Crocs, Inc. (CROX) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights mixed signals: flat revenue growth and EPS, a slight increase in margins, and strategic focus on product newness and diversification. The Q&A reveals management's confidence in overcoming cost pressures and maintaining growth, despite global headwinds. However, the lack of specific guidance on cost impacts and stabilization in North America wholesale, along with a decline in HEYDUDE revenue, tempers optimism. The positive impact of share repurchases and efficient inventory management is offset by tariff and cost pressures, resulting in a neutral sentiment.
Key Financial Performance
Enterprise Revenue $921 million, down 2% year-over-year on a reported basis or down 4% on a constant currency basis. The decline was due to planned wholesale declines as the company optimized and managed this channel for long-term profitable growth.
Crocs Brand Revenue $767 million, down 2% year-over-year. International segment was up 7% on a reported basis, driven by strength in China, India, Japan, and Western Europe. North America was down 6%, with DTC up 5% despite a reduction in promotional activity, offset by wholesale declines.
HEYDUDE Brand Revenue $154 million, down 13% year-over-year. DTC was up 8%, driven by digital marketplace performance and new store openings, while wholesale was down 26% due to inventory management and sell-through levels.
Adjusted Gross Margin 56.9%, down 90 basis points year-over-year. The decline was driven by 100 basis points of incremental tariff impact and product mix, partially offset by brand mix.
Crocs Brand Adjusted Gross Margin 59.5%, down 120 basis points year-over-year. The decline was attributed to incremental tariff impacts and product mix.
HEYDUDE Brand Adjusted Gross Margin 44.5%, down 210 basis points year-over-year. The decline was due to incremental tariff impacts and product mix.
Adjusted Operating Margin 22.3%, down 150 basis points year-over-year. This excludes $5 million of specific costs related to cost savings initiatives.
Adjusted Diluted Earnings Per Share $2.99, flat year-over-year. This was achieved despite challenges, supported by cost savings initiatives and higher profitability in DTC channels.
Inventory Balance $398 million, up 2% year-over-year. Footwear units were down high single digits year-over-year, reflecting actions to manage inventory flow into the marketplace.
Enterprise Inventory Turns Above 4x on an annualized basis, indicating efficient inventory management.
Share Repurchases 800,000 shares repurchased for $74 million in the second quarter to date, reflecting the company's commitment to returning cash to shareholders.
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Operating Highlights
New Product Launches: Crocs introduced several new products, including the Classic Ballet flat, which saw global sellout, and the personalizable 2-strap Saturday Sandal. The LEGO Brick clog partnership also drove significant consumer engagement.
Category Expansion: Crocs expanded its sandal business, expecting it to approach $0.5 billion in revenue for 2026. HEYDUDE launched new products like the Stretch Jersey franchise and expanded its sandal offerings with the Maui Breeze franchise.
Collaborations: Crocs collaborated with LoveShackFancy and Disney, while HEYDUDE partnered with Chevy, Jelly Roll, and Naruto, enhancing brand visibility and consumer engagement.
International Growth: Crocs saw strong international revenue growth, up 7%, with notable performance in China, India, Japan, and Western Europe. The company expanded its presence on TikTok Shop in the U.K. and Malaysia and plans to launch in Japan.
Market Share Gains: Crocs gained market share globally, particularly in the clog and sandal categories, and strengthened its presence in high-priority markets like China and India.
Inventory Management: Crocs achieved best-in-class inventory management with footwear units down high single digits and inventory turning up more than 4x.
Cost Savings Initiatives: The company implemented cost-saving measures, partially offsetting tariff impacts and maintaining profitability.
Digital and Social Commerce: Crocs and HEYDUDE scaled their presence on TikTok Shop, with Crocs being awarded Top Seller of the Year and HEYDUDE receiving the Top Growth Seller of the Year.
Direct-to-Consumer Focus: Both brands emphasized direct-to-consumer channels, with Crocs DTC revenue up 11% and HEYDUDE DTC revenue up 8%, driven by digital marketplaces.
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Risk or Challenges
Impact of the war in the Middle East: The conflict in the Middle East is expected to reduce revenues from the company's Middle East distributor business, increase raw material and transportation costs due to elevated oil prices, and potentially have a broader impact on the global macro economy.
