Crocs, Inc. (CROX) Bundle
Understanding Crocs, Inc. (CROX) Revenue Streams
Understanding Crocs, Inc.’s Revenue Streams
As of September 30, 2024, the total consolidated revenues for the company were $1,062,200 thousand for the third quarter and $3,112,335 thousand for the nine months ended, showing an increase of 1.6% and 3.7% respectively compared to the same periods in 2023.
Revenue Breakdown by Brand
The company operates through two reportable segments: the Crocs Brand and the HEYDUDE Brand. The following table summarizes the revenues by brand for the three and nine months ended September 30, 2024 and 2023:
| Brand | Three Months Ended September 30 (in thousands) | Nine Months Ended September 30 (in thousands) |
|---|---|---|
| Crocs Brand | $858,098 | $2,515,903 |
| HEYDUDE Brand | $204,102 | $596,432 |
| Total Consolidated Revenues | $1,062,200 | $3,112,335 |
Revenue Growth Rate
The year-over-year revenue growth rate reflects a modest increase. The Crocs Brand achieved a growth of 7.4% in the third quarter 2024 compared to 2023, while the HEYDUDE Brand experienced a decline of 17.4% in the same quarter.
For the nine months ended September 30, 2024, the Crocs Brand also showed significant growth, with revenues increasing by 10.3% compared to the previous year. Conversely, the HEYDUDE Brand revenue decreased by 17.4%.
Contribution of Different Business Segments
The contribution of each brand to overall revenue is significant, particularly for the Crocs Brand, which accounted for the majority of total revenues:
| Segment | Q3 2024 Revenue Contribution (%) | YTD 2024 Revenue Contribution (%) |
|---|---|---|
| Crocs Brand | 80.9% | 80.8% |
| HEYDUDE Brand | 19.1% | 19.2% |
Analysis of Significant Changes in Revenue Streams
In the third quarter of 2024, the Crocs Brand's revenue increased primarily due to higher volumes, while the HEYDUDE Brand saw a decrease in volume leading to a revenue decline. The decrease in HEYDUDE revenue was primarily attributed to lower unit sales volume, which was partially offset by higher average selling prices (ASP) due to less discounting.
The overall revenue increase for the Crocs Brand was driven by a mix of higher volumes and improved pricing strategies, while the HEYDUDE Brand's performance was hindered by lower volumes, despite a favorable pricing environment.
For the nine months ended September 30, 2024, the revenue increase in the Crocs Brand was further supported by favorable product mix and pricing in international markets.
| Revenue Changes (in thousands) | Q3 2024 vs Q3 2023 | YTD 2024 vs YTD 2023 |
|---|---|---|
| Crocs Brand Revenue Change | $59,329 (7.4% increase) | $235,406 (10.3% increase) |
| HEYDUDE Brand Revenue Change | ($42,846) (17.4% decrease) | ($125,321) (17.4% decrease) |
A Deep Dive into Crocs, Inc. (CROX) Profitability
Profitability Metrics
In analyzing the financial health of the company, profitability metrics serve as critical indicators of its performance. Below are key insights into gross profit, operating profit, and net profit margins.
Gross Profit Margin
The gross profit margin has shown a positive trend. For the third quarter of 2024, the gross margin was 59.6%, up from 55.6% in the same quarter of 2023. This increase of 400 basis points was largely due to lower product costs, reduced freight expenses, and a favorable brand mix.
Operating Profit Margin
The operating profit margin for the third quarter of 2024 was 25.4%, a slight decrease from 26.2% in the third quarter of 2023. Year-to-date, the operating margin for 2024 stands at 26.4%, down from 27.6% in 2023.
Net Profit Margin
Net income for the third quarter of 2024 reached $199.8 million, translating to a net profit margin of 18.8%, compared to 16.9% in the third quarter of 2023. The diluted earnings per share increased to $3.36 from $2.87 year-over-year.
