Crocs (CROX) 2025 Conference June 03, 2025 08:30 AM ET Speaker0 Great. Good morning everyone. Welcome to Baird's forty sixth Annual and twenty twenty five Global Consumer Technology and Services Conference. I'm John Komp, the Senior Analyst covering the active lifestyle sector and very pleased to have the company joining us for the sixth consecutive year, Crocs, with us to kick off the conference today. And I couldn't think of a better company help us kick off here. I think every consumer in the world likel ...

Core Insights - Cat Footwear, a division of Wolverine World Wide, Inc., is celebrating Caterpillar Inc.'s 100th anniversary by launching a limited-edition boot collection that honors significant achievements in engineering [1][2] - The collection includes three boots, each representing a monumental feat: the Golden Gate Bridge, the Apollo 11 Moon Landing, and the Channel Tunnel System [1][2][6] Company Overview - Cat Footwear is the official footwear licensee of Caterpillar and has been expanding the Cat brand globally since 1994, now offering products in nearly 140 countries [4] - The brand is known for its rugged and durable footwear, paralleling the strength of Caterpillar's machinery [4] Caterpillar Inc. Overview - Caterpillar Inc. reported sales and revenues of $64.8 billion in 2024, making it the leading manufacturer in construction and mining equipment, as well as engines and turbines [5] - The company operates across three primary segments: Construction Industries, Resource Industries, and Energy & Transportation, while also providing financing through its Financial Products segment [5] Product Features - The Golden Gate Bridge Boot features a structural cage and cable system design, with gold hardware [6] - The Apollo 11 Boot is lightweight with a stacked sole, inspired by lunar exploration gear [6] - The Channel Tunnel Boot includes a functioning headlight and sole lights, mimicking trains in a tunnel [6]

Core Insights - The article discusses Stephen Curry's partnership with Under Armour, highlighting its significance in both his career and the brand's evolution in the athletic market [3][4][9]. Company Overview - Under Armour was relatively unknown in the basketball market when it signed Stephen Curry in 2013, while Nike dominated the NBA sneaker market [3][8]. - The deal with Curry was worth $4 million annually, surpassing Nike's offer of $2.5 million, which they did not match [8]. Brand Development - Over the past 12 years, Curry has developed a line of signature products with Under Armour, including footwear and apparel, and was recently named president of the Curry Brand [9]. - As part of his new contract, Curry received 8.8 million shares of Under Armour, valued at $75 million at the time [9]. Financial Performance - Under Armour's stock price has seen significant declines, dropping from a high of $45.41 in 2016 to below $6 per share currently, influenced by leadership changes and competition [10]. Community Impact - Curry's partnership with Under Armour emphasizes an "underdog" message, resonating with his personal journey as a smaller player in the NBA [12][13]. - A portion of the Curry Brand's revenue is allocated to support under-resourced communities, with initiatives such as refurbishing basketball courts and training coaches [14][15].

Core Insights - Topgolf Callaway Brands Corp. has successfully completed the sale of its Jack Wolfskin business to ANTA Sports for $290 million, subject to customary closing adjustments [1][2] - The transaction, effective May 31, 2025, marks a significant milestone for the company as it refocuses on its core businesses and enhances financial flexibility ahead of the planned separation of Topgolf from its core operations [2][3] - The President and CEO of Topgolf Callaway Brands expressed confidence in ANTA Sports to maintain the integrity of the Jack Wolfskin brand and acknowledged the contributions of Jack Wolfskin employees [3] Company Overview - Topgolf Callaway Brands Corp. is a tech-enabled Modern Golf and active lifestyle company, offering golf equipment, apparel, and entertainment, with a portfolio that includes Topgolf, Callaway Golf, TravisMathew, Odyssey, and OGIO [4]

Group 1 - Shoe Carnival has faced significant challenges over the past several months, indicating a decline in performance [1] - The company was previously reaffirmed as a 'buy' candidate in July of the previous year, suggesting a potential for recovery [1] Group 2 - Crude Value Insights focuses on cash flow and companies in the oil and natural gas sector, highlighting the importance of financial health for investment decisions [2] - Subscribers to the service benefit from a comprehensive stock model account and in-depth cash flow analyses of exploration and production firms [2]

