CROX - Earnings call transcript Q2 2024

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Operator

Good day, and welcome to the Crocs Second Quarter 2024 Earnings Conference Call. [Operator Instructions] And please note, this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Senior Vice President of Investor Relations and Corporate Strategy of Crocs. Please go ahead.

Erinn Murphy

Good morning, and thank you for joining us to discuss Crocs, Inc. results. quarter second are Healy, today Chief Officer; Executive With Financial Andrew Officer. Susan Chief and me Rees,

Following remarks, limit questions, which caller. their for we call prepared ask we will that you to per the one open your

intentions, quarterly statements we provisions factors, of information and and of securities our some accordingly, our the unknown results, strategy, Before you cause are These subject these to risks is to to be plans, refer uncertainties, that stated. cited Please involve of financial is constant These our Form not this the with I federal achievements earlier to limited provided would remind statements statements revenue include, begin, the that to call will reconciliation is or on to rates A but expectations release forward-looking outlook. like the basis, on as filed reports unless growth currency metrics this are safe materially. to, risks, morning. regarding XX-Q objectives, uncertainties which GAAP and actual issued laws. on SEC including other contained known and or their and performance these on measures. we refer for information other may harbor press in adjusted we the All our report non-GAAP certain financial more amounts otherwise counterparts a and differ non-GAAP

to call Rees, Executive the this Inc. over Andrew time, turn I'll At Officer. Crocs Chief

Andrew Rees

Thank morning, you, Thank today. Erinn, good you for us everyone. joining and

share company's guidance. more expansion Inc. second welcoming accelerated first by robust to investments. highest which I'd the Healy Susan and we strategic to grew history gross quarter per than XX% points Earnings basis quarter, Coupled represents achievement billion, margin with adjusted $X.XX We Crocs to as our earnings the even discuss in the of XXX Call. we by adjusted exceeded $X.X quarterly reported like revenue of Before her start

million cash flow we for down stock. in free to pay in million resulted performance our $XXX utilized $XXX which Crocs record This of Inc. common repurchased and debt

consistent, primary global Our of existing ignite share three on for remain to two, through awareness X talent, product and marketing, consumers; investment and icons new to enterprise market durable our initiatives growth: gains our usage and and across drive through methodically fuel focused to one, across three, strategic diversifying brands drive both Tier relevance occasions. and our long-term we've markets new our brands digital consumers range behind attract and levers retail;

in and Starting us with the making product Crocs enabling around world. marketing the to are win are with brand, we consumers the investments

During the quarter, we in saw global desirability. brand and further growth awareness

We drive have engagement, model partnership heat. love continued and to fuel to intent a with ultimately, clear brand consumer build our evolve

the Patrick brand announcement with number that of quarter, on to Theater. Naruto, Las second official Pringles K-pop XXth Minions. with Vegas Along and to we anniversary the and the SpongeBob partnerships During range plug Treasures, a by celebrated we creating SpongeBob's a this, unveiled released a from

$XXX and our was Juniper at consumer seen secondary for the to out lifestyle We we've opportunities push multiples sneaker strong of exemplified and response. continue Salehe, within price, into platforms sneaker a the as on shopping release sold original through testament minutes to

the the growth second Classic was Looking led once quarter our by in overall, again at product icon, Clog.

both The the brought to As was woven strengthened like sandal expanding by Asia growth well introduced our drive at built to style, of the growth well version reacted which as DNA. the as prioritize The [ quarter newness the classic new performing have as established double-digit of the Miami In particular, a consumer year. the [ category and our that well have this new a into are ] led we we franchises in to was growth, molded aim purchases. business our Brooklyn durable and favorably franchises that quarter successful in repeat franchises several also during style market across we the ] Brooklyn. as Getaway penetration debatable new occasions sales usage strong geography. highest as We the leveraging Gibix our like by

Our Gibix consumers, we purchasing consumer our and average higher see be continues to of them most one with value. and frequency valuable order

penetration product around priorities are strategic wholesale centered freshness. continually introducing market Gibix channels, enhancing and Our within and higher driving in to speed digital

versus strength Tier X% performed Strength demand our broad-based revenue driven to of North our with retail X channel our partners year. by The prior was Moving market of growth. We by of solid a our ahead markets. geography. America DTC share growth review business expectations led at-once from market the saw by gained and and better

year. first For North exceptional that against versus grew grew and growth a was prior grew International market by triple-digit last revenues Australia. our flat. essentially broader on top X% supported the growth of XX% China China half, revenue XX% American in over year

becoming evidence that clear cautious, we our is Chinese personalizable a market the and as more authentic position is in there advantage. brand the consumer While accessible, competitive see

led the the despite Brand in have off that large. followed. notable the conversation days in our on drove Day the and the midsummer of strength and industry emerged on first footwear as took outsized for more Tmall we period Coming strength brand Douyin at the quarter, share festival, Tmall where in the Super #X promotional This women's Crocs momentum

was ever, on XX rankings. emerge top only time mentioned two brand as brands the during and For festival footwear Tmall first a top XX fashion in the one fashion the of Crocs overall

markets double-digit future. see we within registered the for opportunity by direct Europe in in growth Germany and to the growth and quarter ample led Our the continue U.K.

