Group 1 - The focus is on identifying strong companies that are undervalued by the stock market, with the belief that corrective forces will realign their valuations to intrinsic values [1] - Corrective forces include activist investors' proxy fights, leadership changes, strategic shifts, spin-offs, and industry cyclicality [1] - The objective is to identify these opportunities before they occur, as stock return overperformance is expected from such investments [1]

Core Viewpoint - The article discusses the current challenges faced by Crocs, the original brand of "croc" shoes, as it experiences a decline in revenue growth and increasing competition from cheaper alternatives in the market [8][25][29]. Group 1: Market Performance - Crocs reported a revenue of $937.33 million for Q1 2025, showing a slight decrease of 0.14% year-over-year [8][9]. - The revenue growth rates from 2021 to 2024 were significantly high at 66.92%, 53.67%, 11.46%, and 3.53%, indicating a clear downward trend in growth [8]. - The brand's unique selling proposition, including comfort and patented materials, is being challenged by the influx of cheaper alternatives [14][20]. Group 2: Consumer Behavior - Consumers are increasingly opting for lower-priced alternatives, with many finding similar styles for as low as 30 yuan, which diminishes the perceived value of Crocs [20][24]. - The trend of "ugly can be beautiful" has contributed to the popularity of Crocs, but the brand's identity is not strongly associated with a lifestyle or identity among Chinese consumers [11][30]. - The seasonal nature of Crocs as a summer product limits its market potential in regions with colder climates, affecting overall sales [32][36]. Group 3: Competitive Landscape - The market is seeing a rise in various brands offering similar "croc" styles, including collaborations and lower-priced options from brands like Li Ning and Skechers [20][21]. - The competition is intensified by the emergence of online platforms where consumers can find cheaper alternatives, leading to a shift in consumer purchasing behavior [21][24]. - Crocs' management acknowledges the impact of trade policy changes on competition, which may further challenge its market position [27]. Group 4: Brand Identity and Future Outlook - Crocs struggles to establish a unique brand identity that resonates with consumers, as many do not feel a psychological burden when purchasing counterfeit versions [29]. - The brand's attempts to diversify its product line, such as introducing winter styles, have not significantly changed consumer perception of it as a summer-only product [32][36]. - To achieve explosive growth again, Crocs may need to wait for the next trend to emerge, as its current market position is constrained by cultural and seasonal factors [37].

Core Insights - The article emphasizes the importance of conducting personal in-depth research and due diligence before making investment decisions [3]. Company and Industry Summary - The analysis is intended solely for informational purposes and should not be considered as professional investment advice [3]. - There is a clear indication that past performance does not guarantee future results, highlighting the inherent uncertainties in investment [4].

Core Insights - Crocs, Inc. has appointed Terence Reilly as Executive Vice President and Chief Brand Officer, overseeing marketing and communications for both Crocs and HEYDUDE brands, effective immediately [1][2] - Reilly has a strong background in brand management and will focus on enhancing brand identity, consumer engagement, and storytelling to strengthen the company's global narrative [2][4] - Andrew Rees, CEO, will serve as interim President for HEYDUDE until a permanent structure is established [3] Company Strategy - The new role for Reilly aims to elevate creative direction and deepen consumer connectivity globally [2][4] - Reilly's leadership has already shown positive results for the HEYDUDE brand, indicating a strategic focus and authentic consumer connections [4] - The company is positioning itself for sustainable long-term brand growth through innovative strategies and enhanced consumer engagement [4] Brand Overview - Crocs, Inc. is recognized as a leader in innovative casual footwear, with products sold in over 80 countries through various channels [5] - The company combines comfort and style, appealing to a wide consumer base [5]

HEYDUDE, the casual footwear brand that Crocs, Inc. (NASDAQ: CROX ) acquired for $2.5B in early ’22, has struggled to increase revenues since ’23. Management kept reducing FY guidance every quarter for two years straight, which weighed heavily on the stock's performance. I have discussed some ofI am an experienced investor with a generalist approach to the markets, but over the years, I have developed particular expertise in several key sectors. My investment philosophy is rooted in identifying stocks with ...

Investors who choose to actively manage their portfolios, picking individual businesses in the process, probably want to beat the market over the long term. To achieve this goal, perhaps it's a good idea to look at past winners. Maybe the good times will continue.Artificial intelligence might be getting all the attention. However, there's one booming footwear stock that has skyrocketed 465% in the past five years (as of May 14). That kind of stellar performance deserves a closer look.Is this the smartest st ...

Core Insights - Casio America, Inc. has launched a unique collaboration between G-SHOCK and Crocs, introducing a limited-edition collection that merges rugged utility with street-ready design, enhancing self-expression and functional fashion [1][2]. Group 1: Product Features - The collection features the debut of the Crocs Echo Wave silhouette in a glow-in-the-dark finish, showcasing a custom marbled ankle strap that reflects G-SHOCK's durability and craftsmanship [2]. - A modular watch case is introduced, allowing the timepiece to be worn on the wrist or integrated into the Crocs Echo Wave, redefining traditional watch-wearing methods [3]. - The G-SHOCK Echo Wave Bundle will retail for $200 starting May 27th, available at select wholesale partners and on Crocs.com [4]. Group 2: Company Background - G-SHOCK, developed by Casio, is known for its shock-resistant watches, with a legacy dating back to 1983 when the first model was launched in Japan, establishing itself as "the toughest watch of all time" [5]. - Crocs, Inc., headquartered in Broomfield, Colorado, is a leader in innovative casual footwear, with products sold in over 80 countries through various channels [6].

