX, a obviously, point XXXX. anniversarying

which margin XXXX. a XXX about brand Crocs at gross adjusted finished basis decline is So point XX.X%, our to

basis that had promotions back then mentioned, we really then we and about We air about basis costs. were higher basis you over will And back had XXX the as then about that XX coming year. freight of inflationary XXX talked inventory points currency. the costs come of was about handling and freight points rest points related And to

brand long-term to will the increase our margin. For be do that HEYDUDE ramp in D&L the expected will XXXX, Crocs gross throughout to we about continue but with expectations network. then we need largely year-over-year, And through slower line is to believe year of because subscale work XX%

gross remainder color And to to consolidated will we So HEYDUDE. impact provide margins will year, obviously the to the by XX% including we one projecting the our for of continue side year. gross for XX.X% just we're be this brand overall about adjusted margin note, continue of

Jonathan Komp

That’s all you. really helpful. Thank

Anne Mehlman

you. Thank

Andrew Rees

you. Thank

Operator

Nikic next Our of come Securities. go question Wedbush Please will ahead. today Tom from

Tom Nikic

down It's Thanks us Hey, in said taking question. indication the gave the QX? and QX did believe look kind Andrew, ask wholesale want America better I like QX America hey, in -- in so for North the to demand North Anne. I going wholesale you XX% the you for brand us on to sell-throughs channel. How was for my call, of wholesale think wholesale of the sell-through. the give a I

Andrew Rees

we that was and to quarter our wholesale going end-of-season out sure we double was to -- year a of And with partners North of that. clearing goods advantage one in to I also took We channel down of the that ended our make we the in very goals with say, of promotional would We be Yeah. QX. to digits, it compete American inventories what would promotional be a sure happy primary we're obviously that took promotional quarter. was wholesale Tom, were pump effectively period. make performance kind in anticipated of and enabling

very as happy the to of important we're line. look in-channel in at kind It think performance inventories, we're keep wholesale we the So we was XXXX. business. inventories with our of very And positioned well our for

Tom Nikic

its But down it's plus a big over-inventoried you down it's the I still that sequentially. of is inventory number, risk How the kind optically, working on about Crocs think brand. brand? of course growth do could of -- Okay. I pretty ask we XXXX realize Crocs I any should for low-XXs. it also believe coming core the that over see with and kind way you're potentially core

Andrew Rees

last I a a same ways of over it's couple actually exceptional period because a Yeah. is, growth was Vietnam yes, period right? I last relative if after So think our the there's a was we factory Crocs One XX% Tom, year. inventory normalized think couple future an it immediately the that basis, year you to plans. low would things on think the of same closures, is say, to very -- well But positioned growth remember about.

So normalized inventory which that. an sales where the but be management basis, it think rate the kind best-in-class industry, We on like inventories is four want we'd puts of products a and us in best capital it from we one at ratio. inventories to have at the of in approximately to that's that's once of us to to new in to us healthy allows core terms have bring allows out not on working it and fill demand, excess turn,

given we it's So for it to about we think be, -- growth. future we expect want where what

Tom Nikic

of as $XX of one-time like XXXX. in guess, adjusted little to give those color more Understood. numbers, included description more for release are just Can in was for the press of a comes kind I'm million targets. could you. Thanks, if one sneak normally what from? but you're that kind I for of what charges in curious growth kind that the And the onetime bit just investments I which Andrew. expecting The you us

Anne Mehlman

majority There's how about of it. Sure. three that The consistent of are we talk those in were kind buckets. things just

transitioning where center. might center So, distribution it's we distribution be overlap

we're HEYDUDE that. as investments it's costs some center we're to things changes overlap we're rent some playing So -- corporate kind there. some duplicate distribution like and about, on we in rent headquarters and so some where with paying as making expand duplicate we're the same up talked of bringing Also

we're typically new So the we system for systems. typically implement one-time other ERP we And And as is as those one majority those call then are ERP of HEYDUDE. charges. out a costs, the implementing don't a the