in focused America HEYDUDE Wendy consumer. for solidifying Wally North remain establishing the and the business the as iconic We franchises brand. the and on to Turning

remains to America, the HEYDUDE challenging, recovery business the progress made Xx. inventories half up through year. our of business year, and by have gross underlying expect We we margins second our of of improving and the our that turning versus in in on said, pricing prior digital solid health in in exemplified That excess wholesale North continue

we the marketing improved quarter first in call, effectiveness sell-out focus product year, are and earnings new down the through last sell-in and brand versus As introductions. on and we'll shared energizing

During Corona, iconic HEYDUDE featuring styles. new brand the Wally, beverage X-piece partnerships and market, to the our quarter, including a Hudson the brought Wendy collection we with

the collaboration Dudes, partnership, Our reach. with & lead first international marked HEYDUDE Denim

From perspective, Wally [ Stretch a product and offerings: around we're Wendy we're ], three into and focus and primary Subs bringing across core ]. Canvas the FunkMono more leaning Stretch [ our

focus, our from make the the sneaker is boot key is calculated leading styles brand While core and for. with bets known also that we'll

and our XXXX, to opportunity we new an we our while channel SKU to market. bringing innovations into segmentation As optimize count see still look improving

in and introduced leveraging DNA Wendy will retailing quarter, for it we this to initially comp time for this and DTC height cushion example, in For and the tested We Wally our and product wholesale bring back-to-school. added $XX.

From quarter, a to the bringing year-to-date distribution XX. locations perspective, in total we opened new HEYDUDE our openings XX outlet

new our and breadth with consumer engagement pleased consumers and and are experience genders line. We the stores of growing full shopping across as the see can ages

During the also personalization are creating our proposition introduced our with HeyMakerz, as channels. our explore we the within self-expression buzz consumers stores brand. quarter, direct in These stations

we XX year, to outlet For approximately the stores. open plan

improving on continue the side, our and On segmentation. account to will optimize customer focus we base wholesale

in more the in as Internationally, expand we plans we're Australia our XXXX. to a U.K. get effectiveness also brand awareness quarter. into consistent our in introduce elevating in build and creating at on select and and in to way bigger the have markets Europe making this brand progress working HEYDUDE feet. plan markets distributor We're the to community. introducing in drive moments, of We're and Germany. accelerating direct and methodical reach brand shoes the our and geared We marketing brand on

second In we of our brand one to female her investment our of youth icons the into of significantly culture influence and in to is brand and to accelerate marketing accelerate on this to driver plan plan connectivity heat influence opportunity effectiveness for the and addition more as fall. conversation. We center year We the bringing HEYDUDE. to move half drive focusing the and we're our igniting core, believe the

of call out all purpose our encourage XXXX report the climate for you stability, our more more I and publication for the out the initiatives. released highlights to against to information Crocs, report to turning ambitions annual check to on Before call I community. and over action-orientated June. to of Inc. results, create circularity report This commitment financial review in Susan company a our want inclusivity, progress comfortable world our through to these

call to I turn Susan will over for quarter. the to financials now our the through walk

Susan Healy

Andrew, good morning, everyone. you, Thank and

is further in people to what to performance strong Crocs, say weeks working a review and with honor serve know it brought you its have to purpose. to brands, I'd an our CFO strategic culture, many of Before as well as the the and financial advance by financial company's company with to the is Inc. talented the team opportunity to to This goals and life forward as the like to in I Andrew the I investment community get of management ahead. look quarter,

from billion XX.X%, Now the for of in earnings the to share resulting year We improved brand. points led in second and consolidated operating $X.XX. prior year, quarter Crocs per $X.X last XX.X% review in over a margin financial growing over Adjusted was of generated revenues basis performance. quarter, our XXX X% margin adjusted adjusted gross by

quarter the the results exceeded enterprise. end our high Our of second guidance for

of by year sold million, prior versus increasing $XX.XX. of of X% $XXX DTC shoes were to mix driven and to XX% last X% growth total million of ASP came increasing volume revenues brand, to XX X%. units The Crocs ASP with growth brand the in For growing a from XX% and a of pairs wholesale growth year