Core Insights - Crocs is experiencing faster-than-expected growth in 2025, alleviating some investor concerns regarding tariff impacts on profitability [1] Company Performance - Management provided insights into the potential impact of tariffs, suggesting that the financial effects may not be as significant as previously feared [1]

[Preliminary Information](index=1&type=section&id=Preliminary%20Information) This section outlines the administrative details of Crocs, Inc.'s Form 10-Q filing and provides a cautionary note on forward-looking statements [Form 10-Q Filing Details](index=1&type=section&id=Form%2010-Q%20Filing%20Details) This section provides the administrative details of the quarterly report on Form 10-Q for Crocs, Inc., filed for the period ended March 31, 2025, confirming registrant information and SEC compliance - The report is a Quarterly Report on Form 10-Q for the period ended **March 31, 2025**, filed by **CROCS, INC.**, a Delaware corporation[2](index=2&type=chunk) Form 10-Q Filing Indicators | Indicator | Value | | :--- | :--- | | Commission File No. | 000-51754 | | Trading Symbol | CROX | | Exchange Registered | The Nasdaq Global Select Market | | Shares Outstanding (May 1, 2025) | 56,074,561 | | Filer Status | Large accelerated filer | - Crocs, Inc. has filed all required reports during the preceding **12 months** and has been subject to filing requirements for the past **90 days**, and has submitted every Interactive Data File[4](index=4&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section advises readers that the report contains forward-looking statements subject to risks and uncertainties, which may cause actual results to differ materially from projections - The report contains forward-looking statements under the **Private Litigation Reform Act of 1995**, which are subject to risks and uncertainties that could cause actual results to differ materially[7](index=7&type=chunk)[8](index=8&type=chunk) - Examples of forward-looking statements include expectations regarding future business trends, financial performance, economic impact, liquidity, and strategic plans[8](index=8&type=chunk)[9](index=9&type=chunk) - Readers are cautioned not to place undue reliance on these statements, which speak only as of the report date, and the company does not undertake to update them except as required by law[8](index=8&type=chunk) [PART I — Financial Information](index=4&type=section&id=PART%20I%20%E2%80%94%20Financial%20Information) This part presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Crocs, Inc. for the first quarter of 2025 [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Crocs, Inc. for the three months ended March 31, 2025 and 2024, including statements of income, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with detailed notes [Condensed Consolidated Statements of Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section provides the unaudited condensed consolidated statements of income, detailing revenues, expenses, and net income for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric (in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Revenues | $937,333 | $938,633 | | Cost of sales | $395,784 | $416,556 | | Gross profit | $541,549 | $522,077 | | Selling, general and administrative expenses | $318,575 | $295,648 | | Income from operations | $222,974 | $226,429 | | Income before income taxes | $204,939 | $194,029 | | Net income | $160,103 | $152,454 | | Basic Net income per common share | $2.85 | $2.52 | | Diluted Net income per common share | $2.83 | $2.50 | - Revenues slightly decreased by **$1.3 million (0.1%)** year-over-year[14](index=14&type=chunk) - Net income increased by **$7.6 million (5.0%)** year-over-year[14](index=14&type=chunk) - Diluted EPS increased by **$0.33 (13.2%)** year-over-year[14](index=14&type=chunk) [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This section presents the unaudited condensed consolidated statements of comprehensive income, including net income and other comprehensive income components for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Comprehensive Income (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $160,103 | $152,454 | | Other comprehensive income (loss), net of tax: | | | | Net increase (decrease) from derivatives designated as hedging instruments | $(396) | $256 | | Foreign currency translation gains (losses), net | $29,968 | $(11,413) | | Total comprehensive income, net of tax | $189,675 | $141,297 | - Total comprehensive income increased by **$48.4 million (34.2%)** year-over-year, primarily driven by significant foreign currency translation gains in **2025** compared to losses in **2024**[16](index=16&type=chunk) [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides the unaudited condensed consolidated balance sheets, detailing assets, liabilities, and stockholders' equity as of March 31, 2025, and December 31, 2024 Condensed Consolidated Balance Sheets (in thousands) | Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total current assets | $1,073,946 | $872,269 | | Total assets | $5,066,116 | $4,812,153 | | Total current liabilities | $705,196 | $740,208 | | Long-term borrowings | $1,481,725 | $1,349,339 | | Total liabilities | $3,096,523 | $2,976,421 | | Total stockholders' equity | $1,969,593 | $1,835,732 | - Total assets increased by **$253.9 million (5.3%)** from **December 31, 2024**, primarily due to increases in accounts receivable and inventories[18](index=18&type=chunk) - Total current liabilities decreased by **$35.0 million (4.7%)**, while long-term borrowings increased by **$132.4 million (9.8%)**[18](index=18&type=chunk) - Total stockholders' equity increased by **$133.9 million (7.3%)**[18](index=18&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section presents the unaudited condensed consolidated statements of stockholders' equity, showing changes in equity components for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric (in thousands) | Balance at March 31, 2025 | Balance at December 31, 2024 | | :--- | :--- | :--- | | Total Stockholders' Equity | $1,969,593 | $1,835,732 | | Retained Earnings | $3,721,939 | $3,561,836 | | Treasury Stock (Amount) | $(2,518,065) | $(2,453,473) | - Stockholders' equity increased by **$133.9 million** from **December 31, 2024**, driven by net income of **$160.1 million** and other comprehensive income of **$29.6 million**, partially offset by common stock repurchases of **$61.3 million**[19](index=19&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section provides the unaudited condensed consolidated statements of cash flows, detailing cash activities from operations, investing, and financing for the three months ended March 31, 2025 and 2024 Condensed Consolidated Statements of Cash Flows (in thousands) | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Cash used in operating activities | $(67,235) | $(27,574) | | Cash used in investing activities | $(15,375) | $(15,750) | | Cash provided by financing activities | $65,824 | $54,831 | | Net change in cash, cash equivalents, and restricted cash | $(13,941) | $9,925 | - Cash used in operating activities increased significantly by **$39.7 million** year-over-year, primarily due to changes in working capital, particularly inventories and accounts receivable[22](index=22&type=chunk) - Cash provided by financing activities increased by **$11.0 million** year-over-year, driven by higher proceeds from borrowings, partially offset by increased common stock repurchases and repayments of borrowings[22](index=22&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanatory notes to the unaudited condensed consolidated financial statements, covering accounting policies, financial instruments, debt, and segment information [1. Basis of Presentation and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) This note describes Crocs, Inc.'s business operations and confirms that the interim financial statements are prepared in accordance with U.S. GAAP and Form 10-Q instructions - Crocs, Inc. designs, develops, markets, distributes, and sells casual lifestyle footwear and accessories globally, operating through two reportable segments: **Crocs Brand** and **HEYDUDE Brand**[24](index=24&type=chunk)[25](index=25&type=chunk) - The unaudited condensed consolidated interim financial statements are prepared in accordance with **U.S. GAAP** and **Form 10-Q** instructions, consistent with the Annual Report on **Form 10-K for 2024**[26](index=26&type=chunk)[27](index=27&type=chunk) Cash Flow Supplemental Disclosure (in thousands) | Cash Flow Supplemental Disclosure (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Cash paid for interest | $26,838 | $35,054 | | Cash paid for income taxes | $13,964 | $18,122 | | Cash paid for operating leases | $24,579 | $21,364 | [2. Recent Accounting Pronouncements](index=11&type=section&id=2.%20Recent%20Accounting%20Pronouncements) This note discusses the adoption of new accounting standards, including Pillar Two Global Minimum Tax rules and upcoming FASB guidance, and their anticipated impact on financial statements - The company adopted the **Pillar Two Global Minimum Tax rules**, but does not anticipate a significant impact on its **2025** consolidated financial statements[31](index=31&type=chunk) - New FASB guidance on Income Tax Disclosure (effective after **December 15, 2024**) and Disaggregation of Income Statement Expenses (effective after **December 15, 2026**) are not expected to materially impact financial statements but will require increased disclosures[32](index=32&type=chunk)[33](index=33&type=chunk) [3. Accrued Expenses and Other Liabilities](index=12&type=section&id=3.%20Accrued%20Expenses%20and%20Other%20Liabilities) This note provides a detailed breakdown of accrued expenses and other liabilities, highlighting changes from the prior fiscal year-end Accrued Expenses (in thousands) | Accrued Expenses (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued compensation and benefits | $46,286 | $81,265 | | Professional services | $57,833 | $64,683 | | Fulfillment, freight, and duties | $38,897 | $38,752 | | Return liabilities | $27,128 | $34,255 | | Sales/use and value added taxes payable | $27,080 | $17,330 | | Other | $49,824 | $61,783 | | Total accrued expenses and other liabilities | $247,048 | $298,068 | - Total accrued expenses and other liabilities decreased by **$51.0 million (17.1%)** from **December 31, 2024**, primarily due to lower accrued compensation and benefits[35](index=35&type=chunk) [4. Leases](index=12&type=section&id=4.%20Leases) This note details the company's lease assets and liabilities, including right-of-use assets, operating lease liabilities, and total lease costs for the reporting periods Lease Metric (in thousands) | Lease Metric (in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Right-of-use assets | $335,783 | $307,228 | | Total operating lease liabilities | $380,977 | $351,957 | Lease Costs (in thousands) | Lease Costs (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Operating lease cost | $24,186 | $20,244 | | Short-term lease cost | $2,960 | $4,798 | | Variable lease cost | $5,589 | $7,363 | | Total lease costs | $32,735 | $32,405 | - Total operating lease liabilities increased by **$29.0 million (8.2%)** from **December 31, 2024**[36](index=36&type=chunk) - Weighted average remaining lease term as of **March 31, 2025**, was **6.0 years** with a discount rate of **6.5%**[37](index=37&type=chunk) - In **Q1 2024**, the company recognized impairment of right-of-use assets for former **HEYDUDE** and **Crocs Brand** warehouses, which did not recur in **Q1 2025**[38](index=38&type=chunk)[44](index=44&type=chunk) [5. Fair Value Measurements](index=13&type=section&id=5.