Tom Nikic

in That’s best helpful. And Anne. Thanks Thanks XXXX. of Andrew. luck

Andrew Rees

you. Thank

Anne Mehlman

Thank very much. you

Operator

go Sandler. will today question from next Piper Zvejnieks Our Please ahead. Abbie come from

Abbie Zvejnieks

and thanks question. guys for my Hi, very taking much

So about of freight should lopping air in greater of mix tailwinds cadence gross of think the how we the margin terms from versus promotions HEYDUDE the and revenue?

bit the helpful. you And for due HEYDUDE I to so Can wholesale about color Just you composition, this? would inventory the it's elevated. on changes then more just on reasons logistics? Is behavior be just a talk think said this Thanks. any partner or in there

Anne Mehlman

Thank Abbie. Yes. you,

Let gross inventory. let margin HEYDUDE about then talk with the Andrew I'll me start

a QX to a gross to cadence to from So quarter. a throughout so I the brand, the wholesale from margin given return it just be perspective, a Crocs channel expect be mix pretty patterns. year, normal low seasonal tends the in

seasonal So guidance. the I would just patterns of kind model that out as normal kind given of

And sized talked lower of from that overall expect, that off as rolling XX.X%. of some as we through distribution those costs. to get that the a into and we're back plays to those we freight costs center, I from mentioned think as half be rolling we do storage well in as earlier, as first into HEYDUDE I still And then year. about perspective, to margin better the our increase half gross into into the we a XX% expect higher

Andrew Rees

HEYDUDE be I number on the say yes, factors. was part second a related Yes. around are on to a want it question, inventories, to than basis. we heavier of of I'd your And principally feel And HEYDUDE that Abbie, go-forward inventories we'd think the

probably probably ordered would things acquisition there our right were that we composition -- that were of quickly. on that heavier the receipts inbound haven't have that is pre sold One terms not was liked us in

through way have our work to to going we're So, those.

and supply historically. getting effectively we've There was also that whole match planning that we been good with so pretty can at effectively, just of demand running the and up the function process

have over we're been get the last HEYDUDE at we but year, confident brand, as Crocs I on think that not the On good we'll there.

point. I than bit think we at not a over it, sell about this coming have year. this but We're opportunities to the we'd heavier it's inventory little plenty panicked of like

Abbie Zvejnieks

Perfect.

Anne Mehlman

it's inventory actually our voice as a perspective. have owned on channel think is very over. just in I inventory, One, quick HEYDUDE satisfied own that with I note the can just from our we if we're inventory, that

Andrew Rees

Yes.

Abbie Zvejnieks

promotions, more And risk, are about you the think about should bringing this it. thinking more especially environment? on go-forward of promotional another Got then like newness or are how more level, you fashion we a as as normalized like in and guys

Anne Mehlman

Yes.

promotional mean, played on a especially. we as I QX from think promotions Crocs out from So standpoint, exactly the anticipated I side,

promotion of to we with year, more expect this our for think normalized do it environment. it to I product has think be I mix. Again, don't

think promotional of promotional a a to has return XXXX. of in environment it environment just a low more very norm against I a the

As we actually prepared we less said we're promotional remarks, than were our in pre-pandemic. still

expect be So and line to much I promotions from this do point in forward. pretty going maintain

Abbie Zvejnieks

Got you much. so it. Thank

Anne Mehlman

you. Thank

Andrew Rees

you. Thank

Operator

Our Laura will come Loop. of Champine Please next go question from today ahead.

Laura Champine

congratulations continues likely my that that If growth margins QX. question taking XXXX? for Thanks is and the to of, be, in the in shift to on how international, to in sort gross continues direction mix mixed international towards growth if impact

Anne Mehlman

a little that does where bit on growth It occurs. hello. Yes, depend

is gross Obviously, distributor we've that's direct-to-consumer channels margin, in if standpoint. to obviously carries like a helpful else strong really the from no growth, So which had it SG&A. in anywhere occurs gross but a our headwind margin world, then

it outperformed, growth into And good would embedded again, the but no have embedded, because the associated SG&A be bit, accretive margins a obviously, So distributor guidance. there's that our growth gross with international it. higher impact will we've overall little be

from our Crocs be margin So guidance that perspective. a embedded would in current

Laura Champine

you of a you the sort versus are through distributors or mix do of, outsized this incorporating, distributor in year? stable continues growth think And DTC,

Anne Mehlman

lot to we Actually, growth we and tourism mix. restock. of really it's saw saw a markets, year, distributor No, return stable we I a last strong some pretty had as think

I distributor. balanced and much actually more between think a DTC this mix it's year

Laura Champine

you. Thank it. Got

Anne Mehlman

Yes.