wholesale triple-digit in up by As million. which exceptional revenue growing from led of China X% XX% American saw wholesale growth of XX% expectations, on of and Andrew brick-and-mortar down million of of prior versus $XXX Growth up Australia. noted, digits. while led year, way, last was DTC was mid-single International in the growth XX% up XX%. X%. year our revenues was we year, growth led DTC, revenue $XXX the over growth X%, growth also top prior by came and was North North was America growing Underlying ahead to

direct by strong addition, markets our double grew digits. In European

points to of to reduced below base shoes, million last long were account the Turning were were to term, and inventories. We within was brand year, revenues a the second the for points we brand and have basis quarter channel than freight supported and year HEYDUDE Revenues as higher by X% ASPs year. for from while The down our The range. XXX Wholesale down XX% basis strategy sold last was HEYDUDE. offset the down brand favorable lower. margin strengthen result X% XX.X% year. pairs costs, through XX.X%, year. million, higher gross guidance from rightsized by $XX.XX, product gross was last from digital contraction since brand health were of up international $XXX time volumes Crocs channel which or pricing. XXX XX% of margin Consistent adjusted prioritizing last with ASPs. X higher retail and adjusted our margin DTC contribution, were strategically XX.X% Consolidated our expansion primary drivers prior lower up costs

HEYDUDE partially infrastructure. offset by XX.X% costs, by higher basis XXX freight brand year, and and margin channel investments points prior in driven ASPs lower gross mix was than higher

Our increased second to quarter SG&A adjusted prior XX% year. dollars

share marketing SG&A XXX basis long-term prior in by compared market support talent, Our DTC was to continued to and XX% up rate year, points investment driven gains.

on was operating favorable second the XXX declined compared adjusted for gross basis to to points same but revenue. expectations XX.X% Our to XX.X% last period margin and our quarter year, higher margin

$X.XX. rate Second was effective per earnings XX.X%. quarter to increased Non-GAAP adjusted XX% share diluted tax

Our year. versus last time decline XX XX% June was million, of a inventory of as this balance $XXX

of basis. brands Xx of on achieved an Both our annualized inventory goal turns our above

strong, remains capacity and million and position comprised cash borrowing on million our cash liquidity Our of of equivalents revolver. $XXX of $XXX

the million quarter, billion. approximately During of leverage to of shares repaid net during long-term the X.Xx. million completed We quarter borrowings $XXX repurchasing million X $X.X ended debt, quarter X.X of within approximately we back the share the to reducing target our range we second $XXX We pay of buybacks million best-in-class buy on per stock share price of repurchase cash currently We to XXXX, authorization. generation. and $XXX.XX average debt, to flow free continue plan enabled half an In our $XXX have down share. by at our remaining

turning to guidance. XXXX Now

reflect year. and reaffirming guidance by and and marketing are half investment continuing the talent beat top margin our full in offset the expectations raising operating year QX We in to the line back of in partially our EPS range

We are $XX outlook incremental our of maintaining to our growth the full underlying year headwind X% of FX despite million strength revenue underscoring business. X% of

Our as guidance June assumes currency rates XX. of

between by X% expect international. brand, Crocs growth revenue continue and the For X%, we led to

to wholesale DTC better to year last communicated trends expect to and we for continue we wholesale than quarter. revenues to negative and expect For contract HEYDUDE, XX% as be to between the X% be

We adjusted XX% to consolidated are raising XX% the approximately for from year. our more operating guidance for margins than

margin our half focused We brand first accretive on up Crocs guidance as SG&A We remain and the the maintaining for are gross for margins HEYDUDE SG&A will and to as dollar investing we be strategic XXXX. enterprise above second year initiatives brand which half. to behind drive gross be growth well believe versus

XXXX We of are adjusted $XX.XX guidance $XX.XX a $XX.XX to a raising our earnings range share diluted per of to range from $XX.XX. to

this from does landscape reflects but year assume our the QX, the repurchases. and spending trends investments. in share appropriate with saw along not policy, the debt full range balances of SG&A impact well caution we previous future timing Our around any repayment, strength range updated future geopolitical Consistent with guidance consumer our as as

maintaining rate, taxes to which effective to GAAP XX% be We paid effective cash XX.X%. non-GAAP approximates are be underlying and tax tax of approximately our the expectations rate

select expenditures projects. capital to to tied timing the $XXX annual now million $XXX of cash operational to planned Our from between million, are million down $XXX $XXX million

our guidance for Turning to QX.

with the We to X.X% up down XX, led be international to range X.X% growth. the to entirely at currency almost of as X% revenues expect by consolidated growing rates X%, Crocs in brand of June

QX revenue discounting as for versus XX% to orders. last guidance our Embedded lapping to HEYDUDE sequential as marketplace expect most the down is We modest year quarter, between in significant in of wholesale timing showing our be of of well XX% HEYDUDE impact on the QX. improvement

the We expect in and up talent mid-XX% SG&A to versus QX. With investments elevated spend to range year-to-date the low be in marketing trend.