%20Fair%20Value%20Measurements) This note describes the fair value hierarchy for financial instruments, particularly derivative instruments and borrowing facilities, as of the reporting dates - All derivative instruments are classified as **Level 2** in the fair value hierarchy, with insignificant fair values as of **March 31, 2025**, and **December 31, 2024**[40](index=40&type=chunk) Borrowing Instruments (in thousands) | Borrowing Instruments (in thousands) | March 31, 2025 Carrying Value | March 31, 2025 Fair Value | December 31, 2024 Carrying Value | December 31, 2024 Fair Value | | :--- | :--- | :--- | :--- | :--- | | Term Loan B Facility | $500,000 | $503,438 | $500,000 | $503,125 | | 2029 Notes | $350,000 | $325,983 | $350,000 | $323,780 | | 2031 Notes | $350,000 | $308,886 | $350,000 | $305,610 | | Revolving Facility | $320,000 | $320,000 | $190,000 | $190,000 | - No asset impairment charges were recognized in **Q1 2025**, compared to **$24.1 million** in **Q1 2024**, which included information technology systems and right-of-use assets impairments[44](index=44&type=chunk) [6. Derivative Financial Instruments](index=14&type=section&id=6.%20Derivative%20Financial%20Instruments) This note explains the company's use of foreign currency forward contracts to manage foreign exchange rate risk and provides details on their notional and fair values - The company uses foreign currency forward contracts to manage exposure to foreign exchange rate risk, not for trading or speculation, with counterparty default risk considered **low**[45](index=45&type=chunk)[46](index=46&type=chunk) Derivative Type (in thousands) | Derivative Type (in thousands) | March 31, 2025 Notional | March 31, 2025 Fair Value (Net) | December 31, 2024 Notional | December 31, 2024 Fair Value (Net) | | :--- | :--- | :--- | :--- | :--- | | Non-hedged derivatives | $76,826 | $384 | $149,471 | $(742) | | Hedged derivatives | $43,978 | $(120) | $90,172 | $386 | | Total derivatives | $120,804 | $264 | $239,643 | $(356) | - Foreign currency gains (losses), net, shifted from a loss of **$2.3 million** in **Q1 2024** to a gain of **$4.9 million** in **Q1 2025**[54](index=54&type=chunk) [7. Borrowings](index=16&type=section&id=7.%20Borrowings) This note details the company's debt structure, including fixed and variable-rate borrowings, their maturities, interest rates, and compliance with financial covenants Borrowing Type (in thousands) | Borrowing Type (in thousands) | Maturity | Stated Interest Rate | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | 2029 Notes | 2029 | 4.250% | $350,000 | $350,000 | | 2031 Notes | 2031 | 4.125% | $350,000 | $350,000 | | Term Loan B Facility | 2029 | Variable | $500,000 | $500,000 | | Revolving Facility | 2027 | Variable | $320,000 | $190,000 | | Total face value of long-term borrowings | | | $1,520,000 | $1,390,000 | - Total face value of long-term borrowings increased by **$130.0 million** from **December 31, 2024**, primarily due to increased utilization of the Revolving Facility[55](index=55&type=chunk) - As of **March 31, 2025**, the company had **$679.4 million** of available borrowing capacity under the Revolving Facility and was in compliance with all financial covenants for its debt agreements[57](index=57&type=chunk)[59](index=59&type=chunk)[63](index=63&type=chunk)[71](index=71&type=chunk) [8. Common Stock Repurchase Program](index=18&type=section&id=8.%20Common%20Stock%20Repurchase%20Program) This note outlines the company's common stock repurchase activities during the quarter and the remaining authorization under its share repurchase program - During **Q1 2025**, the company repurchased **0.6 million shares** of common stock for **$60.9 million**, compared to no repurchases in **Q1 2024**[72](index=72&type=chunk) - On **February 10, 2025**, the Board approved a **$1.0 billion** increase to the share repurchase authorization, leaving approximately **$1.3 billion** available for future repurchases as of **March 31, 2025**[74](index=74&type=chunk) [9. Revenues](index=19&type=section&id=9.%20Revenues) This note provides a breakdown of revenues by brand and channel, highlighting performance for the Crocs and HEYDUDE segments Segment/Channel (in thousands) | Segment/Channel (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Crocs Brand Total | $761,608 | $743,816 | | Crocs Brand Wholesale | $476,804 | $462,002 | | Crocs Brand Direct-to-consumer | $284,804 | $281,814 | | HEYDUDE Brand Total | $175,725 | $194,817 | | HEYDUDE Brand Wholesale | $110,693 | $134,753 | | HEYDUDE Brand Direct-to-consumer | $65,032 | $60,064 | | Total consolidated revenues | $937,333 | $938,633 | - Crocs Brand revenues increased by **2.4%** year-over-year, while HEYDUDE Brand revenues decreased by **9.8%** year-over-year[76](index=76&type=chunk) [10. Income Taxes](index=19&type=section&id=10.%20Income%20Taxes) This note details the company's income tax expense and effective tax rate, explaining the factors influencing changes between periods Tax Metric (in thousands, except rate) | Tax Metric (in thousands, except rate) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Income before income taxes | $204,939 | $194,029 | | Income tax expense | $44,836 | $41,575 | | Effective tax rate | 21.9% | 21.4% | - Income tax expense increased by **$3.3 million** year-over-year, and the effective tax rate increased by **0.5 percentage points**, primarily due to a shift in the mix of domestic and foreign earnings[77](index=77&type=chunk) [11. Earnings Per Share](index=20&type=section&id=11.