Operator

Sam Our next Please question today Trading. Williams go will come from of Poser ahead.

Sam Poser

for increased you my you I ROI going taking kind pretty What, a increase Thank to assuming mentioned question. aggressively. both have are assume handful. one, Number small I those that brands investments? the marketing, you for of, you're would on

Andrew Rees

have historically. but I we're investing Sam, spend, to So that increase at would invested dollar about going yes, think the rate say our we're we same I

a between digital our marketing of we're marketing. includes at X% kind run that brand X% we've and lot remember, rate. both of That you and of in maintaining if social and marketing brand Crocs sales So our marketing terms and the our of

brand significant. the that's has more factors a last over in business. one around dollar is But years, the the scale of obviously, several as lot this grown And amount important that

you you sales, percentage have of invest scale If and can lot reach as consumers. a a more you

perspective, HEYDUDE an similar We year in -- invest were the be as will the increase year for of year about brand. it back of rate brand. a HEYDUDE because we we first digesting did the rate in a over at the half last half the the underinvested at From

we're So will it getting the as in half similar then there be half. in first growth an course, increase But also of back the and well.

dollar the be So amount larger. will

Sam Poser

and when The investment went going on up me follow your you invest to the that. on higher x, let what you -- you into Well, we're anticipated? than XXXX said return was

Andrew Rees

The return on our investment expectations. was with consistent

Sam Poser

to Is North of XQ what North up the look it hesitancy and how at well? to Thank American that -- step going expectation to the it is right. DTC think as and more QX just for then look you. QX sort Then appears what like -- in to retailers moment? given All similar Is similar wholesale? America, it -- about

Andrew Rees

do Yeah. kind to We And way about Sam, to never is guide the I we wholesale trying say But first XXXX, We're the we're is year-end. I within sell-in think will think double-digits you're well we'll think it, confident at channel, as think region, by how kind kind I don't sell-through inventories in-channel of I'll I would that get have. of at that. by half confident what right? the sell-in is got very to of normalize of channel? with channel because expect down that we've healthy we we're normalize, positioned mean, of take our kind we And sell-through, pretty what about inventories.

trying that our and bit unknown. heavy with to but we heavy open-to-buy brands so and are DCs constrained expect are The the only that, little could some some and a are -- are of constraints, still manage we dealing that's challenges we -- with focused are partners of other not, an

We are to wholesale. our substantial to North deliver American starting newness

is bit confident we're point, that a but that think this some unknown. in of I at

and first in sell-in XXXX, we'll think I of sell-out. North a definitely wholesale, half of American but see -- So the normalization

Sam Poser

interest And then of -- the gross -- expense Anne, interest can me expecting expense like you year? full sort your the assumed tell net what for you're is the

Anne Mehlman

Yeah.

expense interest HEYDUDE interest assumes an to in guidance rate environment. obviously from rate our So higher debt rate by the the perspective, full so year driven than last year related of

And plus fixed our balance billion then reminder, the $X.X rate Term of rate, rate silver locked at a Loan average that's as million XXX. debt So $XXX of the floating debt X.X%. which of an we is is B in

you obviously, $XXX and and it's year this some, will offset paid we was model average, X.X%, the last year strong against then this And on interest will which down want it rate. flow really So higher year, anticipate million in interest than of to XXXX, cash significant debt this like if but we year. down be

Sam Poser

much. very Thanks right. All

Continued success.

Andrew Rees

Sam. Thanks,

Operator

our line live. from Please And now your of Duffy is ahead. Jim Stifel. question is next go Jim,

muted. maybe You

Jim Duffy

Sorry about that. Yeah. I was on mute.