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

of be In comparisons; quarter the shipments; late to pricing summary, to contribution we second easing three, five, As QX. quarter. two, HEYDUDE wholesale by: new one, growth distributors international had four, the expect sell-in timing year's digital from for lapping last record new to we look we revenue brand, fourth on stores; a the and supported the reset in retail

to growth, We our have clear our in invest to further long-term XXXX fuel ability achieve I confident in business and am to plans our profitable objectives.

turn the thoughts. over now back to final will for I call Andrew his

Andrew Rees

Thank you, Susan.

are and and the ability We that questions. believe marketing significant our our At the capital the this to making half, have through including to our teams by are for pay down delivered debt will We investments we'll pleased we results the call talent brands set return open first durable shareholders. for gains. in strategic up long-term share time,

Operator

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

Jonathan Komp

you to ask And America North talk, of you and that just your expecting HEYDUDE maybe quarter Could trend? assumptions seeing Crocs terms to the want up in second revenue how the sell-through you're what about maybe underlying about assumptions you to you're performance. Could or demand outlook. inflection half hit terms I sell-throughs the the then, know the core fourth I guidance year-over-year and QX Susan, the and needed follow the I Andrew, on talk rates reasons outlook. for HEYDUDE. in consumer just the of to that's or was in it five for highlighted, in think four about

Andrew Rees

look, we're really we I today. an to those before we're So results obviously, thrilled had exceptional start, thrilled announce QX,

had we Crocs. for -- terms our Crocs In the Crocs not half, back adjusting the We're an overall and for expectations brand. half first of But obviously the exceptional brand.

-- half market that X% back first half. North the is approximately through achieved in satisfied That's about first the we're against the with We've at a grown look in that flat. we As half. the think share I we've America, very gains on

U.S. relative consumer see the are I right? approximately back we our from value, think exceptional In think back North We half exceptional gains. the cautious, Crocs definitely cautious more in the perspective, planning revenue well behaving cautiously. we a the are half, is but value give we brand to share we substantial positioned a consumer flat. America we So consumer accelerate environment,

add about talk Susan let maybe I'll and something. And I'll HEYDUDE

Susan Healy

So and the about really tandem. got half think in of QX QX back when year, to you've the you in think about HEYDUDE

year QX QX up. is last down driving that expect below the be to what's QX and wholesale year, last Part we versus anticipate be we of to and sell-in to fact So we ERP we them to that disruption. potential planned of some that in orders QX, had to last that get ahead any deliberately and did implementation shipped avoid year, our we just

last sort or lapping QX. things our so of And in QX, noncomp distributors. then one other look took you're And up also to QX. pricing international some late when like you And see is normalized to at QX between into place reset year you're rollout there's new which you're and going ramping also in going more digital, year's stores, flow retail compares, wholesale of see which are this then sell then

Operator

question Barclays. next The of Yih from comes Adrienne

Adrienne Yih-Tennant

where on question the examples nice my worked guess period, of the the those quarter return on Congrats talent you that see the far brand payback, type you investments Can and and do I on and quarter. you're in talent year-to-date the of you spend SG&A, is the third thus when the incremental us placing marketing. accretive investment. in what the has give ad

Andrew Rees

I we're are investments long-term making. say would these

today, company, stands Our exceptionally as it profitable. is

through XX.X%. future. us both year grow This the several guide grown the is enable EBIT last And HEYDUDE. talent over are to exceptional that At making in this extremely a Our organically investments of we is years, rapidly the across number. and we've time, acquisition an and full also series of in for now to

of terms our around HEYDUDE in rapidly in functions international and investing also talent. marketing for and we're Asia both Some where very teams in be growing our Europe, enhancing that Crocs in examples would Crocs, for

think consumer as one marketing, consumer investments the I we're United little distribution of environments China And seeing that somewhat that's believe of a I about the historically big the to consumer. concerned really from actually infrastructure, cautious is really infrastructure. well. our think, nice right? we the in here some of We're benefits it's obviously, in these made important efficiency States. and We've see terms a some in We engage distribution And in cautiousness the extremely meaningful

our Crocs, about really obviously strong of where place leadership our some got view we're terms and upping marketing we brand got life. HEYDUDE So I of HEYDUDE, that can we're talent new but investment also we've to guess, in a offering and marketing we've in ideas investment how I think great against point meaningfully bring