%20Earnings%20Per%20Share) This note presents the calculation of basic and diluted earnings per share, along with the weighted average common shares outstanding for the reporting periods EPS Metric (in thousands, except per share data) | EPS Metric (in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income | $160,103 | $152,454 | | Weighted average common shares outstanding - basic | 56,110 | 60,564 | | Weighted average common shares outstanding - diluted | 56,502 | 61,054 | | Basic Net income per common share | $2.85 | $2.52 | | Diluted Net income per common share | $2.83 | $2.50 | - Diluted EPS increased by **$0.33 (13.2%)** year-over-year, driven by higher net income and a reduction in weighted average diluted shares outstanding[78](index=78&type=chunk) [12. Commitments and Contingencies](index=20&type=section&id=12.%20Commitments%20and%20Contingencies) This note discloses the company's purchase commitments and discusses ongoing tax audits, indemnities, and guarantees in the normal course of business - As of **March 31, 2025**, the company had purchase commitments of **$265.9 million** to third-party manufacturers, primarily for materials and supplies[79](index=79&type=chunk) - The company is subject to ongoing tax audits and may make indemnities, commitments, and guarantees in the normal course of business, for which no material liability has been recorded[80](index=80&type=chunk)[81](index=81&type=chunk) [13. Operating Segments and Geographic Information](index=20&type=section&id=13.%20Operating%20Segments%20and%20Geographic%20Information) This note provides financial information for the Crocs and HEYDUDE operating segments, detailing their respective revenues and income from operations - The company operates two reportable segments: the **Crocs Brand** and the **HEYDUDE Brand**, with performance evaluated based on segment results before allocating Enterprise corporate expenses[82](index=82&type=chunk)[83](index=83&type=chunk) Segment Performance (in thousands) | Segment Performance (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Crocs Brand Revenues | $761,608 | $743,816 | | Crocs Brand Income from operations | $273,644 | $264,124 | | HEYDUDE Brand Revenues | $175,725 | $194,817 | | HEYDUDE Brand Income from operations | $23,242 | $40,146 | | Total segment income from operations | $296,886 | $304,270 | - Crocs Brand income from operations increased by **3.6%** year-over-year, while HEYDUDE Brand income from operations decreased by **42.1%** year-over-year[85](index=85&type=chunk) [14. Legal Proceedings](index=21&type=section&id=14.%20Legal%20Proceedings) This note describes the putative class action and derivative lawsuits filed against the company and its officers, alleging securities law violations and breach of fiduciary duties - Two putative class action lawsuits (**Carretta v. Crocs, Inc., et al.** and **Shah v. Crocs, Inc., et al.**) were filed in **Q1 2025**, alleging violations of securities laws based on allegedly false and misleading statements related to wholesaler inventory and its impact on revenue[86](index=86&type=chunk) - Four derivative actions were filed by purported shareholders against current directors and officers, alleging breach of fiduciary duties and other claims related to wholesaler inventory[87](index=87&type=chunk)[88](index=88&type=chunk) - The company intends to vigorously defend these actions and is not currently in a position to assess the likelihood or range of potential loss, though it has accrued **$2.5 million** for estimated losses from legal claims and disputes[89](index=89&type=chunk)[90](index=90&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition for the first quarter of 2025, discussing business overview, market trends, and detailed analysis of results [Business Overview](index=23&type=section&id=Business%20Overview) This section provides a high-level overview of Crocs, Inc. as a global leader in innovative casual footwear and accessories, emphasizing comfort, style, and value - Crocs, Inc. is a global leader in innovative casual footwear and accessories, focusing on comfort, style, and value[93](index=93&type=chunk) [Known or Anticipated Trends](index=23&type=section&id=Known%20or%20Anticipated%20Trends) This section discusses market trends, including unpredictable consumer spending, new U.S. tariffs, and the company's strategic investments to drive brand awareness and product diversification - Consumers are spending more unpredictably due to elevated interest rates and inflation, alongside increased geopolitical tensions[97](index=97&type=chunk) - New U.S. tariffs, including a **145% incremental tariff** on imports from China and additional tariffs on imports from Vietnam, Indonesia, India, and Cambodia (temporarily paused for some), are expected to increase product costs and potentially impact margins and sales[97](index=97&type=chunk) - The company is investing in talent, marketing, digital, and retail to drive strategic pillars, including brand awareness, market share growth, and product diversification into sandals, sneakers, and other silhouettes[97](index=97&type=chunk) Liquidity Metric (as of March 31, 2025) | Liquidity Metric (as of March 31, 2025) | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $166.5 | | Available borrowing capacity | $694.4 | | Total borrowings | $1,500.0 | | Common stock repurchased (Q1 2025) | $60.9 | [Use of Non-GAAP Financial Measures](index=23&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) This section explains the company's use of "constant currency" as a non-GAAP financial measure to provide insights