HEYDUDE brand performance: HEYDUDE brand revenue declined by 13% in Q1 2026, with wholesale channel revenue down 26%. The brand is facing challenges in stabilizing the North America marketplace and managing inventory levels.
Tariff impacts: Incremental tariffs have negatively impacted adjusted gross margins for both the Crocs and HEYDUDE brands, contributing to a decline in profitability.
Wholesale channel performance: Planned declines in the wholesale channel for both brands are impacting overall revenue, as the company focuses on optimizing and managing this channel for long-term growth.
Economic uncertainties: Elevated distribution and logistics costs, partly due to the Middle East conflict, and broader economic uncertainties could adversely affect the company's financial performance.
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Guidance & Outlook
Full Year 2026 Revenue Guidance: Enterprise revenue growth is expected to be up 1% to down 1% on a reported basis. Crocs brand revenue is anticipated to be flat to up 2%, driven by international growth and offset by declines in North America. HEYDUDE brand revenue is projected to decline approximately 5% to 7%, an improvement from prior guidance of down 7% to 9%.
Second Quarter 2026 Revenue Guidance: Revenues are expected to be down slightly. Crocs brand revenues are projected to increase by 1% to 3%, while HEYDUDE revenues are expected to decline by 12% to 14%.
Adjusted Gross Margin: For the full year 2026, adjusted gross margin is expected to be slightly up versus 2025, despite the impact of tariffs. Second quarter adjusted gross margin is expected to decline approximately 150 basis points year-over-year due to tariffs.
Adjusted Operating Margin: For the full year 2026, adjusted operating margin is expected to expand modestly from the 22.3% level reported in 2025. Second quarter adjusted operating margin is expected to be approximately 24.7%.
Adjusted Diluted Earnings Per Share: For the full year 2026, adjusted diluted EPS is expected to range between $13.20 and $13.75. For the second quarter, adjusted diluted EPS is projected to be between $4.15 and $4.35.
Capital Expenditures: Capital expenditures for 2026 are expected to range between $70 million and $80 million.
HEYDUDE Brand Growth Expectations: HEYDUDE direct-to-consumer and wholesale channels are expected to return to growth in the second half of 2026.
Tariff Refunds: Potential refunds on incremental tariffs paid in 2025 and 2026 are not currently included in the guidance.
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Shareholder Return Plan
Share Repurchase Program: Crocs, Inc. has an ongoing share repurchase program. During the second quarter of 2026, the company repurchased 800,000 shares for $74 million. The company has $747 million remaining on its existing share repurchase authorization. The repurchase program is part of the company's commitment to return meaningful cash to shareholders.
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Key Q&A
Q:Can you talk about the recent trends in sell-through for the Crocs brand in North America and the outlook for DTC?
A:Andrew Rees highlighted that newness in products, including sandals, clogs, and other styles, is driving strong consumer response in North America and international markets. The DTC business is improving with better execution in digital, stores, and social selling, supported by marketing activations targeting Gen Z. Despite global headwinds, management remains confident in the business trajectory.
Q:What factors give you confidence in the second half projections for revenue and profitability?
A:Patraic Reagan emphasized the strategic pillars for Crocs and HEYDUDE, focusing on product newness and diversification. He noted that actions taken last year, such as pulling back on promotions and inventory, are now providing tailwinds. These factors, combined with ongoing strategies, give confidence in the second half outlook.
Q:Can you unpack the impact of higher costs, including freight surcharges and resin costs?
A:Andrew Rees explained that higher oil prices are impacting transportation costs, which are embedded in the guidance. Resin costs could rise if high oil prices persist, but the company is not seeing a discernible trend in consumer behavior yet. Patraic Reagan added that the company is leveraging supply chain efficiencies and cost-saving measures to mitigate these impacts.
Q:What level of tariffs are embedded in the guidance, and how are inventory levels in the channel?
A:Andrew Rees stated that inventory levels are well-managed, with wholesale customers being prudent. Patraic Reagan explained that tariffs are now part of the base, reducing variance. The guidance includes current tariff impacts, and any changes will be communicated.