Operator

question Stifel. Duffy next of comes Jim Our from

Jim Duffy

the quarter product guide outlook than for to to think, key season? to also perhaps the back-to-school holiday. the With as you, And I year, it most tactical remainder of flow respect considerations your you in for Andrew, strategies, the the more what speak considerations Can fiscal July cautious and relates to and saw across third had speak guide, expected. then

Andrew Rees

I of behaving would of terms give But have. that. we In the inter-quarter, We on we consumer say sort that, perspective anticipated what really don't any never is cautiously.

of we that. is about definitely We year, expected as kind this true. that thought and

So the then think And between we I elucidated rest thoroughly that year way, from our going what HEYDUDE like. guide and looks plan QX prudent that done a the to and perspective. Crocs obviously, lot of we've there's that think a QX it's definitely with on Susan

really changed because inter-quarter our I calling trends X-year So that not it's out really haven't that perspective. note we're we

We and planned expected have accordingly. this

Operator

of next James. question Rick Our from Raymond comes Patel

Rakesh Patel

And wholesale about the versus third you versus direct-to-consumer? ago? line trend the provide are the results, of be results changes you channel color reported Amazon quarter. additional lumpiness in three given brand, of affecting for think what wholesale the terms be in the the may about seeing just might the on you strategy how on can implied months Can how being you talk For BXC Crocs as for

Andrew Rees

I are sure couple -- the bit referring -- I what -- to, I So right? and a in So I'll we lumpiness, hit second not maybe times. first, terms of think think what Rick? would say, But there's and I'm of you

Rakesh Patel

in third slowing about I'm quarter guidance? the embedded the just talking sequential that's

Andrew Rees

approximately Crocs simple, we pretty market be the as to the flat growth, right, X% So that right? that's with to think a for Crocs In brand I guiding first market spend the significant back the half, share gains. approximately was North think So about we're America flat. against in half

So second due that's in distinct think half that's first don't to and I but is half, change to anticipated softness. lumpiness, consumer that that's a

pouring ensure that's returning the make inventory I only plan our inventories way inventory fresh that that's into to And our don't channel. We get to So and want keep in versus to think prudent, we the business clean shareholders. think it over right? sure want piece. that cash I not We we that to and

that's, think, So planning. I prudent just

go Look, customer on want part think a have first we don't in are how really of associated your fact, Amazon shows in continues it we important half that in the year. change in the up the to around this think XP, of I the phasing question marketplace U.S. be as then through versus And and terms We in in That world. Amazon was the we back manage partner sometimes is shifting where I of we to terms perspective trajectory. -- where marketplaces out be that our of be many the And parts the with. P&L XP global -- Amazon the will shops. changes

Operator

from The of Nardone Bank next question of comes Chris America.

Christopher Nardone

Andrew, of rollout? of countries quickly your Crocs us HEYDUDE are you driving growth back gray impacted percentage what seeing brand of the newer international your international of what avoid that gives could discuss expectations? this brand the business from previously some Can where you're can the this your Then also market what that and you if come then U.S. half the outside you regarding the impact year with remind International, momentum to on And confidence So you will business. some biggest issues

Andrew Rees

Crocs, also parts China, driver that's at example, in fundamental right? is So that Australia, Europe. example, a for has of obviously, And So that in for of international point. is there for couple doing of this we're the key been like growth really our and Three past markets thing like years underpenetrated questions right? Western there, for the penetrating

brand the underpenetrated, The driver got So around large probably that where China substantial and drive long-term and are the our is been is marketing able now #X we've growth invest made that is potential, that. to greatest and world that the to substantive markets have we're our like we've investments talent, and driving key invest markets and that fundamental enable penetration.

strong We been out of has a called growth. very a that couple Australia times. also driver of Growth

I X, think we prepared up in triple-digit last the on remarks, year. is during XX% referenced which is quarter China growth

We are than past. been the continue to strong growth We but expect think consumer also the have calling that. Chinese positioned China, that our out fact in is the we conservative well is clearly they against brand more in

of that terms in we're Western direct term, the in important is at India, think markets, I also investments super about have strong et we markets, which also coherent potential performed cetera, also well, U.K., other longer of if double-digit And very marketplace. say growth. In Germany, look excited key would making yielding some We're emerging rapidly we our our market. European a

right. All

percentage [ is your mirror question say talked the to the of other our break What model going Crocs. business. percent that before. have We HEYDUDE parts be international of about are it in international. internationally I is essentially ] is think I But the of HEYDUDE So don't out I would terms

in distributors with in from mind, would perspective, distributors, we awareness distributors, Crocs is put So that planted in these starting proxies And say, to direct, bear off is X of I use brand our going we're a where direct flags going essentially we're where for HEYDUDE, HEYDUDE we're we're international countries. be terms right? and to

in market the We We U.K., we're Germany. will flag think new planting be We're flags for HEYDUDE. planted planting in to Australia. that's in a flags going nice a

participating e-commerce, direct selling we're that leveraging market are team. that the Crocs we're those and our means we're So And directly opening markets. wholesale in

gives The is with be second need, of of new get international QX Chris. agreements to distributors, that initiated called you some of initial up new our and distribution everything out shipments Hopefully, doing is we'll part thing a range which we've we've benefit XXXX. running will Susan and in done you distributors, a range

