Dive Brief:
- Crocs finished out a year of wild growth with revenue up 42.6% year over year in the fourth quarter and gross margins up by 770 basis points, according to a press release.
- For the full fiscal year, Crocs’ revenue hit a record $2.3 billion, up about 67% from 2020. Even in a difficult supply chain environment, the brand’s operating income rose 219% with operating margin just under 30%.
- Coming off the acquisition deal for the Heydude casual footwear brand, Crocs now aims for $6 billion in revenue for the combined businesses by 2026.
Dive Insight:
Crocs had a breakout year in 2021, with sales and profit metrics up significantly over 2020 (which was also a growth year for the brand) as the clog-maker rides a wave of casualization, and reaps the benefits of its energetic marketing that capitalizes on social media and high-profile collaborations.
All of the brand’s channels contributed to last year’s growth. DTC revenue was up 64.4% to $1.1 billion, while wholesale was up 69.4% to just under $1.2 billion.
The brand’s sales through digital channels grew 47.6% in the year and represented 36.7% of sales for 2021, down from last year (when the figure was 42%) but an overall increase from 2019 (31%). The company expects digital sales to hit $2.5 billion by 2026.
Crocs already had big plans for future growth before it struck a $2.5 billion agreement to buy Heydude. With Heydude in the fold, Crocs says it has a multi-brand porftolio and a $160 billion addressable market, while also owning a company that is already fast-growing and profitable. (The company expects the acquisition to close later this month.)
Creating friction in the near term is the operating environment. According to an investor presentation, the company expects that more than $40 million in revenue will be pushed from Q1 to Q2 this year because of supply chain disruptions, which executives on a call said were related to extended transit times and delays in loading and unloading product.
Crocs also expects $75 million in added air freight costs to ding the company’s gross margin in the first half of the year.
Even with delays, management does not expect retail customers to cancel orders of Crocs products, executives said.
Amid widespread disruptions last year, Crocs still managed rapid growth. In October, after the company weathered factory shutdowns in Vietnam due to COVID-19 outbreaks, CEO Andrew Reese said the relatively simple configuration of Crocs’ core product, the clog, made it easier to move production when needed.
B. Riley Securities analyst Susan Anderson estimated earlier this month that Crocs earnings margin (before interest and taxes) will have expanded by 2,200 basis points between 2018 and the end of 2022, almost half of that coming from price increases and the rest from leveraging operating expenses with a higher sales base.
“While some investors believe this could be difficult to maintain, we believe it is sustainable as consumers have adjusted to higher ticket prices (easier to hold than lower promos) and as long as the Crocs brand remains on-trend with consumers,” Anderson said.
Looking ahead, the company projects revenue for the Crocs namesake brand to grow 20% in 2022 and for Heydude’s revenue to reach between $700 million and $750 million.
