CROX - Earnings call 2 2023

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Operator

Good morning, and welcome to the Crocs' Second Quarter 2023 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Cori Lin. Please go ahead.

Corinne Lin

Good morning, everyone, and thank you for joining us today for the Crocs Inc.

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

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

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

Andrew Rees

market growth Crocs XX% leverage per XX% Asian with fueled to continues growth leverage to currency, $XX at with revenues and brand a new and record by $XXX increasing constant gain as results. Gross Anne North introductions. from billion. constant of shortly, brands are HEYDUDE highlights second grew our of to XX% by XX% net growth. Cori, strongly increased and quarter. Revenues the us revenue incredibly pleased America exceptional repurchase our operating DTC X.X% industry-leading and with up sandals billion direct-to-consumer comparable with revenues million of market brand share. revenues by global and appreciable detail in HEYDUDE delivered share XX% diluted to share product I'm XX%. you, financial gained We evened shares once $X.XX and quarter The Thank Crocs XX% million everyone. currency. constant XX% over X.Xx revenues quarterly brand per DTC were rising and but second again, was driven July. in at The at quarter of earnings in continue over extremely We share, on good results morning, perform review few grew here more XX% basis. currency $X revenues delivered will profitability digital allowing sales Adjusted a Crocs ended margins. XX%, of $X end,

who remains Time market gains the quarter, excellent was In profitable Finally, health, our brand share on delivered The year. Crocs an to would brands XXX Companies and past. a brand the Cross of Inc. of growth [indiscernible], and may offering more brand in strong past new our continue brands. named success updates not deliver of summary, since growing like the to new respect We've consumers samples. clog focused our provide to clog high-orientated efforts XXXX. the seen our had newness Siren. back XXXX, with our to significant the as for and build and marketing simultaneously This and growth clog Crush, revenue to diversifying and globe. globally number we Influential recently, Megacrush excitement for product we're driving considered half Most introductions, quarter, the have each we With I and brand current in across reaching both innovation, the now including the teams relevance product while

personalization global launch Echo continues for In more a the our relevance continues is classic. expectations, encouraging. The addition, to our clog Dylan, very of initial to fashion-forward drive elevated outperform and recent and

Turning to sandals.

shared, we incredible global important into to billion all the continues robust XX% As this our initiative expand marketing go-to-market compete and in We're in category, robust effectively allowing Classic leading to sound sound technologies, our category growth compared to and price calendar. The a is last product franchises. XX% our points, of relatively an we and XX-month to driven molded performance, Brooklyn QX excited regions, will basis. revenues fragmented have be strong year where believe grew trailing saddle us $XX allow adjacent market. growth by for new a diversified sandal accessible Crocs, on offerings, introductions Growth was our where us by

and the have successful been addition, and Mellow Crush In extremely styles. top-selling are introductions recent also more

pleased who the we're Bembury. drive sandal this a pog in introduce From will very I'm We will innovative continue Pollex as acquisition million the the new customer to awareness Overall, revenues creative trajectory. for a of x Pollex with to Salehe activations and slide partnership styles. Bembury, excess with as Salehe grow director new X-year $XXX collaboration perspective, we that [indiscernible] to sandal Crocs confident of will such plans with with serve year. announced

for which Siren X quarter, such we a Rapper, with the provided sandal partnered instantly and out our to offerings Lil globally. slide, introduced halo high our Nas Pollex recently, and collection More sold Crush. This showcase we as

and took quarter Bell, Saitsfy, a marketing brand, clog During Other slide our the with pop-up from the and collaboration with Parisian over brand, slide Mercy a food same Mellow Week, with Paris Ottogi. we running partnership Fashion highlights include space. Taco close Korean

featuring Jibbitz out of and our blockbuster weekend. month, ahead sold quickly sandals launch this the movie clogs, last Barbie Finally, collection

in much is [indiscernible] growth in our and visited underpenetrated X within the way. it and currently creations relative China, as opportunity had is and with We Bai incubator and followers. On views. passionate momentum And for of emerging celebrities, products partnered revenues Crocs strong at in with for related XXX% leading constant XXX over Growth Crocs's South deploying Chinese create popularity many delight to Australia, personalization. continues designers fashion China surprise created to with rising Fashion driver brand including of June met own team Asia. QX, have to accumulated expectations Korea exceptional as Asia was ahead from another We're and million We local encouraged potential of the throughout Crocs following brand long-term revenues collaborations and give China, quarter we another a Shanghai stores. We've partners, a with stores. excitement how here our RED, playbook broad-based have visit brand the leadership known to important Asia used Jingting has vehicle Zhou XX% region, us grown. the to the growth social by to wonderful the Week. same and one by China suppliers more where I Southeast Chinese a again for grew by X time years, was market. QX collaborations globally, including currency. U.S. In influences, in sign hashtag and the featured authentic particularly The increased in style and this in Crocs over first the the to Crocs' been Labelhood Yutong our brand, great app, their consumers has and including self-expression our in topics were see

second Tmall in by Douyin, China June, Chinese mid-season even second-largest and summary, within incredibly footwear the casual mid-season Crocs we sales the in confident Crocs In During potential festival momentum footwear first TikTok, for In on brand Crocs in brand we're about the are festival. excited market the sales ranked popular more in world. rank the the in during brands.

of constant currency the digital growth of to incredibly Now DTC growth exceptional with HEYDUDE. XX% pleased We're XX%. and

and marketing is innovation awareness is products coasts. the customer driving acquisition and Our growing new on

revenues year. Our last the demonstrates compared XX% e-commerce West increased QX Coast of that to both and data East