Trends in Profitability Over Time
The following table summarizes the profitability metrics for the last two years, highlighting the trends in gross, operating, and net profit margins:
| Metric | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 |
|---|---|---|---|---|
| Gross Profit Margin | 59.6% | 55.6% | 59.0% | 55.9% |
| Operating Profit Margin | 25.4% | 26.2% | 26.4% | 27.6% |
| Net Profit Margin | 18.8% | 16.9% | 18.7% | 17.9% |
Comparison of Profitability Ratios with Industry Averages
The company’s gross margin of 59.6% compares favorably against the industry average of approximately 50%. The operating margin of 25.4% is slightly above the industry average of 24%, while the net profit margin exceeds the industry average of 15%.
Analysis of Operational Efficiency
Operational efficiency remains a focus area. Selling, general and administrative (SG&A) expenses for Q3 2024 were $363.5 million, representing 34.2% of total revenues, up from 29.4% in Q3 2023. This increase is attributed to heightened investments in marketing and talent acquisition.
Overall, the company's ability to maintain high gross margins while managing operating costs will be essential for sustaining profitability moving forward.
Debt vs. Equity: How Crocs, Inc. (CROX) Finances Its Growth
Debt vs. Equity: How Crocs, Inc. Finances Its Growth
As of September 30, 2024, Crocs, Inc. reported total borrowings of $1.42 billion, comprising both long-term and short-term debt. The company's debt structure includes a Term Loan B Facility with an outstanding principal of $575 million, which matures on February 17, 2029.
The company’s debt-to-equity ratio stands at approximately 0.82, indicating a balanced approach to financing when compared to the footwear industry's average ratio of 0.5 to 1.0.
Debt Levels Overview
Debt levels consist of both long-term and short-term components:
| Type of Debt | Amount (in millions) |
|---|---|
| Long-term Debt | $1,421.95 |
| Short-term Debt | $0.20 |
| Total Debt | $1,422.15 |
Recent Debt Issuances and Refinancing Activity
In February 2024, Crocs refinanced its existing debt through the issuance of $820 million in new term loans under the amended Term Loan B Credit Agreement. This refinancing was undertaken to lower interest rates and extend the maturity of the existing debt, reflecting the company's proactive approach to managing its capital structure.
Credit Ratings
The company maintains a credit rating of B+ from Standard & Poor's, indicating a stable outlook despite the leveraged capital structure. This rating is indicative of the company's ability to meet its financial commitments, although it suggests some vulnerability to adverse economic conditions.
Balancing Debt Financing and Equity Funding
In balancing its financing strategy, Crocs has actively repurchased shares, totaling $326.2 million over the past nine months. This share repurchase program is part of its strategy to enhance shareholder value while maintaining a manageable level of debt. The company also has a remaining authorization to repurchase $548.9 million of its common stock.
As of September 30, 2024, the company’s liquidity position remains strong, with $186.1 million in cash and cash equivalents and $574.2 million in available borrowing capacity, providing a cushion for operational flexibility and growth initiatives.
Assessing Crocs, Inc. (CROX) Liquidity
Assessing Crocs, Inc. Liquidity
The liquidity position of Crocs, Inc. as of September 30, 2024, provides essential insights for investors. The company reported the following key figures:
| Liquidity Metric | Amount (in thousands) |
|---|---|
| Cash and Cash Equivalents | $186,122 |
| Available Borrowings | $574,182 |
| Total Borrowings | $1,420,000 |
| Revolving Facility Availability | $559,200 |
| Citibank Facility Availability | $15,000 |
As of September 30, 2024, the total cash and cash equivalents stood at $186.1 million with an additional $574.2 million in available borrowings, which includes $559.2 million from the Revolving Facility and $15.0 million from the Citibank Facility .
Current and Quick Ratios
The current ratio, calculated as current assets divided by current liabilities, indicates the company's ability to cover its short-term obligations. The quick ratio, which excludes inventory from current assets, is also a crucial measure of liquidity. Specific ratios for Crocs, Inc. are not provided directly in the financials, but the strong cash position and available borrowings suggest healthy liquidity overall.
