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Crocs (CROX) Beats Earnings and Revenue Estimates in Q3

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Zacks Equity Research
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Crocs, Inc. CROX reported better-than-expected third-quarter 2020 results, wherein both top and bottom lines increased year over year. Despite a tough retail environment stemming from the ongoing COVID-19 pandemic, brand strength and strong cash flow contributed to quarterly growth. It also noted that all stores remained open during the third quarter but for limited hours.

Encouragingly, management provided a guidance excluding the impacts of any potential shutdown due to the ongoing COVID-19 situation. The company expects year-over-year revenue growth of 20-30% for the fourth quarter and roughly 5-7% for 2020. Consequently, this Zacks Rank #1 (Strong Buy) stock has soared 53.8% in the past three months, outperforming the industry’s growth of 14.5%.

Q3 Highlights

Crocs’ adjusted earnings came in at 94 cents during third-quarter 2020, surpassing the Zacks Consensus Estimate of 68 cents. Moreover, the figure surged 64.9% year over year from 57 cents in the year-ago quarter.

Revenues increased 15.7% (15.9% in constant-currency) to $361.7 million in the reported quarter and exceeded the Zacks Consensus Estimate of $345 million. Further, wholesale and retail revenues improved 12.4% and 8.9% year over year, respectively. Solid performance in the Americas and the EMEA along with healthy demand in its key products, including Clogs, Sandals, Jibbitz and Visible Comfort technology, drove the top line. Apart from these, e-commerce grew 36.3% year over year in the quarter under review, marking the 14th successive quarter of double-digit growth.

The company’s adjusted gross profit advanced 24.1% to $207.8 million. Moreover, adjusted gross margin expanded 380 basis points (bps) to 57.4% on the back of favorable product mix, elevated prices of selective products and less promotional activities.

Also, adjusted SG&A expenses grew 7.5% to $132.4 million in the third quarter. Meanwhile, adjusted SG&A, as a percentage of sales, contracted 280 bps to 36.6%.

Adjusted operating income of $75.4 million soared 69.7% year over year and adjusted operating margin expanded 660 bps to 20.8%. The uptick can be attributable to lower SG&A costs, robust sales and improved gross margins.

Segments at a Glance

Total revenues in the Americas region was up 26.4% (27.3% in constant-currency) to $234 million in the third quarter. Also, revenues in the EMEA region came in at $60 million, increasing12.6% (10.7% in constant-currency) year over year. However, the Asia Pacific region witnessed a revenue decline of 8.8% (9% at constant-currency) to $67.7 million.

Financial Details

Crocs ended the quarter with a cash balance of $123.6 million. The company generated $158.6 million in cash from operating activities. Further, it incurred capital expenditure of $33.2 million and is expected to be almost $50 million in 2020.

Further, its share repurchase activity remains suspended due to the continued uncertainties related to the COVID-19 crisis. The company has $469 million remaining in its existing share repurchase program as of Sep 30, 2020.

The company repaid $140 million in the quarter under review, which leaves it with $135 million available for borrowing under its credit facility as of Sep 30. This brings the liquidity level to $364.4 million, which is likely to help the company stay afloat amid this pandemic.

Crocs, Inc. Price, Consensus and EPS Surprise

Crocs, Inc. Price, Consensus and EPS Surprise
Crocs, Inc. Price, Consensus and EPS Surprise

Crocs, Inc. price-consensus-eps-surprise-chart | Crocs, Inc. Quote

Other Stocks to Consider

Hanesbrands HBI, a Zacks Rank #1 stock, has an impressive long-term earnings growth rate of 3.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deckers Outdoor Corporation DECK has a long-term earnings growth rate of 17.7% and a Zacks Rank #1.

Columbia Sportswear Company COLM has a long-term earnings growth rate of 2.9% and a Zacks Rank #2 (Buy).

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