New product silhouettes are new colors from range driving to excitement. new introductions, which

Our of holidays Memorial July ahead men, of and sellers top amongst styles Xth Day were women Americana and kids.

them performed Americana last As our a of back quickly, Wally in year, our for brand to women building stock. have selection strongly the The introduced XX efforts demonstration both Sirocco and the beyond out Washed and over great styles and and sold in patents The and DTC Funk newly year. on the Wendy sneakers to And approach, saw and colors, featured we're the getting Wally we Karina Wendy start. this off test-and-learn our early of Canvas expand process and are success wholesale. a new iconic in the within

on we launching colleges saw great or and brand collection, on enhancing awareness. September. and front, first-ever launched forward social lifestyle the sell-through. We've On we SEC marketing We with collaboration our started back-to-campus quarter collection channels Maceoo, Conference also HEYDUDE see from this a in brand outdoor our to look focused to our the featuring Southeastern

#XX part secure we pipeline of $XXX very QX HEYDUDE NPD pipeline tracking of #X QX on million as conscious on and brand used to in this second shrinkage over in strategic nonstrategic the we the 'XX. This the year part for of last data wholesale fill rose to last will from during revenue footwear in some U.S. marketplace. million decision was partners. brand, our self-space, in all DTC knowing $XX We June, pipeline of estimate in fill Circana, XX% consumer alliance indicates year there from last approximately sales. and revenues, fashion was Adequate up for channels, for to growth. Retail in service our the strategic wholesale based across accounts estimate quarter QX XX% discussed last competition be to the XXXX of in in in year respect formerly to based alliance fill takeaway year's XX% with Finally, increase our be fiscal accounts, that related our

lowering the year growth towards we remainder look revenues. expected is the HEYDUDE, are be we for As to outlook Wholesale of our low. for

are As in customers in wholesale plan, the is the called discontinuation based million the partners relationships earnings, expansion some noncomparable outlook with Since U.S. performance market smaller and performance. to strategic of on HEYDUDE in terms June, recent to in and historical of our a future major of year their while there $XXX last many outlined rapid we sales HEYDUDE's are have with number cautious customers. of out and pleased lack on us very their data overall due bookings

particularly penetration ERP near-term gaining to the and the due as in brand warehouse the strategic the back outlook, is constrained HEYDUDE and remain long-term shared, incredibly Even year revenue previously of related accounts this potential and We in of to basis. optimistic [indiscernible] capabilities, on the anticipate global transitions. we acquiring lower a Finally, distribution about we with is brand new customers coasts. the on half

digital both exceptional growth to new product brands. driven globally. consumers Finally, We turning resonating for currency XX% saw well with by introductions that are constant

app consumer our XX% scaling rapidly the For custom for U.S., and configurator and continue on Korea. the our South the an organizations clogs to of is Crocs be gaining offering Jibbitz. In by penetration design in excited reaching and over site to now online brand, traction, launch customization we

global the expansion and SMS key accelerating like with app. also the Our is programs CRM markets database in of

our e-tail As business higher ASP, better sale, where transitioning result DTC well sales to as anticipate we to and direct the of segment control higher were brand sales. sell consumer. our where digital -- lower and realize we directly Crocs' in of we on will some last we directly quarter, marketplaces to that in wholesale a as sits This gain our wholesale both mentioned crocs.com

of including experience, retain to and and digital-first in and in the continues in to coupled to investing introductions also both confidence believe driving and from scaling evidence we're clear digital In brands we're to share I quarter tremendous and new difficult review points These more working across robust, potential is investments HEYDUDE, summary, led have being our Amazon's our our price call enhanced customer our approach site such gaining For will results digital payment brands. of financial rates globally. democratic both recent journey. top-performing efforts, our customers. Day. Overall, as a improve product our growth the with digital we over now new have a benefiting marketing capabilities, We're offerings the be underlying – acquire in strength and we strong strong as the from market. a during turn Anne for to all Crocs to growth second detail. growth financial HEYDUDE is Sell-through and Prime channels, brand

Anne Mehlman

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

amounts, the amounts growth. diluted of excellent XX.X% billion to reconciliation consolidated in year-on-year margin press their mentioned second of to a $X quarter XX% industry-leading non-GAAP please We gross morning's For had of profitability revenues, operating quarter of another margin with XX.X%. release. equivalent refer of this and an adjusted GAAP adjusted adjusted delivered We XX.X%, growth with over EPS representing

revenues portfolio XX-month HEYDUDE XX% at well Channel brand DTC is representing XX-month basis revenues perspective. On and diversified total XX%. balanced from revenues geography with a Our of wholesale channel trailing and were and XX% QX, brand, mix in trailing revenue. a of was

brand Crocs approximately were XX% total TTM markets. TTM from revenue Finally, of international and XX% of revenues

revenues and increase price brand of up driven DTC XX brand the on constant growing DTC average The of QX brand price shoes, and was which The of fewer strong pairs million were during million, Crocs' by growth quarter, promotions During prior Crocs' internationally. the driven to $XXX an X.X%. currency by sold selling year was XX.X% XX.X%. XX.X% increases second a $XX, basis,

