Crocs Inc. is setting the stage for future growth.
The footwear firm on Thursday posted third quarter earnings results that were better than what Wall Street expected. Shares of Crocs rose 5.2 percent to $89.07 in early morning trading on the NasdaqGS platform. The shares closed down nearly 2.1 percent to $84.69, but that was likely largely in part due to investors digesting the news that the U.S. and China had reached an understanding of sorts in their trade war.
Crocs posted a 27.0 percent decline in net income to $145.8 million, or $2.70 a diluted share, on a 6.2 percent revenue decline to $996.3 million. Adjusted diluted earnings per share (EPS) were $2.92. That was better than expected and easily bested Wall Street’s consensus calling for adjusted diluted EPS of $2.36 on revenue of $961.5 million.
The report also noted that fourth quarter revenues were expected to fall by 8 percent, although adjusted diluted EPS for the quarter was guided to the range of $1.82 to $1.92. When companies report a decline in revenue expectations, investors tend often react by selling shares since they’re on the hunt for quarter-to-quarter growth. But in the case of Crocs, investors showed they understood the company’s strategy — disclosed when they posted second quarter results — to pull back in order to move forward.
Crocs CEO Andrew Rees told investors on Thursday’s conference call that the strategic actions for its core Crocs business are needed to “protect the long-term brand health.” Those moves include pulling back on the breadth and depth of promotional activity across digital channels in North America, and reducing receipts into the wholesale channel to “better match supply to demand and ultimately drive a demand-led model,” he said. The CEO also said that the return to growth in North America will be based on greater product innovation, diversification within clogs, and growth within sandals as well as in new categories.
Crocs in August introduced its newest cozy franchise with global brand ambassador actress Millie Bobbi Brown, with a faux-fur clog assortment that’s more slipper than the brand’s core outdoor shoe.
Rees said the brand remains the No. 1 footwear brand on TikTok shop —the platform that’s gaining momentum with the younger consumers — in the U.S., and that it is was the first fashion brand to livestream 24/7 for an entire month across the site. “We’re continuing to expand this partnership and have launched TikTok shop in the U.K., Germany and Brazil,” the CEO said.
And while Hey Dude remains challenged, Rees said third quarter results came in ahead of expectations. He also noted that the brand has returned to the Top 10 list of preferred brands among males in the latest Piper Sandler survey this fall. He also said that the Wally Stretch Sox shoe — it features a soft cotton lining, cushy foam insole and a breezy mesh sock liner — has resonated well with consumers. The brand will launch in 2026 a “sweatshirt” version for one’s feet called Stretch Jersey. Rees said retailer response to the product “has been very strong” for both men and women.
The company is also cleaning up channel inventory in the North American market. To that end, it has accelerated returns and markdown allowances to its retailers, which has impacted revenue in the third quarter through vendor returns. “We’re planning for continued markdown support in the fourth quarter,” Rees told investors. He expects to complete the bulk of the Hey Dude cleanup activity during 2025.
The CEO also told investors that the company has been making significant investments in its supply chain over the last several year, and that has created some efficiencies as Crocs has been able to integrate more fully the Crocs and Hey Dude supply chains.
Looking ahead, Rees said the North American consumer is bifurcated, with highly affluent shoppers in great financial shape and a large portion of customers at the lower end who are super cautious about their spending and buying closer to need. The company has already seen less traffic to stores operating in the mid- to lower tier channels. Still, the company is keeping its pipeline of new products intact, forging ahead with a focus on clog innovation and diversifying into new silhouettes and categories.
And finally, for products under $100, which is really the vast majority of the firm’s mix — Crocs classic clog is has manufacturer’s suggested retail price of $50 and Hey Dude ranges between $60 and $70 — he said the under $100 arena “remains relatively competitive.” While big athletic brands can elevate pricing to compensate for tariff impacts, there’s less of an ability to do that “at the price points that we compete at,” Rees said.