Q:Can the 5% growth in North America DTC for the Crocs brand continue?
A:Andrew Rees noted that while specific channel guidance is not provided, the drivers of DTC performance, such as newness in products and effective execution, are fundamental and should continue. DTC is expected to outperform wholesale.
Q:What drove the downside in gross margin for Q1, and how should we think about it for the rest of the year?
A:Patraic Reagan attributed the Q1 gross margin decline to new product mix and brand mix, with HEYDUDE outperforming expectations. These factors align with the company's growth strategy, and the impact of new product mix is expected to normalize over time.
Q:Do you see North America wholesale stabilizing in the near to medium term?
A:Andrew Rees expressed confidence in the stabilization of North America wholesale, noting that inventory levels are being right-sized and newness is being introduced effectively. The business is expected to grow as the brand continues to diversify.
Q:What are your expectations for input costs if higher oil prices persist, and how will you protect profitability?
A:Andrew Rees stated that sustained high oil prices could pressure resin and transportation costs, but the company has strategies to mitigate these impacts, including supply chain efficiencies. Patraic Reagan added that all known impacts are included in the guidance, and the company is prepared to adjust as needed.
Q:Is the 10% revenue growth guidance for Crocs International still valid, and what is the impact of FX?
A:Patraic Reagan confirmed that international growth is expected to be high single digits to 10%, with the Middle East conflict causing some friction. FX impact is slightly worse than 90 days ago but not materially affecting guidance.
Q:What are the areas of reinvestment in SG&A, and how flexible is the supply chain?
A:Andrew Rees mentioned investments in DTC capabilities, digital selling, and marketing. The supply chain is flexible, with lean inventories and backup inventory for best-selling items to capture at-once opportunities.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the magnitude of potential cost headwinds from higher oil prices and resin costs, as well as the exact impact of tariffs on guidance. Additionally, they did not provide specific channel or geographic guidance for DTC growth or North America wholesale stabilization.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Austin Slide
Ballet flat
Breeze franchise
Charmed micro
Chevy Jelly
China Super
City presence
Classic Ballet
Classics franchise
Clog product
Crocband
HEYO
Japan
Malaysia
Middle East
RO
Sandal
Wally
ability consumer
celebrity
clog
collaboration
commitment
consumer channel
consumer engagement
consumer touch
distributor
highlight
laser
launch
material
medium
personalization
relevance
repurchase
sellout
store opportunity
touch point
world
CROX Transcript
Crocs, Inc. (CROX) Q1 2026 Earnings Call Transcript
Unknown4-30
The earnings call highlights mixed signals: flat revenue growth and EPS, a slight increase in margins, and strategic focus on product newness and diversification. The Q&A reveals management's confidence in overcoming cost pressures and maintaining growth, despite global headwinds. However, the lack of specific guidance on cost impacts and stabilization in North America wholesale, along with a decline in HEYDUDE revenue, tempers optimism. The positive impact of share repurchases and efficient inventory management is offset by tariff and cost pressures, resulting in a neutral sentiment.
Crocs, Inc. (CROX) Q4 2025 Earnings Call Transcript
Unknown2-12
The earnings call highlights several concerns: revenue decline in key markets, reduced marketing spend, and significant tariff impacts. Although there are positive notes like international growth and cost-saving initiatives, the guidance remains weak with declining margins and EPS. The Q&A reveals management's lack of clarity on key issues, further contributing to uncertainty. The combination of these factors, along with a cautious consumer environment, suggests a negative stock price movement in the short term.
Crocs, Inc. (CROX) Q3 2025 Earnings Call Transcript
Unknown10-30
The earnings call reflects concerns with declining revenues and tariff impacts, despite cost-saving measures and international growth. The Q&A highlighted cautious consumer spending and challenges in North America, with management avoiding specifics on cost savings and tariff impacts. Additionally, HEYDUDE's ongoing cleanup and cautious wholesale planning indicate uncertainty. The lack of clear guidance and ongoing tariff-related headwinds contribute to a negative sentiment, suggesting a stock price decline of -2% to -8%.
Crocs, Inc. (CROX) Presents At Goldman Sachs 32nd Annual Global Retailing Conference 2025 Transcript
Neutral9-3
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