Echo, in Crocs continue important increased and products QX an XX% pillars in newer grew XX% generate future, growth as to with the of represent Sandals, for with demand digits sales. brand, double brand and the all Within growth to Dylan. Crocs' regions such clogs Crush

from world, and strong Jibbitz last consumers Finally, internationally. excitement growing with growth to create around continues of year engagement XX% the

brand wholesale In XX.X%. We significant North to in declining also the comparable brand, U.S. region. increased highlights XX.X% million, demand, with gained a for revenues key second half of Crocs' Now were first by share of The America, and a channel X.X% despite revenues underlying DTC more robust, Wholesale DTC indicator few revenues XX.X%. discuss sales increasing quarter consumer increased Crocs environment. a challenging let's $XXX to footwear growth America, an North a market. was market driver

QX we led Asia had growth to million, China to Pacific XXXX. South growth the the across broad-based as brand brand second for with X.X% also growth triple Korea quarter Southeast the in and grew long-term Asia $XXX revenues and revenues brand while digits, growth. from over were double-digit delivered Australia a was in $XXX revenues EMEALA plan of on increasing our and execute significant countries to of million, Crocs' strong unite and Crocs' Asia decline XX% growth channels. region.

reminder, of a year following benefited QX a from As revenue $XX million last shift QX out the shutdowns. Vietnam

going to second of approved terminated will Africa. after revenue well in relationship and in the and by into we of servicing growth as including outside and finding outstanding product with by markets, anticipated half impact strong decline their first growth $XX with quarter, implemented direct was offset This distributor territories. This This terminated the $X connection marketplace million. U.K. our diversion program the distributors. quarter, newly In million was evidence the comp France a not gray management in a in the market, XX.X% impacted DTC revenues quarter, as significant QX relationship by we the

this We EMEALA the revenue to reaccelerate expect back of growth in year. half

QX $XXX.X HEYDUDE, million, an of to last were increase X.X% Turning from year. revenues

growth DTC increased with selling sales basis market and pressure QX, last from gray the is XX.X%. last HEYDUDE During of due led X.X% QX predominantly revenues Digital penetration on prior or from selling digital year increased shoes, which pairs lower X.X to points sold of X,XXX year. e-commerce, an channel, X.X% Amazon. The $XX.XX million price was brand price average XX.X% to XX.X% the than increasing over during increase year.

the second last our were rates by inefficiency. consumer and quarter XX the consolidated margins overhead that absence XXX gross distribution higher from increasing offset impacted of and air fulfillment by with gross adjusted points As in Andrew driven favorability margins explained incredibly basis for the is freight partially points. HEYDUDE basis was associated Currency network costs negatively brand by freight XX.X%, HEYDUDE approximately for healthy. Consolidated ocean underlying year, demand earlier,

to with prior prices combined freight flat impacted points, points. HEYDUDE mix. for channel freight XX basis Turning inbound higher air by by adjusted approximately the margins XX% margins partially rates, points margin of or basis were with year. lower year, prior basis mix offset than was Crocs product negatively brand. XXX gross Adjusted reduced XXX XX.X%, Currency were internationally brand higher gross and the

a continue freight reduction inbound see in to We rates.

on However, this inventory by to storage ASP digital costs channels. has been offset related the network, our great market additional our transition and pressures of network distribution with combined subscale and

our brands annualize adjusted both in more HEYDUDE. talent consolidated of XX.X% last second and the than XXX quarter, represented and as revenues, which investments year points support to for During marketing SG&A growth for basis higher invested we additional is trajectory

consolidated an XX.X%. quarter basis adjusted $XXX margins by increased increase second class to in consolidated to million, adjusted XX.X% XX points operating income Our best and and year was remain prior operating

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

Our in approximately continued we leverage repay billion. X.Xx, the adjusted midyear leverage of equivalents. strong to cash us approximately net ended X.Xx, leverage free to end as $X our QX, gross cash and the the of At million half, of reducing flow and generation borrowings first quarter cash was $XXX second $XXX enabled million with goal with achieving debt

approach of We price currently quickly we shares million generation deleverage completed methodically free have buybacks, and repurchase we Xx of share exceptional our and to net repurchasing us target long-term billion we share repayment will program. In continue share cash remaining authorization, July, to $XX X.Xx. share on balance debt flow and resume leverage our of enabled $X Our repurchase has as repurchase $XXX.XX. at to our an average XXX,XXX

X.X% brand Crocs' $XXX inventory million, HEYDUDE of at year. to the inventory improve, prior turns million. was last decline inventory. to continue decrease $XXX $XXX A and XXXX, prior to very XX, a pleased with June we was Inventory of and was are Our down XX.X% million, year, year. health QX to balance inventory XX% of our

year I third visibility XXXX for look to our are for and of on Having the a and the full would we confidence in year the revenue for we first improved and basis, As Crocs expect half XX% to and basis focused and exceptional an XXXX, quarter profitability. to balance like operating XX.X% are best-in-class adjusted XXXX. raising raising forward, XX% our reported for a outlook All prior the approximately stated. particularly as We in with unless a of current will brand, otherwise resulting second completed be XX.X% basis growth full outlook we compared reported approximately share $X the of of numbers be around billion. On half, growth consolidated revenue always, XX.X% up our on from now guidance on year. are margin to full revenues to profitability

in to closely able operating manage outperformed, been higher confident have and investing we've are SG&A margins deliver our while future We gross as growth. to for ability margins

brand be reported grow to We to X% up approximately diluted between perspective, X% to are per the previously, to are continue. adjusted expect from to also From share up Asia basis, Crocs to on our raising guidance from highest expected expectations the and XX% to of with XX% $XX.XX to we PTC now growth and for our expected $XX.XX outlook prior earnings $XX.XX. a deliver outperformance brand $XX.XX, the raising a