Operator

next Tom comes The from question Wedbush. of Nikic

Tom Nikic

just parent what new Terence ask to want about got I the the Can can play brand reinvigorate very bit -- I what essentially on side. the who he it's like a is you guess, the a HEYDUDE and know, the President, what with rejuvenate overall. HEYDUDE brand a little familiar obviously, enterprise obviously, talk for in I back and help getting growth HEYDUDE brings how like part trajectory. table brand, to to he'll

Andrew Rees

I going thrilled to to have it's we're this Terence say XX days Look, back. at would be point.

but him thrilled We initially he with trajectory he Stanley, -- impressed love was was by So time we're we're working it to where drive back. able not a all of have he was and with while at to here was the when very him he for us. period

leading back. thrilled we to I he's would So business. we're emphasize, a team believe Also, also have him what is strong management within HEYDUDE our

of really, the able I terms got He's think pieces on place. in he's to focus , driving the and definitely sharpening I three Wally. four their or in key the sit icon, think, is what And we've One all we brand's think the of So things. do. Wendy

on is and obviously our America, energy innovation attention driving So Wendy He North into biggest market. which is investment the and the focus, focusing Wally.

leverage increase right? the to female significant a younger investment guidance gives broader an But believe also of we brand us that's consumer. can female, North passion in firepower, to consumer, focus Embedded can brand our internationally say, we in derives we a that's spread the I opportunities heat younger consumers really can the range in world, is and in drive much the if we energize female And to overall. it arming energy around consumer the for going youth engage half if shifting know female lastly, we with would drive, back our brand substantial. marketing If and we're America and and the culture he's the marketing the also

to support innovation will to that Terence we able bring he's So and and really the able be brand drive HEYDUDE future. the the to in

Operator

comes next of Poser question The Williams Sam Trading. from

Samuel Poser

and been that the to Walmart, for we're lastly, going to much selling have since guidance both then for Number one. you're anticipating the just three half one, you about And what's how Number back the the promotional going back guidance to you half the activities of of ask brands. then merge for into saw is in the the American how you in two, can talk brand activity have promotional domestic North year? one lapping there? in ] allowed year or Barbie on I'm I Crocs affecting walmart.com long [ quarter

Andrew Rees

is years walmart.com is our we Number highly Crocs walmart.com relative marketplace is several particularly should the philosophy democratic second unchanged India. represented U.S. Flipkart been the is the as brand, brands, one, in Amazon is this, is have the in for now. market a believe And largest our we present consumer where brand on on shopping, to be which which

we appropriately for think to needs But that's are platforms the marketplaces. to on. the those be on shopping represented consumer obviously, those product to segmented brand So be important relative the

kind hopefully, So that answers question. of that

you terms at In that Sam? what promotional are you of getting are to activity, What elicipate? trying

Samuel Poser

you it's the are Well, -- asking, I'm but about just you a guidance, weaker seeing consumer. about talk U.S. I mean, more really,

look HEYDUDE at how the promotional? to get responding needing So looking and Or that? if -- I'm anticipating then and to just do I'm you marketplace wondering if you're you how to towards need Crocs you're get more

Andrew Rees

those more promotional coming of to down perspective certainly So it more and pandemic, would say pandemic year, market than important, the periods. and promotional pretty gets of and the is is, I is it I was was sort key periods during what last pre is out key from I say, super kind what my was look, promotional it the marketplace it's would which would returning promotional of say dirty than

promotional an do in we've and not anticipating get share doing increasing at terms for consumer point, half. half back back believe the of you I'm trajectory we we've about spending. As we'll this to continue in to rate sure we're anticipated And participate to an That not been periods the half. of your that, those fair reason with have first talked difference in brand, is accessible that. promotions growth the of to

helps. quo think we strategy status see and Hope as we as see kind I So quo. it of status that our

and Barbie nice lot that great brands. a was pink was a or business. is about any Barbie, not specific on But color of impact driving our not performing we color enjoyed really comping the it being question we product, have terms great. year, specific our comping and last really the In and collab your in of advent It Look, a that of