Anne Mehlman

Good morning, Jim.

Jim Duffy

of have Anne, the Andrew. margins Good morning, brands regions. around and for morning, couple questions I good the a

First, challenges. unforeseen HEYDUDE that HEYDUDE rethink curious, margin still which XX%, opportunity for on I'm running I guess original above you've XX%. had does objective is your some XX%, however, the you make at the brand? The margins, of HEYDUDE,

Anne Mehlman

so Yeah. shared Hey, overall, hadn't the the margins I service One very out we do from that pulled HEYDUDE cost margins. when Jim, margins, HEYDUDE we're thank with, to brands. operating operating thing believe guided, you originally the both pleased we much.

we've now pulled out. So that

guide overall we brands of have then both operating are cost And get pulled running obviously operating out higher margin to the so XX%. shared And margins. to our service

ran XX.X%, both our year, we higher. delivered guide So but XX% invest in support obviously, brands long-term continue last to is We around as the growth. to we

Jim Duffy

investments But I in you. regions don't keep margin me, into excuse Anne mix towards mixed profit consistent? -- guidance. shift relatively regional brand, regional speak margin international the for see you Thank planned profit Helpful. the -- meaningful or for international, direction the Will you or and to to pools? the and you'll get want a know is growth of the can does mix you Crocs the of region the

Anne Mehlman

Yes.

our couple regions of profitable. an things are a operating Obviously, all very there. So, perspective, margin from of

profitability to see Asia, international to to we've markets, that China continue that expand. In in we scale investing been continue will As growth. significantly we support

continues Asian scale, expand those leverage to markets our it and obviously, profit And margins. then so, drives as

a margin So, I expect mix. significant change operating don't based on our international

Jim Duffy

Thank Okay. much. you very

Anne Mehlman

you. Thank

Operator

Mitch question go Research. next of Kummetz ahead. from Seaport is Our Please

Mitch Kummetz

taking Thanks questions. Yes. for my

First question HEYDUDE. on

So in you gave the reported. guide

kind know works year-over-year. think kind you I that curious over to expect I'm would to the little kind growth straight I know, growth to be year, I be continue to you're a math, go has you larger pro as think, a cadence that been as through quarters? mid-teens forma the think the of by I my the of of you that bit, if lap out numbers. moderating numbers. larger lapping And line

thinking year So be do on wondering that should straight-line moderate if a we pro as sort basis forma goes mid-teens to I'm of that or you expect of kind of by? the

Anne Mehlman

morning, Mitch. Good Yes.

I think as didn't growth year. obviously, full them is own just we a highest QX for

the think guided a On we we I growth haven't see mentioned. you basis, year. by reported quarter, good as throughout So

brand half As Crocs just in the cautious but Andrew year, also consumer. also mentioned, on we're just given the cautious of on the overall, the back cautious

half incorporated guidance So for year. back the the that our we've into of

Mitch Kummetz

business, Crocs maybe questions. the on a then just And Okay. couple of

the You last in I'm the it lined mentioned how believe overall. know performed for a how kind think in lapped And healthy I curious I'm outperformed the in curious to that the pretty this quarter, said was QX. growth year you year? and that classic guys that I category business was quarter. of Clogs clog clogs

half is kind kind of then kind expected I'm And those big you that kind the be and secondly, continue of by in there sort that segments. I if Andrew, of on curious outsized if if of in and kind that sandals, segment the the outlook of you're biggest of XXXX? everyday performed versus growth piece sandal guess, the segments of then, wondering four I there. referenced for the to of how XXXX? kind back I'm seeing And others, would assume the

Andrew Rees

a Mitch, there. of Good. lot questions Okay.

all gain that as we a look we land has of it's Classic of And we performed extremely exceptional in extremely job doing It international well an to long, in that. QX. right? kind share and well really we've year of mentioned performed in remarks, classic, and prepared So, our been lot as cement the important markets,

that's to US. in online well driving also Classic growth. do Classic the -- continues classic So continue to been strong extremely do

year. in From perspective, line I Lined a the last – say Lined peaked business the US