million. full translates to a XXXX Andrew to as basis. This between mentioned, growth of outlook are pro lowering growth For XX% X.X% and HEYDUDE, approximately XX% X.X% revenue a forma $XXX year reported be revenues on on growth we to our

about growth to closely basis, the we and a to approximately are a have growth anticipate at potential remain wholesale the of brand. the for planning healthy [indiscernible] of very the for continue year, we limits HEYDUDE brand, young is that XX%, the our this our remainder their in and long-term growth inventory strong sellout wholesale capabilities. On very we warehouse constrained manage While X-year excited HEYDUDE partners

to For we QX, X% revenues significant to consolidated for we X%, HEYDUDE. expect pipeline have approximately grow as sale

for turn $X.XX raise expectations we time, incredibly adjusted $X.XX. the share margin pleased and over his QX are and final back operating thoughts. I'll were call We Andrew to In summary, EPS. to be At diluted per earnings to approximately operating that expect able XX% this for adjusted we of margin revenue, to

Andrew Rees

Thank you, Anne.

in we're Crocs growth. ability and forward, look incredibly brands to the of we As share and gains our sustainable and confident profitable HEYDUDE drive strength the market

questions. squarely on focus please and remains open shareholder for call health brand sustaining value. Our Operator, the long-term creating

Operator

[Operator comes first Instructions] Our from Baird. Jonathan Komp question from

Jonathan Komp

to detail just for I a more pointed how when bigger-picture quarter in expectations a give about want outlook then brand, embedded the Could bought the HEYDUDE? you know your for and to channel at just XXXX. the you're of HEYDUDE. to start by for you expecting And least the asking a revenue color question, your revenue total what billion more in little maybe think third $X you I third about little quarter by guidance

this as that think get we delivering we year. XXXX? But drivers beyond the You're should how about growth

Andrew Rees

Thank Great. you, Jonathan.

maybe I'll come your part for QX. So of kind HEYDUDE, do the and of to set back stage can the first look, then question last we

to was we strengthened I and think year, we that. doing team. as the dramatically see expanded introduced similar So time, lot is well, what we since that come we're are look we we same the well. -- back very of same to new we've owned HEYDUDE, at distribution that the And I'll distribution the of doing rapidly know last we've been At silhouettes A innovative to we've essentially would part expansion look, or Crocs. period say

up higher we we across than, XX% the look XX, frankly, all the QX consumer which look brand brands casual XX% brand, for incredibly footwear satisfaction NPS at is for high. space. and is as As got in most channels, sell-out the

prepared a back we've at our that that million sell-in look the there's pretty talked we're related did come. reducing on And wholesale. remarks, things one, going we to brand, to there. hard expectations year about year, last principally $XXX the as in Number we the of for few got As I is half of

the partners we of the in be are wholesale our half year. pretty cautious Second, seeing back

through about for athletic in of in some the overall principally brands consumer, some just back cautious to being that traffic big some work they're think trajectory other they've of of on overstock brands, the they're the they've trends the of don't the year. I X got good cautious got is history have HEYDUDE and kind they reasons. and One half

very seeing combine transitioning, of at-once cautious towards that have around we we some and warehouse bookings. year, we're business, our system. constraints When with our the So that end we our ERP were the

capabilities. And seen realistic market lastly, our from from some which it's we've at-once platform, coming we about gray -- last being the we're closed then on principally think distributors Amazon So the year. that we

are of hard but seeing mitigation We a up we're also working clean Amazon the that, to slight presentation.

So I think, hopefully, to incredibly that gives of you happening a strong the HEYDUDE. We're incredibly growth. not confident with brand, picture long-term with year's trajectory. guide of the We're growth what's ready confident next

for that think feel HEYDUDE well the we in and the long-term commentary of in growth around I your add Anne question, QX. was brand, some And U.S. the internationally. let embedded but here I'll both positioned

Anne Mehlman

thing Andrew. still Thanks, pipeline for the of or fill. remember, non-comp HEYDUDE is the QX the John, think as business just biggest Andrew I we're to dealing with, mentioned,

the of fill business, be to HEYDUDE year. that's grow and expect around revenue and that's up, expect Andrew QX obviously, And we to of related to to then million from wholesale $XX color for guidance that overall then and continue can had and about just to the do pipeline you -- be primarily see the Crocs, last our part direct-to-consumer growth. we presentation, provides really we QX, as down, the for So mentioned,

Jonathan Komp

Okay. then separately I if just could And That's very about helpful. ask Crocs.

to mentioned, the for was Could raising any where since seeing the maybe and the million updated the you're year still second for you Crocs to highlight like half, going maybe in in just maybe you Given like you're you're but Crocs quite the with it for distributor tie gross sales thoughts looks that from that guidance the the miss looks in upside close year. margin some it $XX on strong quarter? of for

Andrew Rees

couple. perform is particularly Thanks, a many Crocs strong. seeing Yes. within regions. probably we're in business frankly, John. brand the DTC is the I'd but here strongly strong, call America, Asia. in, And North very also very Look, out

we stronger probably it to is wholesale going business thought U.S. bit little was than Our be. a

also China of really China, think a So very about gave Asia color we we in good prepared performing is feel lot well. is that. Broader around you remarks, our well. I performing

seeing really as what strength Crocs, is We Jibbitz. innovation. times, well across really by in see So innovation, continued few well it's product I as a think talked we've about of as same it things the sandals we're kind but it's clogs that marketing as driven

trajectory. we in margin your overall feel Anne Crocs' very up let point. So gross pick I'll the confident on