into underlying business trends by adjusting for foreign exchange rate fluctuations - The company uses **'constant currency'** as a non-GAAP financial measure to show underlying business trends by retranslating current period results using prior year average foreign exchange rates[94](index=94&type=chunk) - Management uses constant currency for internal comparisons and external communications, believing it provides useful insights into operating performance and trends, but it should not be considered in isolation from **U.S. GAAP**[95](index=95&type=chunk) [Key Performance Indicators](index=23&type=section&id=Key%20Performance%20Indicators) This section identifies gross margin and operating margin as key performance indicators used by management to assess operational efficiency, market competitiveness, and strategic decision-making - Management utilizes **gross margin** (gross profit / revenues) and **operating margin** (income from operations / revenues) to assess operational efficiency, market competitiveness, identify trends, and make strategic decisions[96](index=96&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk) [First Quarter 2025 Financial and Operational Highlights](index=25&type=section&id=First%20Quarter%202025%20Financial%20and%20Operational%20Highlights) This section summarizes the key financial and operational results for the first quarter of 2025, including revenues, margins, expenses, and earnings per share First Quarter 2025 Financial and Operational Highlights | Metric | Q1 2025 | Q1 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Revenues | $937.3 million | $938.6 million | (0.1%) | | Crocs Brand Revenue Growth | 2.4% (4.2% constant currency) | - | - | | HEYDUDE Brand Revenue Growth | (9.8%) (9.5% constant currency) | - | - | | Gross Margin | 57.8% | 55.6% | +220 bps | | SG&A Expenses | $318.6 million | $295.6 million | +$23.0 million | | SG&A as % of Revenues | 34.0% | 31.5% | +250 bps | | Income from Operations | $223.0 million | $226.4 million | (1.5%) | | Net Income | $160.1 million | $152.5 million | +5.0% | | Diluted EPS | $2.83 | $2.50 | +13.2% | - Gross margin improvement was primarily due to lower product costs and favorable customer mix for the **Crocs Brand**[102](index=102&type=chunk) - SG&A expenses increased due to higher costs in the **DTC channel**, partially offset by the non-recurrence of prior year impairment charges[102](index=102&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's revenues, cost of sales, gross profit, operating expenses, and net income for the three months ended March 31, 2025 and 2024 Results of Operations (in thousands, except per share, margin, and average selling price data) | Metric (in thousands, except per share, margin, and average selling price data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | % Change Favorable (Unfavorable) | | :--- | :--- | :--- | :--- | | Revenues | $937,333 | $938,633 | (0.1)% | | Cost of sales | $395,784 | $416,556 | 5.0% | | Gross profit | $541,549 | $522,077 | 3.7% | | Selling, general and administrative expenses | $318,575 | $295,648 | (7.8)% | | Income from operations | $222,974 | $226,429 | (1.5)% | | Foreign currency gains (losses), net | $4,873 | $(2,273) | 314.4% | | Interest income | $333 | $416 | (20.0)% | | Interest expense | $(22,766) | $(30,563) | 25.5% | | Other income (expense), net | $(475) | $20 | (2,475.0)% | | Income before income taxes | $204,939 | $194,029 | 5.6% | | Income tax expense | $44,836 | $41,575 | (7.8)% | | Net income | $160,103 | $152,454 | 5.0% | | Basic Net income per common share | $2.85 | $2.52 | 13.1% | | Diluted Net income per common share | $2.83 | $2.50 | 13.2% | | Gross margin | 57.8% | 55.6% | 220 bp | | Operating margin | 23.8% | 24.1% | (30)bp | - Revenues decreased slightly due to lower average selling price (ASP) in the **Crocs Brand** and unfavorable foreign currency fluctuations, partially offset by higher unit sales volume in the **Crocs Brand** and higher ASP in the **HEYDUDE Brand**[104](index=104&type=chunk)[105](index=105&type=chunk) - Gross margin increased to **57.8%** from **55.6%** due to lower product costs and favorable customer mix for the **Crocs Brand**[106](index=106&type=chunk) - SG&A expenses increased by **$22.9 million**, or **7.8%**, primarily due to higher compensation, marketing, and DTC channel costs, partially offset by the non-recurrence of prior year impairment charges[107](index=107&type=chunk) - Interest expense decreased by **$7.8 million**, or **25.5%**, due to lower outstanding borrowings and lower weighted average interest rates on the **Term Loan B Facility**[109](index=109&type=chunk) [Reportable Operating Segments](index=27&type=section&id=Reportable%20Operating%20Segments) This section analyzes the financial performance of the Crocs Brand and HEYDUDE Brand segments, detailing their respective revenues and income from operations Segment Revenues (in thousands) | Segment (in thousands) | Q1 2025 Revenues | Q1 2024 Revenues | % Change (YoY) | Constant Currency % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Crocs Brand | $761,608 | $743,816 | 2.4% | 4.2% | | HEYDUDE Brand | $175,725 | $194,817 | (9.8%) | (9.5%) | | Total consolidated | $937,333 | $938,633 | (0.1%) | 1.4% | Segment Income from Operations (in thousands) | Segment (in thousands) | Q1 2025 Income from Operations | Q1 2024 Income from Operations | % Change (YoY) | Constant Currency % Change (YoY) | | :--- | :--- | :--- | :--- | :--- | | Crocs Brand | $273,644 | $264,124 | 3.6% | 6.1% | | HEYDUDE Brand | $23,242 | $40,146 | (42.1%) | (41.8%) | | Enterprise corporate | $(73,912) | $(77,841) | 5.0% | 5.1% | | Total consolidated | $222,974 | $226,429 | (1.5%) | 1.5% | - Crocs Brand