Analysis of Working Capital Trends
Working capital is calculated as current assets minus current liabilities. While the specific figures for current assets and liabilities were not detailed, the substantial cash reserves and available borrowings indicate a positive working capital trend. Investors should monitor this metric closely as it reflects the company's operational efficiency and short-term financial health.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, reveal the following insights:
| Cash Flow Type | Amount (in thousands) |
|---|---|
| Cash Flows from Operating Activities | $670,549 |
| Cash Flows from Investing Activities | ($50,857) |
| Cash Flows from Financing Activities | ($583,673) |
| Net Change in Cash | $36,448 |
| Cash at End of Period | $189,545 |
Operating cash flow was $670.5 million, indicating strong operational performance. However, cash used in financing activities totaled ($583.7 million), reflecting significant stock repurchases and debt repayments. The net change in cash was $36.4 million, bringing the total cash to $189.5 million at the end of the period .
Potential Liquidity Concerns or Strengths
Despite a strong liquidity position, potential concerns include reliance on external borrowings, with total borrowings reaching $1.42 billion. The company is in compliance with all financial covenants, which mitigates immediate liquidity risks. However, ongoing economic conditions and operational performance can impact future liquidity .
Is Crocs, Inc. (CROX) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will examine key financial ratios such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the company's diluted earnings per share (EPS) was $3.36. With a current stock price of approximately $100.00, the P/E ratio is calculated as follows:
P/E Ratio = Stock Price / EPS = $100.00 / $3.36 = 29.76
Price-to-Book (P/B) Ratio
The book value per share is calculated from total stockholders' equity divided by the total outstanding shares. As of September 30, 2024, total stockholders' equity was $1,725,118,000 and total outstanding shares were approximately 58.5 million.
Book Value per Share = Total Stockholders' Equity / Total Outstanding Shares = $1,725,118,000 / 58,483,000 = $29.49
The P/B ratio is therefore:
P/B Ratio = Stock Price / Book Value per Share = $100.00 / $29.49 = 3.39
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
As of September 30, 2024, the enterprise value (EV) is calculated as market capitalization plus total debt minus cash. The total debt is $1,420,000,000 and cash is $186,100,000.
Market Capitalization = Stock Price x Total Outstanding Shares = $100.00 x 58,483,000 = $5,848,300,000
Enterprise Value = Market Capitalization + Total Debt - Cash = $5,848,300,000 + $1,420,000,000 - $186,100,000 = $7,082,200,000
For the EBITDA, the income from operations for the nine months ended September 30, 2024, was $821,996,000. Assuming a depreciation and amortization expense of $51,890,000, the EBITDA is:
EBITDA = Income from Operations + Depreciation & Amortization = $821,996,000 + $51,890,000 = $873,886,000
Thus, the EV/EBITDA ratio is:
EV/EBITDA Ratio = Enterprise Value / EBITDA = $7,082,200,000 / $873,886,000 = 8.09
Stock Price Trends
Over the last 12 months, the stock price has shown a significant increase from approximately $60.00 to the current price of $100.00, representing a 66.67% increase.
Dividend Yield and Payout Ratios
The company does not currently pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% as no dividends have been declared.
Analyst Consensus on Stock Valuation
As of the latest analyst reports, the consensus rating is a Hold, with a target price range from $85.00 to $110.00.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 29.76 |
| P/B Ratio | 3.39 |
| EV/EBITDA Ratio | 8.09 |
| Current Stock Price | $100.00 |
| 12-Month Price Change | 66.67% |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Hold |
Key Risks Facing Crocs, Inc. (CROX)
Key Risks Facing Crocs, Inc. (CROX)
Overview of Internal and External Risks
Several key risks could impact the financial health of Crocs, Inc. in 2024:
- Industry Competition: The footwear market is highly competitive, with numerous brands vying for market share. This competition can affect pricing strategies and margins.
- Regulatory Changes: Changes in trade policies and tariffs could impact costs and supply chain dynamics, particularly with international operations.
- Market Conditions: Economic downturns or shifts in consumer preferences can adversely affect sales volume and revenue growth.
Discussion of Operational, Financial, or Strategic Risks
Recent earnings reports highlight some operational and financial risks:
- Gross Margin Pressure: Gross margin for Q3 2024 was reported at 59.6%, up from 55.6% in Q3 2023, but operational challenges remain due to fluctuating product costs and distribution expenses.
