Shares of Crocs (CROX) are up Thursday after reporting better-than-expected fourth-quarter earnings and record annual profit. Williams Trading Equity Analyst Sam Poser joins Yahoo Finance Live to discuss the results, noting Crocs is "moving in the right direction".
Poser says the biggest earnings "surprise" was the company's gross margins. He highlights Crocs' shift towards an "aggressive pull model" that could further boost margins. Poser also acknowledges their newly acquired Hey Dude brand is "stabilizing" after initial struggles.
Looking ahead, Poser states Crocs' long-term marketing strategies, driving short-term revenue gains, could continue to lift profits.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Angel Smith
Video Transcript
AKIKO FUJITA: Well Crocs shares are climbing higher today after reporting a record-high annual profit in 2023 and issuing a solid full-year guidance. Joining me now is Sam Poser, Williams Trading equity analyst. Sam, what do you think was the biggest driver for the company in the quarter, and how much of that momentum can carry through?
SAM POSER: Well, I mean, they-- they pre announced the number about a month and a half ago at a conference. So-- so from a revenue perspective, it wasn't really a surprise. The surprise really came on the gross margin that was better than what everybody anticipated. And it looks like the Hey Dude business-- people seem to be convinced that the Hey Dude business is going to stabilize within 2024. So-- and the inventories are very clean, and their leverage ratio is down.
So they're just moving in the right direction. They're more flexible. And they're working towards a-- a much more aggressive-- working towards a much more aggressive pull model, which will help margins down the road. And I think that's why the stock's reacting because I don't think people quite expected the EPS beat, and the guidance from an EPS perspective was higher than what the Street anticipated.
AKIKO FUJITA: What are you watching for in terms of additional levers that could push the stock even higher?
SAM POSER: Yeah, so-- so one of the things that they've done well and they talked about it back in January, and they rementioned it on the call today was they're going to-- they're-- they're-- they're cranking up their SGNA spend especially on marketing, what they're calling long-term marketing. We believe that the short-term-- short-term marketing will-- the long-term marketing will drive short-term sales even though that's not included in the guidance.
Given where we are in the year for Crocs and for Hey Dude while it's still wintertime, we don't think that we're really going to see that until we get to around Easter or maybe just after. That's when we'll see that. And then we think there's upside on the numbers. But a little too early to tell, but things are moving in the right direction and especially the inventories as clean as we've seen in a long, long time.