revenue growth was driven by higher volume, partially offset by lower ASP due to increased promotions and unfavorable product mix[112](index=112&type=chunk) - HEYDUDE Brand revenue decrease was primarily due to lower volume, partially offset by higher ASP from favorable channel mix towards **DTC**[115](index=115&type=chunk) - HEYDUDE segment income from operations decreased significantly by **42.1%**, despite a **40 basis point** increase in gross margin, due to increased SG&A costs[116](index=116&type=chunk)[117](index=117&type=chunk) - Enterprise corporate costs decreased by **$3.9 million**, or **5.0%**, primarily due to the non-recurrence of a prior year IT systems impairment charge related to **HEYDUDE** integration[118](index=118&type=chunk) [Store Locations](index=28&type=section&id=Store%20Locations) This section provides a summary of the company-operated retail store count for both the Crocs Brand and HEYDUDE Brand as of March 31, 2025 and 2024 Company-Operated Retail Locations | Brand | Company-Operated Retail Locations (March 31, 2025) | Company-Operated Retail Locations (March 31, 2024) | | :--- | :--- | :--- | | Crocs Brand (Total) | 393 | 349 | | Crocs Brand (North America) | 187 | 170 | | Crocs Brand (International) | 206 | 179 | | HEYDUDE Brand | 54 | 19 | - The company significantly expanded its **HEYDUDE Brand** retail footprint, increasing from **19 to 54** company-operated locations year-over-year[119](index=119&type=chunk) [Financial Condition, Capital Resources, and Liquidity](index=29&type=section&id=Financial%20Condition%2C%20Capital%20Resources%2C%20and%20Liquidity) This section discusses the company's liquidity position, including cash and available borrowings, and its ability to meet ongoing financial obligations Liquidity Position (as of March 31, 2025) | Liquidity Position (as of March 31, 2025) | Amount (in thousands) | | :--- | :--- | | Cash and cash equivalents | $166,460 | | Available borrowings | $694,416 | - The company believes its current liquidity, including cash and available borrowings, is sufficient to meet ongoing needs for at least the **next twelve months**[120](index=120&type=chunk) - As of **March 31, 2025**, **$117.4 million** of the total cash was held in international locations, with an insignificant amount restricted by local laws[123](index=123&type=chunk) - Cash used in operating activities increased by **$39.7 million** year-over-year, primarily due to changes in inventories and accounts receivable[141](index=141&type=chunk) - Cash provided by financing activities increased by **$11.0 million** year-over-year, driven by higher proceeds from borrowings (**$116.8 million** increase), partially offset by increased common stock repurchases (**$60.9 million** increase) and higher repayments of borrowings (**$48.6 million** increase)[143](index=143&type=chunk)[144](index=144&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to market risks, specifically interest rate fluctuations on variable-rate debt and foreign currency exchange rate changes, and outlines strategies to manage these risks [Interest Rate Risk](index=33&type=section&id=Interest%20Rate%20Risk) This section describes the company's exposure to interest rate fluctuations on its variable-rate borrowings and quantifies the potential impact of a hypothetical rate increase - The company is exposed to interest rate fluctuations on its variable-rate borrowings under the **Term Loan B Facility** and **Revolving Facility**[151](index=151&type=chunk) Borrowing Type (as of March 31, 2025) | Borrowing Type (as of March 31, 2025) | Face Value (in millions) | | :--- | :--- | | Fixed-rate Notes | $700.0 | | Variable-rate Term Loan B Facility | $500.0 | | Variable-rate Revolving Facility | $320.0 | | Total Borrowings | $1,520.0 | - A hypothetical **1%** increase in interest rates on variable-rate borrowings would increase interest expense by **$8.2 million** over the next **twelve months**[153](index=153&type=chunk) [Foreign Currency Exchange Risk](index=33&type=section&id=Foreign%20Currency%20Exchange%20Risk) This section explains how changes in foreign exchange rates impact the company's reported financial statements and details the use of derivative instruments to mitigate this risk - Changes in foreign exchange rates directly impact reported **U.S. Dollar** financial statements due to the translation of international subsidiaries' operating results and financial positions[154](index=154&type=chunk) - A **1%** appreciation of the **U.S. Dollar** relative to foreign currencies would have decreased revenues by **$4.3 million** and income before taxes by **$1.0 million** for **Q1 2025**[155](index=155&type=chunk) - The company uses foreign currency forward exchange contracts to manage this exposure, with a notional value of **$120.8 million** as of **March 31, 2025**[156](index=156&type=chunk) - A **10%** appreciation in the **U.S. Dollar** would result in a net decrease of **$1.5 million** in the fair value of the derivative portfolio[157](index=157&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the first quarter of 2025 - As of **March 31, 2025**, management, including the **CEO** and **CFO**, concluded that the company's disclosure controls and procedures were effective to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[159](index=159&type=chunk) - There were no changes in internal control over financial reporting during the three months ended **March 31, 2025**, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[160](index=160&type=chunk) [PART II — Other Information](index=35&type=section&id=PART%20II%20%E2%80%94%20Other%20Information) This part includes disclosures on legal proceedings, risk factors, equity security sales, and other