Operator

next question of Laura Champine from comes Loop. The

Laura Champine

last the growth It's of months, how with leadership kind your long-term really it, your when also a about growth thoughts the on And of over the prospects influence brand. call of the material your short-term for new be you do there to make has HEYDUDE think with able trajectory HEYDUDE, should kicker potential nine a experience long-term impact? but the HEYDUDE of

Andrew Rees

last that. that the -- proposition does enough brand. is long-term perspective to value what So Obviously, easy to were with engagement HEYDUDE projections brings consumer had the compelling think cetera wrong potential did and the we've over performed it brand. has here extremely a the in brand think or length not from we a against different think, has some colors, things associated We of bullish I in I lot the we think consumers. about a really I table, that comfortable, many extremely the on say effective as for of we strategy, we as can on U.S. perspective particularly as we fabrications, that we are And hoped flavors, bullish several at it would long-term months, et against talked is that we our when with strategy change today's make bought would That consumer lightweight, the not some marketing the product the marketplace.

of we the product reinforcing kind And bring line everything that. is learn and continue certain in in really, the brand areas can the innovation about we to

ambitions. also revenues, note, not contribution profitability. solid the margin brand our It's our despite meeting making current I So would overall terms of an picture in financial extremely to and

be think to but our brand. for the very we confident -- reach we're full the ambition And have not So place, will in in we able brand. have strategy ambition we place reaching I in team that the for the

is So were we confident we're it. nutshell, enthusiastic -- about as the think as we brand as in I and we're when a bought

Operator

The from KeyBanc Ashley next question of Markets. Owens Capital comes

Ashley Owens

of solid gross in margins want both the just some brands seen year. half on a We've the touch I for first expansion to bit. pretty

if first still in how be we the as levels modeling provide helpful. Just the be would expansion we're seeing and takes balance the should that could you we back half? for on Just half puts did of thinking about similar any in color

Andrew Rees

answer that. Susan will Yes,

Susan Healy

due So at at the the but enterprise first level, as the for to year-end up we expect same rate not the gross margins to be harder compares. the half, half, for the basically second

it from QX as on expect year. slightly at expecting brand bigger be to years compare the we to we're ago. HEYDUDE to year-over-year some So kind start it brand Crocs, last of up we by we recover side, gains when And fully two if freight it to anniversary for we margins look

Operator

Mitch The Seaport. next of comes from question Kummetz

Mitchel Kummetz

'XX just you book to do North expect mentioned America order question Spring as Susan, orders the coming HEYDUDE up quantify a earlier, that you follow-up And spring And Jonathan's perhaps. wholesale order the shift. be together? then is Can you or how to Andrew, down?

Andrew Rees

I would we're look, retailers, think, as obviously, would But Spring satisfied I selling somewhat order comment. really buying they you're of currently current out look, you cautiously see we well don't comment consistently what of with, year, expect, would for I domestic books. that the a 'XX the business future say, remainder aware, on say, we're and that's given trajectory the the as

plan get about From we'll HEYDUDE future. our the that and getting where Spring obviously Spring look marketing we at product We're with of tell a some and a you 'XX we of we'll and line. excited lot bringing As book, we're about 'XX. that's our more 'XX engagement. and order the feedback domestically in positive embedded And that strategy, within table line at, and we're support against compelling really the to drive with and it's globally to Crocs of strength our the consumer perspective, innovation happy the in that into we're

Susan Healy

think impact compares gives that's year. what's the XX% about year the implied guidance our on is and we for that that being in about of out in when of don't providing for down the on guidance that earlier that we full that definitely specifically, the QX, orders but embedded you has specifics last lift shipped QX, the year-over-year that you the break part And XX% to

Operator

question Jay next of Sole from UBS. comes Our

Jay Sole

Andrew, little I'm a can on China just business. you wondering elaborate if bit the

XX% last forward? you comments, but opportunity? maybe top few whether in pleased, being that on do kind of year. of your market, growth And for more up you're Crocs Can triple a expect digit you growth made China going brand what where progress there's You just about talk

Andrew Rees

highlighted through, your done channels. say, digital growth last social the Crocs strong personalization in -- established market. it relevance. a months. consumer. we're China. in of in We've Clog talked and very really excited would really and driven particularly year a it of driven in and heart you driven relevant across the the made right? platform question, brand QX, really about think by that and very to that channels, growth I the our I XX -- mostly XX% strong and the last over across is lot trajectory We're seeing Clog That's growth in the We've growth we That's we're as marketing, triple-digit we've strong the strong the Chinese At brand Chinese we've

both So digital. that's been

It's as Douyin and mono-branded So that sell stores. two digital it's franchise partners book Tmall, other is the what which through we all wholesale, a platforms. then

stores franchise seeing also gains, So are partners store more opening mono-branded are those those comp stores.