Anne Mehlman

Yes. I would just well. DTC add EMEALA incredibly strong also that actually is as

So even we the is impacting distributor DTC around EMEALA that, in strong think, part growth though I of, XX%. very saw

but gross Crocs' flowing stronger. -- perspective, so margins a also margin from overall, through gross So are

Some of that stronger outperforms. is just channel DTC as

of The year second well we've margins. And just piece kind as -- freight recoup out promotional bit international freight in lower a as able seen airfreight is America. level we've last rates. supporting to then, are of which price our been levels in markets, taken quite North really the then And obviously, we've

now overall, higher be be of guide, I they bit to kind a that. little probably to we And So thought than going were expect they're the going be higher north to we're thinking we margins original than say, would of XX%.

for margin about expectations than are gross operating margin the kind our XX.X% of time, last the that overall, we rate. talked the supports higher So year and

Operator

The Piper comes next question Abi Sandler. from from Zvejnieks

Abigail Zvejnieks

just So just what just then between data behavior the specifically? on that guess, U.S. between in wholesale that second on first, having historical Is differences, sellout half dynamic? between brands? not And in material can that you the the is from HEYDUDE really and your happened this just comment any there Crocs any non-comp seeing Or difference you're I partner for HEYDUDE?

Andrew Rees

Yes.

I is a definitely asking it's ourselves say and and kind think I also would clearly brand looking newness, been lot it's the Crocs that sandals question that Crocs of of both Abbi. the obviously I is performed a it's closely well. newness And would feel. it's the would at say I really well. we sellout we've both is of wholesale, has clogs, at, performing strong. U.S. say And HEYDUDE the very it

think I gave that you to some to at strategic dramatically, partners. estimates, is our I XX%. the up all sell-out least in close think across aggregate up in we visibility X% and channels, It's

some We half and takeaway is have and kind it in performing on is issue is my to Crocs It's for And answer, strong. year. with how cautious react once to year. So of consumer history the I hard they bookings. of nonexistent of wholesale. very And situation. seeing our at that principal to The performs funders, the history years definitely back as the that and warehouse think back light, of it's in for half given the wholesale years us the we're highlighted the earlier in

So that's really our diagnosis.

Abigail Zvejnieks

strong That just -- it. And the then on Got management really the quarter. during was inventory makes sense.

So margin but you some HEYDUDE was storage flat pressure the from talked about costs. gross year-over-year,

you think start to maybe benefit could So when HEYDUDE margin? through you clear to the as some see gross do you inventory,

Anne Mehlman

very about pleased longer-term our overall brands for both We're return down and obviously, with target Yes. Xx. inventory, with for targets both be for coming brands line our really to in

pressure we through distributors of is Vegas opening that think overall, subpart are is we terminations U.S. partners. as related legacy we Amazon the next logistics to piece X second there's obviously, kind the we and went brand, on One also the a really the gross from and ASPs, gray and of international our lot mentioned, piece, some I quite that gross additional pressuring cure up which margin market terminated of situation of legacy did and storage seeing margins. of to, activity our distribution the perspective, a HEYDUDE center. new the some year Las with kind for of And HEYDUDE pieces you some when of expect that's

and not improve So we expect to year. work to the that throughout through

kind that's back of the in year, in line with be is margins I So shorter should our line originally which where around more the term. on XX% expect, thought, gross we next

Operator

next The Securities. Tom question from from Nikic comes Wedbush

Tom Nikic

guess So also the I pretty on or I we in we about yes, that's would year think fill based fill door guess or reacceleration contribution that when I slide in embedded do obviously, I'm comfortable of But had the quarter. the if fourth you year. down for how up sure pretty there's and with that not in that's imply new fourth in sell-through happened amount there's believe earlier significant last of QX, a that HEYDUDE and And channel the kind step said HEYDUDE, significant a quarter? get the channel whatever. deck,

Andrew Rees

Yes.

the with DTC anticipate business there's is, think in bigger, It that One balance quarter, things. right? fourth the typically the period. is few we I is in holiday a the

think pipeline harder think of yes, a to nice we in business, got trajectory also the And business. our So the will is wholesale looked sort DTC in we've is DTC as on still And can the we rebound you balance business. But fourth there And that's our see, at the quarter. a a we component fill QX. see I of of comp bigger.

Tom Nikic

inventories. up then to right. follow on I just All And want

I year-over-year being about year-over-year in think inventories half down we was not down Should XX% inventory the think back So I'm if mistaken. well? as

Anne Mehlman

to don't X-turn our to guide that the the I think Yes, at of don't by closer -- typically expect I we target. to be we inventory. end say would year look

revenue in for a from both obviously, wholesale on, tend QX. in lot a ahead selling for of very brands to high depends it perspective, think both we will inventories a I season and bring So

depends our by So around that in probably that inventories X QX on will QX. think order book, some turns obviously. of line we back be our But

Operator

next The from from Sole comes question UBS. Jay

Jay Sole

Crocs it nice for to the The you data gave deck us, $XXX that sandals be brand. slide point that continue to million expect

from new mentioned You HEYDUDE. also styles some

where the a ago? maybe in was right of it you here? deck do pointed to think going slide And I to it where Wendy year see percentage Funk, and you now? from And What out Wally HEYDUDE revenue where -- Sirocco. the is

