Earnings   //   February 16, 2023

Digital and international growth helped Crocs’s sales skyrocket

Crocs says it’s seeing “exceptional” demand for its shoes — especially internationally and via digital channels — as the company celebrates a third straight year of record-setting revenues.

On Thursday, Crocs reported $3.6 billion in revenue for 2022, a 54% jump from 2021. Its fourth-quarter revenue totaled $945.2 million, an increase of 61.1% from the same period a year before. Looking forward to 2023, Crocs expects “another strong year of robust revenue growth” and a record number of product introductions, CEO Andrew Rees said on the earnings call.

While Crocs has been around since 2002, it’s enjoyed tremendous growth over the last couple of years as more people have invested in comfortable and casual footwear. Its sales ballooned to record levels in 2020, and again in 2021. In late 2021, Crocs acquired Hey Dude Shoes for $2.5 billion, vastly expanding its offerings and customer base. The deal, along with Crocs’s many playful collaborations, has helped the company stay on solid footing with shoppers, even as formal footwear has come back into play.

Hey Dude delivered “great initial results” over the past year, Rees said. The brand, which sells casual shoes, sandals and slip-ons, enjoyed 70% growth in 2022 on a pro-forma basis, most of which came from wholesale. While the Hey Dude deal expanded Crocs’s inventory levels by some $169 million as of Dec. 31, Crocs is making headway on cutting this down. It’s also expanding its distribution for Hey Dude, including building a new center in Las Vegas.

As Crocs works to build out Hey Dude, its namesake brand continues to shine. The Crocs brand sold a whopping 27 million pairs of shoes during the fourth quarter, an increase of nearly 21% year-over-year. The majority of sales came from its foam clogs, which accounted for 79% of its quarterly revenue. Crocs’s colorful jibbitz, which fit into the holes on its shoes, grew 13% during the quarter to account for 8% of total revenue.

One of Crocs’s fastest-growing categories is sandals, which grew 53% in the fourth quarter to represent 10% of total brand revenue. While sandal production slowed in the first half of the year due to factory shutdowns in Vietnam, the category bounced back in the second half, thanks to new products like the Echo Slide and Crush Sandal. Today, Crocs is “incredibly confident in sandal growth in 2023,” particularly in India and Southeast Asia, Rees said.

In fact, international growth has been key to the main Crocs brand, executives said. Quarterly revenue in North America was mostly flat from 2021, with a gain from DTC offset by a decline in wholesale.¬†However, sales in South Korea and India grew “strong double digits during the quarter and the year,” CFO Anne Mehlman said on the call. Despite challenges from Covid-related closures in China, Crocs managed to grow sales by 38% during the quarter.

Both Crocs and Hey Dude have focused on building out their digital channels, which remain a “top priority” for both brands, Mehlman explained. During the fourth quarter, the two brands’ digital business grew 80% year-over-year. The company attributes this to “product newness, refined user experience and additional marketing activities,” Mehlman said.

As a brand, Crocs has courted its Gen Z customers through a series of splashy collaborations. Last quarter, it launched collections with Pok√©mon, 7 Eleven and Marvel’s “Black Panther,” as well as celebrities including Jimmy Kimmel, SZA and Luke Combs. In the past, Crocs has teamed up with buzzy franchises including Nickelodeon, Pixar, “Star Wars” and “Harry Potter.” Overall, Crocs is ranked number two on Gen Z research firm dcdx’s list of most magnetic fashion brands.

Crocs and Hey Dude join Skechers and Ugg as solid performers in the casual footwear space, Beth Goldstein, industry analyst for footwear and accessories at The NPD Group, told Modern Retail. And while 2022 “skewed more towards the dress segment than the past few years,” Goldstein added, “many fashion brands are also winning with more versatile, casual product, like loafers, which will become a bigger driver in 2023.”