Crocs Stock Plummets Amid Continued Heydude Sales Challenges

Essential Highlights

• Crocs shares dropped significantly on Tuesday due to persistent underperformance in sales from its smaller Heydude brand.
• Although the footwear company exceeded third-quarter earnings expectations, it lowered its revenue outlook for the entire year.
• Heydude’s full-year sales are now projected to decline by 14.5% year-over-year, a steeper drop than the previously anticipated 8% to 10% decrease.

Crocs, Inc. (CROX) shares tumbled over 18% on Tuesday after the company’s third-quarter earnings beat was overshadowed by ongoing sales struggles at Heydude, a brand Crocs acquired in 2022.

The company reported revenues of $1.06 billion, slightly surpassing estimates from Visible Alpha, while net income reached $199.8 million, outperforming the expected $187.3 million.

Investor concerns primarily centered around Heydude’s sales, which fell short at $204 million, prompting Crocs to revise its full-year sales forecast downward for the brand.

Heydude Sales Continue to Weigh on Profitability

CEO Andrew Rees acknowledged positive impacts from recent marketing investments but stated that Heydude’s current performance and market conditions suggest a longer timeline before the brand recovers.

For the fourth quarter, Crocs anticipates revenue to remain flat or show slight growth year-over-year, with Crocs brand sales expected to increase by 2%, offset by a 4% to 6% decline in Heydude sales. Analysts had forecasted Heydude’s quarterly revenue to rise to $251.3 million from $227.6 million a year earlier.

Additionally, Crocs adjusted its full-year revenue growth forecast to the lower end of the 3% to 5% range. Crocs brand revenue is expected to grow around 8%, while Heydude’s revenue is now projected to decline by 14.5%, compared to the previous estimate of an 8% to 10% drop.

“While we are revising our full-year outlook for Heydude, I remain optimistic about the brand’s long-term growth potential,” Rees stated in a press release.

Shares of Crocs closed down more than 18.5% on Tuesday at $112.49.

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