Celebrity-heavy collabs are key to Crocs‘ quarterly success.
The casual footwear company said Tuesday it expects fourth quarter revenue to grow between 20 percent and 30 percent compared to 2019, bringing full year 2020 revenue growth of approximately 5 percent to 7 percent.
This came as the clog maker reported record third-quarter revenue of $361.7 million, an increase of 15.7 percent over record third quarter revenue achieved in 2019, with growth in all three channels–e-commerce revenue grew 36.3 percent, wholesale revenue rose 12.4 percent and retail revenue increased 8.9 percent.
Digital sales were up 35.5 percent to represent 37.7 percent of revenue versus 32.2 percent last year. Retail comparable store sales grew 16.2 percent.
Net income in the quarter rose 73.5 percent to $61.89 million from $35.68 million in the year-ago period. Diluted earnings per share (EPS) grew 78.4 percent to a quarterly record of 91 cents compared to 51 cents for the same period last year. Operating income increased 80.7 percent to $72.1 million and operating margins expanded 710 basis points to 19.9 percent.
“We achieved record third quarter revenue and EPS despite the challenges presented by the global COVID-19 pandemic,” CEO Andrew Rees said. “Our extraordinary performance and strong cash flow generation demonstrates the strength of the Crocs brand and product offering globally.”
Rees told analysts on a conference call that the Crocs brand “continues to resonate strongly with consumers throughout the world, as a result of our powerful marketing and iconic products.” He cited an event in South Korea in August, where fans “queued overnight at stores for our collaboration with KFC, that sold out in 90 seconds. With Chinatown Market, we launched our colorful Grateful Dead Croc, which LeBron James wore around the NBA bubble, creating quite a stir.”
“We continue to celebrate come as you are, with a special edition glow-in-the-dark Croc, with Puerto Rican star Bad Bunny,” he said. “The Crocs with Bad Bunny design, were in very high demand, selling out in minutes…This month was full of Croctober surprises, the most noteworthy being our collaboration with Justin Bieber and his clothing brand, Drew House, which generated an incredible global media buzz. The singer-songwriter designed yellow Jibbitz adorned clocks that sold out quickly around the world.”
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From a product perspective, Rees said results continue to be driven by four key product pillars: clogs, sandals, Jibbitz, and visible comfort technology. Sales of clogs were particularly strong this quarter, increasing 31 percent year-over-year to represent 72 percent of total footwear revenues versus 62 percent last year, he said.
“I think the shifting consumer mindset has only helped the brand,” Rees said. “We make a product that is fun, it’s value priced, it’s easy on and off, it’s easy to clean. There are a lot of both functional and emotional benefits to our brand, and I think it fits really well with where the global consumer is today. So, I think there are many reasons not to think that the growth that we’re seeing is short-lived…I think we can substantiate that on multiple avenues.”
In the third quarter, gross margin of 57.2 percent increased 480 basis points in the quarter compared to 52.4 percent in the same period last year. Sales, general and administrative (SG&A) expenses of $134.7 million increased from $123.9 million in the same period last year and SG&A as a percent of revenue improved by 240 basis points to 37.2 percent.
By region, Americas revenue increased 27.3 percent to $234 million, Asia Pacific revenue fell 9 percent to $67.7 million and Europe, Middle East and Africa (EMEA) revenues rose 10.7 percent to $60.
Overall, inventories increased to $174.1 million as of Sept. 30 compared to $172 million as of Dec. 31 and $139.8 million as of Sept. 30, 2019, as in-transit inventories were up approximately $20 million from the same period last year. Crocs is on track for approximately $50 million of capital expenditures for 2020, which reflects investment to support future growth.
“We’re even more confident now than a year ago about the Crocs brand strength and our long term growth potential,” Rees added. “We’re incredibly optimistic about 2021 and our growth trajectory. Our four key product pillars, and our powerful social and digital marketing, are clearly creating exceptional consumer engagement. From a channel and region perspective, our digital-first strategy and our long-term focus on Asia will deliver our growth for years to come.”