Crocs Is a ‘Brand Management Story, Not a Fad’ + More Reasons Analysts Are Championing the Label

Samantha McDonald
·3 min read

Crocs Inc. isn’t just riding the pandemic-exit wave — it’s thriving.

Like many of its peers, FN’s 2020 brand of the year has seen a boost in business thanks to recent reopenings, fiscal stimulus and the acceleration of the casualization trend. But, following a massive earnings beat and positive outlook, analysts suggest that its stellar performance is not just for the near term.

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At market close, CROX stock was up 15.3% to nearly $98. The shares surged shortly after the release of its first-quarter financial report and conference call, where CEO Andrew Rees called out “record” sales and profits — plus suggested that management was “incredibly optimistic about the balance of 2021.”

Since the first quarter of the 2019 fiscal year, according to UBS analyst Jay Sole, Crocs has beat sales guidance by 7.5% on average. This morning, the clog maker reported 63.6% improvement in Q1 2021 revenues to $460.1 million, compared with consensus bets of $415.3 million.

“Our recent conversations with investors indicated many expected a beat, yet we think today’s FY21 guidance raise surpasses high market expectations,” he wrote in a distribution note.

Sole added that another better-than-anticipated figure was the brand’s gross margin, which improved 55.2%. “This suggests CROX’s initiative to raise prices is working much better than many realized,” he explained. “The gross margin beat also has potentially big and positive out-year earnings implications if the gains are sustainable, and this likely has a good effect on the stock’s price-to-earnings ratio.”

For the three months ended March 31, Crocs recorded adjusted earnings of $1.49 per share, versus the prior year period’s earnings of 16 cents per share. Wall Street had predicted earnings of 89 cents per share.

Following the conference call, Williams Trading analyst Sam Poser raised his price target for the brand from $111 to $160. In a note, he touted the strength of the Broomfield, Colo.-based company’s product, marketing and collaborations.

By category, clogs and sandals jumped a respective 87% and 17% year over year, representing 76% and 17% of total footwear revenues. Sales of Jibbitz, on the other hand, more than doubled for the quarter from the prior year period.

“Crocs is and continues to be a brand management story, not a fad,” Poser wrote, citing strong messaging, hot collaborations, burgeoning digital sales, product innovation and more.

While sales in the Asia-Pacific region rose 20.1% to $82.6 million, Crocs outperformed in all geographies: Europe-Middle East-Africa advanced 41% to $101.1 million, and its Americas division saw the biggest hike of 87.5% to $276.4 million.

For the 2021 fiscal year, the company anticipated revenue growth to be between 40% and 50% from 2020 revenues of $1.39 billion. Next quarter, sales were forecasted to climb in the range of 60% and 70% from the prior year period’s sales of $331.5 million.

“If there was a soft spot in Q1, we missed it,” said CL King & Associates managing director of research Steven Marotta. “If there was a soft spot in guidance, we missed it.”

He added, “The brand — and, by extension, the company — is catching a tailwind that would make El Niño blush, capitalizing on the investments made in digital capabilities, top-notch marketing talent, regional organizational streamlining and keen strategic execution.”

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