miscellaneous information not covered in the financial statements [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to Note 14 of the financial statements for a detailed discussion of legal matters, including class action and derivative lawsuits related to wholesaler inventory - A discussion of legal matters is found in **Note 14 — Legal Proceedings** in the accompanying notes to the condensed consolidated financial statements[162](index=162&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section updates the risk factors from the annual report, specifically highlighting the adverse impact of government actions and regulations, such as tariffs and trade protection measures - New **U.S. tariffs**, including a **145% incremental tariff** on imports from China (representing approximately **22% of Q1 2025 sourcing** to the U.S.) and additional tariffs on imports from other Asian countries, are expected to increase product costs and negatively impact results[165](index=165&type=chunk) - The company may not be able to fully offset tariffs through price increases, potentially impacting margins and demand for products[165](index=165&type=chunk) - Uncertainty and volatility in global financial and economic conditions due to trade restrictions could lead to declining consumer confidence, inflation, reduced demand, and adverse changes in capital availability and cost[167](index=167&type=chunk)[168](index=168&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) This section details the company's common stock repurchase activities during the first quarter of 2025 and the remaining authorization under its share repurchase program Issuer Purchases of Equity Securities | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1 - 31, 2025 | 317,414 | $104.61 | | February 1 - 28, 2025 | 289,845 | $95.43 | | March 1 - 31, 2025 | — | — | | Total (Q1 2025) | 607,259 | $100.23 | - As of **March 31, 2025**, approximately **$1.3 billion** remained available for repurchase under the company's share repurchase authorization, which was increased by **$1.0 billion** on **February 10, 2025**[169](index=169&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) This section states that no directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the first quarter of 2025 - No directors or officers adopted or terminated **Rule 10b5-1** or non-Rule 10b5-1 trading arrangements during the three months ended **March 31, 2025**[170](index=170&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including corporate organizational documents, supplemental indentures, employment offer letters, and certifications - Exhibits include Restated Certificate of Incorporation, Amended and Restated Bylaws, Supplemental Indentures (dated **January 29, 2025**, and **February 28, 2025**), Employment Offer Letters, and **CEO/CFO certifications**[172](index=172&type=chunk) [Signatures](index=39&type=section&id=Signatures) This section contains the official signatures confirming the due authorization and filing of the report by Crocs, Inc.'s authorized officers [Report Signatures](index=39&type=section&id=Report%20Signatures) This section contains the official signature confirming the due authorization and filing of the report by Crocs, Inc.'s Executive Vice President and Chief Financial Officer - The report was signed on **May 8, 2025**, by **Susan Healy**, Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) of **Crocs, Inc.**[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk)

Core Insights - Crocs, Inc. reported strong first-quarter 2025 results, with revenues and earnings surpassing the Zacks Consensus Estimate, driven by effective execution across Crocs and HEYDUDE brands, disciplined cost management, resilient consumer demand, and strategic pricing [1][2] Financial Performance - Adjusted earnings per share were $3.00, beating the Zacks Consensus Estimate of $2.51, remaining nearly flat year over year [4] - Consolidated revenues were flat year over year at $937 million, exceeding the Zacks Consensus Estimate of $910 million; on a constant-currency basis, revenues improved by 1.4% [4] - Direct-to-consumer (DTC) revenues increased by 2.3%, while wholesale revenues fell by 1.6%; on a constant-currency basis, DTC revenues jumped by 3.5% and wholesale revenues were flat [4] Brand Performance - Revenues for the Crocs brand grew by 2.4% year over year to $762 million, with a 1.1% increase in DTC revenues and a 3.2% rise in wholesale revenues; on a constant-currency basis, revenues improved by 4.2% [5] - HEYDUDE brand revenues rose by 9.8% year over year to $176 million, with a 17.9% decrease in wholesale revenues offset by an 8.3% increase in DTC revenues; on a constant-currency basis, revenues improved by 9.5% [6] Profitability Metrics - Adjusted gross profit rose by 3% year over year to $541.5 million, with adjusted gross margin expanding by 180 basis points to 57.8% [7] - Adjusted selling, general and administrative (SG&A) expenses increased by 520 basis points to 34% of revenues; adjusted operating income fell by 12.5% year over year to $255 million, with adjusted operating margin contracting by 330 basis points to 23.8% [7] Financial Position - At the end of Q1 2025, the company had cash and cash equivalents of $166.5 million, long-term borrowings of $1.48 billion, and stockholders' equity of $1.97 billion [8] - The company borrowed $130 million in debt during the quarter and repurchased 0.6 million shares for $61 million, with $1.3 billion of share repurchase authorization available for future repurchases [9] Outlook - Due to ongoing macroeconomic uncertainty, the company has withdrawn its 2025 financial guidance and will not issue an updated full-year outlook at this time [10]