Andrew Rees

is We been Wendy. into important I to the other in HEYDUDE business but while new think to ton from that's one is and day, Wally silhouette. styles, out and going we're Jay, of silhouettes is and -- of occasions, We've of continue product very and providing a the the other qualitatively tell And brand we wearing diversify a highlighting brand our and take that large a into the you assets Yes. innovation iconic perspective don't well newness can the that portion data, not kind build which

and we well Memorial Xth when pack, right? So and shoe, the had it year, the stars really is they of we going that. I a July, example great brand, saw with traction into highlighted think did the patriotic bought stripe we last great essentially,

kids. to, that amazing. I expanded think, that we star and did XX-plus So said we And men's, colors women's across

business, in and -- a business is accounts. of key kind and Wally very innovation also portion and I running which plus portion So well casual the DTC large the so very a our and performing is Wendy, a our would in wholesale large in particular, our into a of Wally Wendy, And running going silhouettes. additional out is orientated, call Sirocco

Jay Sole

in QX? give And down Can cash if you a at or of update helpful. continue and mean bought an that maybe back do rate, a trends those rate Okay. for us lot plans be Got stock. you you different debt the use I QX I would to one on the expect quarter, some ask it. could similar more. Obviously, paid a

Anne Mehlman

with pleased Yes, into debt paydown Yes. Thanks, our Jay. we've what and we're [indiscernible] incredibly historical paydown.

HEYDUDE. on gave done the obviously debt work lot since to cash we free $XXX a incredible expect we've million flow. purchased generate to derisking down So and of We balance continue do of sheet

So that -- capital. our dynamics after deploy obviously, these given flow free funding continue will to cash business, we'll we

to So shares. ratio down target also of a X.X to prioritize get paying longer-term buy opportunistically leverage to net as we'll back will we stated, to X and we look debt

will we back both half the of So in balance the year.

Jay Sole

EPS And guidance? in is that included the

Anne Mehlman

opportunistic No. and The any buyback. share paydown debt EPS includes guidance excludes

Operator

Poser Mark Trading. comes from Samuel Williams Our from next question

Samuel Poser

don't scarcity then going everybody think -- drive how the do that in a controlling there All up that create how question product right. help both told good What MAP of up? can but business more long want show, cleaned MAP and new Amazon -- how you MAP a out seeing so have are you need I My showing more you you is get you that's at of on I that so to the a program, balance promotion. is lot amount follow relative run were to Crocs full-price holidays, of to doing HEYDUDE you're And holidays. you to all a -- -- core with you product because better when and we to a to what Fannie take

Andrew Rees

right. All Okay.

-- first, So I Sam. let me first part the think do

so our a pretty for is and well an say I'd I We X key and the HEYDUDE, frankly try on Crocs we throughout operate you which give what styles they retailers, typical. year, to is year, holidays ongoing are know. promoted we the MAP, mapped So not basis. are make sure as think, And then

Those at them to full-price Amazon some to are sell-through, and your highlight with the place the period a would of times plus when our -- consumer to a then little opportunity key very brands think particularly for margin compete Crocs strategy then partners give periods of [indiscernible]? so follow I other opportunity ask want extra promotion. deal with majority also and So that all promotional question do very an great brands. that's driving profitability business brand. for in some [indiscernible] achieved associated drive sensible wholesale rate time, drive overall that our gross will high an what you a cadence give been maintain expecting is -- And for most we is promotion. and And is that a key to

Samuel Poser

-- the strong need you you understand as just I wouldn't it it. But start promote, if just consumer strong understand, I it? as mean, that core MAP have waiting but brand that clear, both colors promoting a to a I brands and So the sale control periods versus Yes. appears you have don't if are I you policy, people your have -- understand going mean, I time you're but over if to stuff for

Andrew Rees

breaks right? there's colors, And products not a the not lot other there's pretty on the Sam, And of in drive are the evidence and week MAP week we ton light. the of buy. week our say, evidence right? would colabs a are MAP brand We would in, So consumer say, for the for I sell I core really So doing see would say products, I that to scarcity, look, all do waiting that, the drive with reason periods. Yes. to scarcity interest core a we're core cores out, right? things and multiple

in and you of of don't clog, if range seasonal about product that's We a whole kind seasonal out. that And core of amounts have replenished. the huge think colors get classic

And consumer so available buy later. don't they if knows not them, they're the

sales really the of of So activation, well, think be I balance working trajectory of brand well marketing of it's margin colabs, honest, the to gross overall kind as and achievement. the driving terms consumer activity, as the in

Samuel Poser

Amazon And that question? then -- And including apply the HEYDUDE to

Andrew Rees

that the following Amazon similar a quite approach. say, the we're similar seeing pricing hard to really And have of and partners essentially So down. a are to close pressure in But lot that the rapidly we've for of market, to we kind We're HEYDUDE, transitioning I Yes. expanded right? gray terms distribution would a strategy same Crocs. of brand, we're of working

I we've a of closed we distributors that think coming highlighted internationally. lot the product that from think we is that

of that and the amount have out. available and running is is run will product believe they finite So we out,

temporary is to we with it clear what disruption disruption, business, and And so a it. it's how the think very about but I we're deal

Operator

from from comes Riley. Lick B. Jeff question next The

Jeffrey Lick

efforts in on on your and June a IR changed. bit color on the just from how color any XX%. your I'm what how The you to you or is QX little take implication if wondering that communications. to that at XX% would guidance Anne, could you mid-XXs down probably wondering go presentation your some on us deteriorated What from put June Andrew as you to the terms -- today I and of is through given how HEYDUDE happened were the about things things walk out get was implication The point, track to you X. X feedback?