We of Lined And this lower bit the probably that business business. watermark to a we're important a a consumer of going we in for our quarter that fourth think It's takeaway a level. the to right? component little expect reset at a of year. high future, very moderate little that Lined So was moderated bit

area. We different think really coming into completely international I Lined we've got some for say is strong would that innovation story. a

winter products. has on incremental markets kind of So a a Lined international an basis, those of in demand lot still Lined penetration opportunities that

Europe think of parts northern So think right? Asia, I Northern

sandals perspective, QX think story right of if bit yes, a was the growth plus it about you're parts and in in in that So from different you line percent. sandals, growth HX sandals, different a And world. XX% we XX-plus of a talked for about

of new sandals, XX-plus in you driven growth well we've are Asia. percent So styles our as that heavy sandal as if of market, some by to rate markets a for markets sell-in think really distributor sandals to those and of about strong QX those brought lot distributor Southeast

Mitch Kummetz

Thanks Okay. and That’s luck. helpful. good

Andrew Rees

Thank you.

Anne Mehlman

Yes.

Operator

question UBS. Our of from ahead. is go next Sole Jay Please

Mauricio Serna

Hi. that Serna expectations a a -- results. how could Sole. what if you more of our little year Good particular for Jay bit is look Mauricio on ask on perspective? wholesale on business, wanted this morning. at This your the Thanks details it DTC from for the questions. I we and Maybe European business is that behalf more performing in when provide taking and are Congratulations to

when the for that prior XXXX, a to track as second think promotional doing XXXX lastly, to as And rate of sheet, on we Also, Should it do activity we gross getting outlook you levels? about leverage the more the of to margin lap think similar to health half normalized ratio. were seems -- the the the what on you acquisition? buyback we HEYDUDE resume company balance you're Thanks. soon to and expect a at your target as as return

Andrew Rees

Mauricio, then sheet. EU you on color and talk about gross margin little will So I'll a give and balance Anne

is our which business EMEALA well EMEALA fourth Europe, in performed obviously Africa Middle exceptional. XX% - quarter. East, the So growth look, segments, and obviously LatAm the extremely

strong of If we're market. the kind very we brand Crocs down trajectory Europe, seeing European in to isolate for the

of Europe. I XXX% prepared is obviously in our that, market UK, an remarks, in growth in important think called the out as example an we which

very DTC trajectory wholesale also business. business, our primarily up showing seeing for and that's showing So we're up in strong our Europe it's in which in is the digital brand both

XX% As think but to trends we going strong still in business. lap growth, very we we're I XXXX, European to see don't look our

-- consumer confident. they're traction. categories, very is we're the our we about The not product pullback saying are really So still And And brand significant that's still brand but brand. I'm seeing not for buying from that's getting Crocs. the not true have broader a they across trajectory.

Anne Mehlman

margin second your think Yeah. And on then I relies gross question outlook.

mentioned, I as environment. as promotional a well as from think the out I as so QX exactly margins And with perspective, we anticipated margin played

continues. each very get And you're be then that January period cycling the to liquidation and inventory through was our to tends successful. more promotions QX, and seasonal think quarters. you I throughout normalized of liquidation the

still we're were think less pre-pandemic. from than environment, promotional I a the of return promotional we

And year. out of ordinary. this feel a I the anything level that's at see so like we're pretty normalized we don't

we second past to options pleased during leverage we then want we're get debt paid debt question capital we priority Xx and to on And Then then really pay allocation. continue And allocate. how of to -- to continue in is which down have of We're with. your $XXX million some to our XXXX gross that. that down XXXX,

be we at share that look repurchases get to will a equally we Xx rates, priority will that to leverage, target also at and resuming we interest our point. debt, down would current at net X.Xx as So pay then

Mauricio Serna

Okay. Thank you so much.