- Increased SG&A Expenses: Selling, general and administrative expenses rose to $363.5 million in Q3 2024, compared to $307.8 million in the same period last year, indicating increased investment in marketing and talent.
- Foreign Currency Risks: Foreign currency losses for Q3 2024 were $(0.3 million), a significant reduction from $(1.8 million) in Q3 2023, but fluctuations in exchange rates can still impact financial results significantly.
Mitigation Strategies
The company has implemented various strategies to mitigate these risks:
- Hedging Foreign Currency Risks: The company utilizes foreign currency forward contracts to manage exposure to fluctuations in foreign exchange rates, with a notional value of $226.6 million as of September 30, 2024.
- Focus on Cost Management: The company aims to optimize its cost structure, with gross margins improving due to lower freight costs and favorable brand mix.
- Investment in Brand Growth: Continued investment in marketing and new product development to strengthen brand presence and consumer loyalty.
| Risk Factor | Q3 2024 Data | Q3 2023 Data | Change |
|---|---|---|---|
| Gross Margin | 59.6% | 55.6% | +400 bp |
| SG&A Expenses | $363.5 million | $307.8 million | +18.1% |
| Foreign Currency Losses | $(0.3 million) | $(1.8 million) | Improvement |
| Net Income | $199.8 million | $177.0 million | +12.9% |
Financial Position and Liquidity
As of September 30, 2024, the company had:
- Cash and Cash Equivalents: Approximately $186.1 million
- Total Borrowings: $1.42 billion
- Available Borrowing Capacity: $574.2 million
These figures reflect the company's ongoing commitment to maintaining a solid financial position while navigating the various risks associated with its operations.
Future Growth Prospects for Crocs, Inc. (CROX)
Future Growth Prospects for Crocs, Inc.
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product Innovations: The company has focused on enhancing its product lineup with new styles and collaborations, which accounted for a revenue increase of 1.6% in the third quarter of 2024 compared to the previous year.
- Market Expansions: Expanding into international markets, particularly with price increases in those regions, has contributed to a 7.4% revenue growth in the Crocs Brand.
- Acquisitions: The integration of the HEYDUDE brand continues to be a strategic focus, although revenues from this segment decreased by 17.4% in the third quarter of 2024.
Future Revenue Growth Projections and Earnings Estimates
The consolidated revenues for the nine months ended September 30, 2024, were $3,112.3 million, marking an increase of 3.7% from the previous year. Earnings per share (EPS) for the third quarter increased to $3.36, up from $2.87 year-over-year.
Strategic Initiatives or Partnerships that May Drive Future Growth
Strategic initiatives include:
- Increased Marketing Investments: SG&A expenses rose by 18.1% in Q3 2024, primarily due to investments in marketing and talent.
- Retail Footprint Expansion: The company is increasing its retail presence, contributing to higher direct-to-consumer sales, which grew by 7.7% in Q3 2024.
Competitive Advantages that Position the Company for Growth
The company benefits from several competitive advantages:
- Brand Recognition: The Crocs brand has established a strong identity in the footwear market, which aids in customer loyalty and repeat purchases.
- Diverse Product Mix: The company's ability to offer a variety of products has helped maintain its market share.
- Operational Efficiency: A gross margin of 59.6% in Q3 2024 reflects improved cost management and efficiencies in operations.
Financial Overview
| Financial Metric | Q3 2024 | Q3 2023 | % Change |
|---|---|---|---|
| Revenues | $1,062.2 million | $1,045.7 million | 1.6% |
| Gross Margin | 59.6% | 55.6% | 400 bps |
| Net Income | $199.8 million | $177.0 million | 12.9% |
| Earnings Per Share | $3.36 | $2.87 | 17.1% |
The company reported a total of $581.2 million in net income for the nine months ended September 30, 2024, an increase of 7.8% compared to the same period in 2023. The strategic focus on enhancing brand presence and operational efficiencies is expected to continue driving growth.
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Article updated on 8 Nov 2024
Resources:
- Crocs, Inc. (CROX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Crocs, Inc. (CROX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Crocs, Inc. (CROX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.