Andrew Rees

X biggest the to which highlighted earlier think is was as Jeff, really big question, an pieces. One is I right, Look, at what there's thing, -- we I Yes. our look wholesale.

they majority has the wholesale clean to about for the other other think market. sort the need at our the we is And overhang the going we inventory And through. channel, gray were told The been wholesale more the They pretty is, that half That's we've biggest to that understand number be. some that work brands the we our fourth the up of the probably look this cautious some really that been as one, conservative, efforts biggest change. year. back The reason were is the wholesale. of for they quarter, bookings of thought we reasons to from reasons the and have channel they

dollars open-to-buy their to more be. constrained little are So they'd like than bit a

HEYDUDE, argue to of bit history same a performs the argument, that could have they half you year, see that have and brands overstock it and unlike the and history have back we to terms exactly can deal that that the the Now back the the the certainly And with years in and one, should and right? don't they ability that degree of in don't the how they'd we'll strong continue deal Crocs they're of but confidence of for HEYDUDE, to. us in on responsibility that years brands in don't like with and they pushing us a to So we the made performing argument. separately, make then on invest history

So at the we back lower just the of year. our was felt, it this expectations for half prudent point, to

of of perspective, perspective. year, growth half see new lots brand, silhouette a changed, from from territory both also as we product a beyond what opportunities the really customer this a from perspective we look that's and introduction the for So and back

Jeffrey Lick

guys probably impact on percentage? the terms then as on impact, decelerated wondering, seems are direct-to-consumer you year, is of XX.X% in curious, -- that that those an And It is bit. have the in how -- a little I'm DTC a might great QX of X percentage points a revenue to the follow-up quick that comparable? a HEYDUDE like was relative on that market at Just I XX.X%. measure that much

Anne Mehlman

Yes.

XX% March. the only just so -- just was was that Jeff, So

a didn't of retail have type because that of you we of e-com, The business amount XX.X% for If stores. direct-to-consumer, call which that. remember, for March and the growth we small was before clearance own direct-to-consumer total is

growth. XX.X% the that's So

we So to own when you're of business. comparing month kind of months X X kind the

kind it's perspective. And -- box So a able grey sell XX% to hurt on pressured growth has totally directly but in of actually consumer the being feel growth. say, lose can both also, pretty brands, obviously, insignificant. would sure comparison, from sure ASPs. a extra I'm talk buy a not we But if ready not good the to actually about consumer. much about market it's we we the actually, It's for or I not we're to I'm fair how

that been market So program aggressive very We attacking sure on kind our a pretty be a about, significant product of making to very and focused that. continue should cleanup it we've in obviously, will talked and ends canceled we've launched distributor, up be. we where

Operator

question from from next Jim Stifel. Duffy The comes

Jim Duffy

speak growth, parts business of start, you channel I'm from to then in for throughout development lot a avenues speak background, to the can the to mix. with the size Maybe you COVID, to for stores channel? plan just baseline, Andrew, to do the And maybe Or be that can open you that different of speak more China size hoping China marketplace the you digital the current build. and now. the Give a can of as moving well? if And opportunity us principal will then sense the

Andrew Rees

Yes.

we this come have Anne about right? a think the the from in Let talked I'll and you and what we're with end to cleanup. strategy the size historically some going talk the me about about to do talk the in strategy So China. -- respect perspective, give to at through that, of way about of it, and about base the

channel large our to business. within or important the a in franchise strategy authenticity a to keep and of in footprint profitable component or And highly are own the country the we stores quite way invest showcase then invested drive digital expensive most malls, ourselves, probably have the stores. in of consumer. stores. And today, clean. in they company-owned our Those also to they best is heavily because And secondly, also which the have are that the are they with the We've your third for your directly partners in in. They're mono-branded we inventories then all It's definitely because it, think the are important then China. major of we cities small company-owned outlet products, our have sort and distributors we partner distribution digital. important latest very China or they So about super of stores

So to We digital think across look principally think from will platform. our continue will diversified as we business the growth that's growth, and at we grow, things. X come

So where that's selling in the social Tmall, China. Chinese do lot that's JD, a but we increasingly, of TikTok, also

partner-operated from come from digital and stores. will And so also the come growth will

obviously, Crocs They're from aggressively. store really to extremely and look And they and they making partner so stores lot we'll money if see of are they're they're and that quite will, The can If encourage probably their continue an the grow making portfolio, operating performing for commercial they a we money those, [indiscernible], they're animals. at that. option will footprint, well.

and really, drive in will business the partner-operated the stores So future. the the digital

Anne Mehlman

Yes.

a about the XX%, math, you $XXX more So do we base. a kind size said which to if And grow is I revenue perspective, said X% think we million like from that $XX business. China our to we And historically, would a was of historically, longer-term Crocs' the about million base. it it obviously, be of growth have been for be roughly, is expect would

we So very quickly. growing are obviously it

on and is really So kind share long-term so track growing, it taking of with those without trajectory. that

and we're China So pretty that with is track. growing how is pleased overall on

Jim Duffy

that is business? Anne, a margin-accretive And

Anne Mehlman

that you incredibly into now, that in marketing investing quite strong. heavily outsized term, right? we're investing it But that obviously, business right So and gross business. are leverage we're So the margins in long

Jim Duffy

question curious for revenue tempered is view. Great. it HEYDUDE for last the adjusted I'm you've me just all SG&A, on if been Then the

Anne Mehlman

was you of can your the question? sorry, part say I'm that again? last What

Jim Duffy

in SG&A. planned the I'm for view. It's tempered brand the investment revenue your HEYDUDE curious SG&A you've adjusted HEYDUDE if the

