Crocs(US:CROX)2025-08-07 20:35Financial Performance - Revenues for Q2 2025 were $1,149.4 million, a 3.4% increase compared to Q2 2024, driven by higher unit sales in the Crocs Brand and favorable exchange rates [107]. - Crocs Brand revenues grew by 5.0%, while HEYDUDE Brand revenues decreased by 3.9% in Q2 2025 [108]. - Gross margin increased to 61.7%, up 30 basis points from the previous year, primarily due to reduced discounting in the Crocs Brand [108]. - Net loss for Q2 2025 was $492.3 million, or a loss per diluted share of $8.82, compared to net income of $228.9 million, or $3.77 per diluted share, in Q2 2024 [108]. - Total consolidated revenues for the three months ended June 30, 2025, were $1,149.4 million, a 3.4% increase compared to $1,111.5 million in the same period in 2024 [124]. - Crocs Brand revenues increased to $959.6 million for the three months ended June 30, 2025, up from $914.0 million in 2024, primarily due to higher volume [125]. - HEYDUDE Brand revenues decreased to $189.8 million for the three months ended June 30, 2025, down from $197.5 million in 2024, primarily due to lower volume [131]. Expenses and Impairments - Selling, general and administrative expenses rose to $398.2 million, representing 34.6% of revenues, compared to 32.0% in Q2 2024 [108]. - The company recognized non-cash impairment charges of $430.0 million for the HEYDUDE trademark and $307.0 million for HEYDUDE Brand goodwill in Q2 2025 [108]. - SG&A expenses rose by $42.1 million, or 11.8%, in the three months ended June 30, 2025, primarily due to increased investment in talent, DTC costs, and marketing [114]. - Asset impairments totaled $738.1 million during the three months ended June 30, 2025, mainly due to impairments related to the HEYDUDE Brand [116]. - SG&A, including asset impairments, for the HEYDUDE Brand segment increased by $746.7 million, or 1,367.3%, during the three months ended June 30, 2025, primarily due to impairments [134]. Liquidity and Borrowings - Total borrowings were $1.4 billion as of June 30, 2025, with $200.6 million in cash and cash equivalents and $799.4 million in available borrowing capacity [103]. - The company's liquidity position included $200.6 million in cash and cash equivalents and $799.4 million of available borrowings as of June 30, 2025 [140]. - As of June 30, 2025, the Term Loan B Facility was fully drawn with $500.0 million in outstanding principal, maturing on February 17, 2029 [149]. - The company had $215.0 million in outstanding borrowings and $0.6 million in outstanding letters of credit under the Revolving Facility as of June 30, 2025 [146]. - The company’s total commitments under the Revolving Facility were $1.0 billion, with $784.4 million of available borrowing capacity as of June 30, 2025 [146]. Market and Economic Conditions - The company is facing pressures from elevated interest rates, inflation, and geopolitical tensions, which are impacting consumer discretionary spending [103]. - A hypothetical 1% increase in interest rates on variable rate borrowings would increase interest expense by $7.2 million over the next twelve months [173]. - An increase of 1% in the value of the U.S. Dollar relative to foreign currencies would have decreased revenues by $5.5 million and income before taxes by $1.5 million for the three months ended June 30, 2025 [175]. Operational Changes - The company is diversifying its sourcing mix and refining its cost structure to mitigate the impact of tariffs imposed on imports from several countries [103]. - The company plans to reduce promotional activity to protect brand health and profitability for the Crocs Brand [103]. - As of June 30, 2025, the company operated 412 retail locations for the Crocs Brand, an increase from 363 locations as of June 30, 2024, and 63 locations for the HEYDUDE Brand, up from 32 locations [139]. Cash Flow and Investments - Cash provided by operating activities decreased by $155.1 million, or 41.5%, for the six months ended June 30, 2025, compared to the same period in 2024 [158]. - Cash used in financing activities decreased by $146.9 million, or 45.9%, for the six months ended June 30, 2025, primarily due to an increase in proceeds from borrowings [160]. - Cash used in investing activities decreased by $0.9 million, or 2.6%, for the six months ended June 30, 2025, compared to the same period in 2024 [159]. Accounting and Compliance - The company evaluates its critical accounting policies and estimates on an ongoing basis, with significant judgments affecting reported amounts of assets and liabilities [163]. - The company has no material off-balance sheet arrangements as of June 30, 2025, other than certain purchase commitments [162]. - The company was in compliance with all financial covenants under the Credit Agreement and the Term Loan B Credit Agreement as of June 30, 2025 [145][150]. - The company recognized non-cash impairment charges of $430.0 million for the HEYDUDE trademark and $307.0 million for the HEYDUDE Brand reporting unit goodwill during the three months ended June 30, 2025, due to downward revisions in internal forecasts [164]. - As of June 30, 2025, the company's goodwill balance was $404.7 million, down from $711.5 million as of December 31, 2024, with $403.0 million assigned to the HEYDUDE Brand segment [165].