Anne Mehlman

you. Thank

Operator

Paribas. next Our ahead. Aubrey Instructions] go Tianello [Operator with BNP is question from Please

Aubrey Tianello

Good with the my to start morning. out Thanks outlook taking for question. SG&A I so much XXXX. for wanted

on long-term to Can EBIT more little being the year, on than pull your the the on detail you're for SG&A able lower Just view where revenue more guide a a any you you're this with algo. preserve XX% given little cautious margin? to -- back just

Anne Mehlman

Yeah, sure.

marketing, So marketing for X%. to talent. in sales we a invest mentioned Andrew XXXX, percentage earlier of that invest we in as the as to And we -- and -- of call, on X% principally plan

was it's obviously, revenue on, try brand. to the So not to an decline usually if to because pulling area us at with significantly although back we preserve we want look really we

an from quickly out we necessary business in year, levers if deleverage think it's don't to year-over-year doesn't standpoint were cost pull back XXXX, we're investing as SG&A of for I this SG&A expected, because the So Obviously, turn we structure. pull to the us over more hit the XX%. and pretty XX%. But our can given flexibility

Aubrey Tianello

Yeah.

Andrew Rees

Yeah. Yeah.

question, able in from margins, point perspective expansion continue I growth actually we're view. of gross really, business to growth drive our which invest with are of is opposite think is an in and to SG&A future your emphasize, the the to I

Aubrey Tianello

Got Yeah. And one then HEYDUDE. just it. maybe on it. Got

terms wholesale the in how help penetration Just you of far the couple Can growth the for impressive. process domestically is been door along room brand with the are more in much understand us has is how there US? opportunity of of you how given amount years last much left in that so and

Andrew Rees

question. Great Yes.

we're your US, as implied the good really really we've progress our door that year made our and in you right? fueled sort progress of question kind has first we've in of in growth. wholesale the with in pleased So, made of penetration ownership So,

door is door the at As penetration penetration do we in we feel XXXX, US. there available long-term still incremental there's and like look

continue of penetrated of key And to So not significant for door on. think across have to customers the are share in there's There brand HEYDUDE obviously the greater consistently awareness as US. lot addition a continue that right? opportunity, drive I yet by styles brand new working as to we a to market, still and we that number we're we bring that,

regional, it describe was remember you we If -- the awareness purchased would it its as. brand, I when was

see, in drive we we So, rates share believe, invest will share of We'll in awareness, of sell-through. penetration. by expansion marketing increase door, door as we we will see and an both

network constrained that a of with long somewhat we're in our capabilities American lots are because HEYDUDE. But constrained for see growth growth the So XXXX, where distribution consistent we be not will our North run, D&L runway in with dealing potential. over

Aubrey Tianello

if guide internationally year? on Great. of for I for any just follow-up the And frame in that then reflected And update quickly on Any with that. the maybe could HEYDUDE? is the time expanding

Andrew Rees

Yes.

to one point actually, just and to in my go answer want think add back I last I it.

so one dollar just brand released of, HEYDUDE indicated and US in think that recently I was the I in think, information terms. not the some if fastest-growing QX, in PD

obviously exceptional. that's So,

distribution in our super and continue test From is select an wholesale digital in Germany That for with that clear, presence to come to UK the to plan international of perspective, yes, right? the customers will and So, we're the brand direct some will second internationally. sort XXXX involve a up game later quarter. third

partners East. It the Middle the sorry, some will Middle also with involve sort in East distribution in wholesale Southern and -- the key of Europe

all our we been We've a of and HEYDUDE that's important the lot associated dollars plan. important feedback for research modest positioning get from kind of plan done markets. for with XXXX. receptivity brand It's -- we've our that's that relatively It's International. of but in it's future. So these We critically about really terms in testing think strong

Aubrey Tianello

much. so Thank you

Andrew Rees

Thank you.

Andrew Rees

Thank you.

Operator

over like I'd Andrew question-and-answer will Rees At session. our for closing to this turn time, conference to remarks. we any back conclude the

Andrew Rees

and you for and prepared morning. the from And brand are brands we're year questions, answers as incredibly confident is how great our questions terms XXXX. everybody. this Thank very our in to you. Appreciate much, positioned exciting Thank of our also interest can remarks or tell you everybody's in another positioned

Operator

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

your You disconnect now may lines.

Crocs (CROX) 16 Feb 232022 Q4 Earnings call transcript