Anne Mehlman

we I our actually, not into accelerate this understand. again, investments original No, takeaway with because, in issue. continue a is consumer plans to line HEYDUDE

And to with portfolio profitability. benefit XX.X% operating also And brand still our the strongly luckily, so we the can not very need we feel that one of brands. having margins, we and of so invest but generate a in having much benefit

the will pace. the same to at invest HEYDUDE So throughout continue we SG&A in year

Operator

Loop. from comes Champine question Laura next from The

Laura Champine

from to grow the customer that high in year teens about rate in for wholesale year of and for HEYDUDE is growth more thoughts your to hear because HEYDUDE the this expecting internal orders I next the So conservatively. shift like that coming Does beyond? mid-XXs impact own

Andrew Rees

Laura. No,

HEYDUDE No, even making to immediately as to on, investments had to long-term we're we and answer we've We're brand. our And on potential, make, quarter year company we that. for essentially, we confident very potential marketing question, the have we managing the high performance. since X expectations it, trajectory I the for SG&A it down a X adjustment before that of of of brand its and -- continue not or do rate, kind taking very it's will the growth brand. ultimate the in investments this and anticipated owned this sorry, Jim's one-half-year we And think Anne's we to connected continue the still prior. the investments, talent would when growth we saw see say, same long-term the bought to the I

Laura Champine

that if a just then for of there. And a your And on policy in Wild to the there been Amazon? is resell Understood. sold this goods guide Amazon and that sort Wild HEYDUDE for so, on change impacting Has much year? follow-up customers the own how West environment for on wholesale gray

Andrew Rees

a change. Yes, there has been

So -- and we further will make changes.

What stores, goods that X So but X we so for were what Amazon. did that terminate impact operating, year last we did say, our customers year, or year, last be buying doesn't is would did some just sell principally guide to clear. to this I and we on

not several year. last doing That's that. we were customers So year. that terminated That was this done

Amazon. to that have sell is very that doesn't do. of allowed because been also they sale our policy. our We our all clear of terms to do not mean that on some in they are partners But That

the right? wholesale which We well, back moving as rights policy to further, this sell our we customers. customers' own have So will their wholesale is Crocs, as essentially to is had through large our of end this the go we year, construct same on for dot-coms

the rights the retailers own on think the absolutely on footwear rights not they I have presence web sell any that to they dot-com, sell will Locker, to have. mom-and-pop have or the but their biggest So Foot

of in in of process sort digital sale. we're reining the continued So of

Just into about restricting further to same that. We're say, the has. Crocs we're than place getting not that

Laura Champine

be been the much you -- have impacted And how can on guide sense. Makes that for you specific has XXXX?

Andrew Rees

is specific break can't some impact. that Look, We had out that. it around be probably factor. and it's a probably But

Operator

from Rick The from Patel Raymond next comes question James.

Rakesh Patel

in versus talk also I'm think just if the about in America Can contribution terms the Crocs pricing back in at anything that brand HEYDUDE? wholesale in call of North you going we the how light there's volume the drivers of the half? of out business should And of about trends the to forward? you're curious seeing

Andrew Rees

as Yes. Crocs, kind I question. drivers of we multi-period question mean your think -- the of is think I a

We interest brand. brand new we interest So Crocs see very in marketing in growing introductions. product see see and, support. the high to We continue collaborations the drive Crocs in strong fact,

sandal grow capture continued will sandal our interest continue and business of acceleration also diversify of rapid to Jibbitz. the well and the clog with to innovation continuing and as categories We through that as clogs penetration

of -- businesses we'll think towards kind those be can will would innovative core this brand also to we silhouettes say, really with, year, I Crocs we that new the So relevant. end see continue and particularly back and of experiment we the

to the continue So in experimentation. envelope see you'll of us terms push

I important. think super that's

continue Crocs And our DTC trajectory we'll for will to by in America. that drive evidenced pretty kind as strong so growth our -- the brand confident wholesale and multiyear performance, of North I'm

Rakesh Patel

capacity that what from through it's accelerate new I'm event? year. does you change update going that also I expect HEYDUDE international just and in when us curious issues? you And efforts? you be with wholesale constraint happen, strategy HEYDUDE'S are partners touched if can or to go-to-market on second Can addressing from And believe terms half add on next versus But kind a perspective potential of a of where to ERP first-half working we

Andrew Rees

at year. warehouse, plan at end essentially our new of We to the our the Yes. to transition ERP

of goods a be And constraints. have around extra will will of transition we're that lot double-handled stored release subscale One that to costs a important in good places. period. So incurring couple and goods is a move

wholesale us really are in flexible. not of a also today, with ability alleviate very we're trying cost-effective, and also to little some business. to do flexibility can but year. expense direct major flexibility whom some much and opportunity the that a And So allow have give that'll -- partners be bit shipments, it efficient more lot It the with the will the some also react to will at-once business and to a us of following also will which larger reduce

give will business. for us opportunity flexibility more that the will it lot flexibility larger us So a at-once and cost, a give lower

Operator

question-and-answer for turn our I session. any conference over closing concludes to This remarks. like the Andrew to back Rees would

Andrew Rees

and is So sheet for a like pay I everybody business. phenomenal just balance quarter. just real the rapidly what to close, of give their you're I'd we second to flexibility. had of I think cash-generated think us our and power the And the Obviously, ability a also lot continued portfolio in interest seeing to thank debt down very

interest, for again next you your quarter. and to you thank we'll talk So

Operator

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

You may now disconnect.

Crocs (CROX) 27 Jul 232023 Q2 Earnings call transcript