on major China growth and what fleet, had think also wholesale we of So Tier in which where the a retail couple sorry, we've metropolitan in energy X that's X market. Tier and some areas, cities modest Beijing growth. also important we and Shanghai call the and outlets, other -- incremental are been driving the Chinese stores we're both our focusing in

channels. across So growth all

anticipation we expectations, growth size growth very Chinese component market. think more partners channels. see across years drive the in market. the and all we're will from to quantifying market. We're of we Chinese as open penetration our not wholesale still forward, largest I As we of while sustained across we underpenetrated But the multiple the is look over And growth sales that relative will kind of the come growth our much the come think store our more will future stores

in cities Tier to of of We a two business X Our years. X, demographic Tier the lot the anticipation of sort market. portion is cities. X next not keep high quality higher our business below of the focused penetrate and the to really We're we'll three want on tier anticipating

Operator

Our next Stifel. question comes from Jim Duffy of

Jim Duffy

leverage And DTC With sandals to how engagement. I the is targeted between the any the has flow product, if shift of And ones, what then buyback? cash there capital within of the been that on may. net allocation, the on in sneaker increasing share reducing quick priority always are read-throughs Is and secondly, adoption? your more Two like model, important hallmarks in one range. now wholesale leverage translating

Andrew Rees

and I'm can then allocation. hit on So sound going to hit sneakers capital Susan

fashion-orientated some our So of from a sandal a saw, perspective, with performance driven I We the think, to QX. we've samples. happy relative by QX. been during kind That's sandal strengthening some

fashion or fashion a sandal We've made So some been well. and sandal franchise, the been models introduced we've of of and add have it. Up. driven innovation into sandal. well, been inventory. that a of in We've to charms well, collections which kind new is a the of fashion where of sandal that's some sandal. couple a been couple is Brooklyn, a Getaway, a have which comfort can that also Those we to introductions long-standing the including new The more performing been Miami, performing elevated performing chasing personalized have really there has the a wedge consumer which dress

sneaker a product and growth but trajectory and brand. continue performing remarks. our Salehe we really about orientated all a continue that very the with but So in experimentation And testing we markets during is we or test kind highlighted innovate important key range Juniper we're think that We really that's small longer-term to the introduce sandals drive offering a and to continue that sneaker that's been long-term experiment of silhouette, it's the the very, to small, it's penetrated It's -- of in confident of arena. orientated pinnacle we sort at The in that markets. strategy, did prepared for quarter. well X Tier whole

allocation. capital for Susan to over it hand me Let

Susan Healy

Yes.

in mean back flow, to We're with buyback. answer and asked have of to the business X our you of do is and about also we're leverage like down planning we're strong year. debt Jim, the pay So short the fortunate target share X.Xx. within cash both range I and very both a we half to net

from the So ways. both cash a liquidity flexibility no that to us to we deploy question, to your answer target, in really gives And we capital like at point this are flow that and where standing. change

Operator

is next follow-up question Baird. Our from a

Jonathan Komp

a to And planning to picture X% obviously, investments. higher year grow wanted you're Just almost is for question which the SG&A spending to year. for philosophy bigger ask revenue this a XX% X% yet and year you're follow-up. one I SG&A more in around the the

philosophy. just of revenue So these faster remind drive color could you there in as strategy? maybe the us your And hope terms out, And growth? overall the investments look that we overall is any

Andrew Rees

you that question, due year obviously, would EBIT extremely that, I your the the starting highlighted high we're off a off peers margins high we're base of of achieve this So we with right? margin, say -- which our of distorted Crocs And efficiency will also very gross in on experienced the obviously, relative we're level industry starting in So brand kind our even investment from profitability, and model. profile we to XX.X% business in. of our terms that's to an in just extraordinary

think and any talent capabilities people the we important we be will on in terms of invest and I periods investments in most SG&A variable both where SG&A will in will of off at time for we and variable and of future. think turned be our time there point be infrastructure that and choose is philosophy and going can forward, because and In to when make marketing

work. of not support is guarantee to investments but support and -- growth. sorry, no guarantees a those and intent assure long-term or the

continue trying So years a long-term to company many and a for grow that come. to to brand build has growth can we're and potential

there of say would of distort SG&A, philosophy that's think from we a will I kind So be of in it SG&A, perspective. there we leverage periods how when periods we and were when about long-term time time

Operator

question-and-answer This our concludes session.

Andrew Rees

And in you, questions. bit the their today jump a interest thoughtful their for little Sorry, there. and everybody, gun company. our thank everybody, Thanks, us joining for

we So appreciate it.

Operator

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

You may now disconnect.

Crocs (CROX) 1 Aug 242024 Q2 Earnings call transcript