Company Performance - Deckers' stock fell after reporting fiscal fourth-quarter results that exceeded expectations but provided disappointing guidance [1] - The company achieved a 6.5% year-over-year revenue increase to $1.02 billion, with Ugg brand sales growing by 3.6% and Hoka sales increasing by 10% [1][2] - For fiscal 2025, overall revenue rose 16.3% to $4.99 billion, with Ugg sales up 13.1% and Hoka up 23.6% [2] Future Guidance - Management refrained from providing full-year guidance due to macroeconomic uncertainties, projecting a 9% revenue growth for fiscal 2026's first quarter [3] - Earnings per share are expected to decline due to rising costs from tariffs, freight, and increased promotional activities [3] Market Position - Deckers has gained market share from Nike, with a compound annual revenue growth rate of 19% over the last five years [4] - Hoka's revenue reached $2.23 billion in fiscal 2025, while Ugg's sales were $2.53 billion, indicating Hoka's strong position in the running category [4] Competitor Analysis - Nike has experienced a decline in revenue for several quarters, missing out on a post-pandemic boom in running [6] - However, Nike's sales in the running category grew by a mid-single-digit percentage in fiscal 2025 Q3, indicating a potential recovery [7][8] - Hoka's 10% revenue growth suggests it is still gaining market share from Nike, but analysts believe Nike may be regaining ground [9][10] Analyst Insights - Jefferies analyst Randal Konik suggests that Hoka's slowing growth may indicate a shift in market share back to Nike [10] - Jefferies has given Nike a buy rating with a price target of $115, which is approximately 85% higher than its current level [11] - Nike is currently trading at its lowest enterprise-value-to-sales multiple in 15 years, primarily due to a decline in stock price [12]

Core Insights - OPEN YY and PUMA have officially announced the details of their second collaboration, themed "Daily Sports–Imagine!" which explores the athletic DNA of the H-Street shoe model while infusing new trends into its classic design [1][2] - The H-Street shoe, originally launched in 2003, is inspired by the Harambee spikes that were popular in the late 1990s, maintaining its original mesh and suede structure while enhancing retro athletic aesthetics through material quality [1] - The collaboration will be available on June 10 across PUMA and OPEN YY's official websites, select offline stores, and MUSINSA channels, showcasing a "minimal modification" strategy that preserves the shoe's original athletic attributes while achieving a trendy expression [1] Market Impact - The first collaboration between OPEN YY and PUMA sold out upon release, and this second collaboration continues the "classic revival + trendy interpretation" model, further strengthening PUMA's cultural authority in the retro sports shoe market [2] - As the June release date approaches, the new series has sparked discussions within the trend community, indicating that market feedback may provide new insights for sports brand collaboration strategies [2]

Core Insights - Bath & Body Works (BBWI) reported strong first-quarter fiscal 2025 results, with net sales meeting estimates and earnings surpassing expectations, showing year-over-year improvement [1][3] Financial Performance - Adjusted earnings were 49 cents per share, beating the Zacks Consensus Estimate of 47 cents, and increased by 28.9% from 38 cents in the prior year [3] - Net sales rose 2.9% year over year to $1,424 million, marking the strongest underlying sales performance since fiscal 2021, driven by successful product innovation and collaboration with Disney [3] - U.S. and Canada store net sales increased 4.3% to $1.11 billion, exceeding the consensus estimate of $1.09 billion, while direct sales fell 4.3% to $250 million, missing the estimate [4] Margin Analysis - Gross profit increased 6.6% year over year to $646 million, with gross margin expanding 160 basis points to 45.4% [5] - Operating income rose 11.8% to $209 million, with operating margin increasing 120 basis points to 14.7% [6] Store Operations - The company ended the quarter with 1,900 stores, including 1,787 in the U.S. and 113 in Canada, opening 13 and closing 8 stores during the quarter [8] - Internationally, partners opened 14 stores and closed 19, ending with 524 stores, with plans for at least 30 net new store openings in fiscal 2025 [9] Financial Health - Cash and cash equivalents stood at $636 million, with long-term debt of $3.89 billion and long-term operating lease liabilities of $895 million [10] - Total inventory increased by 7% year over year, attributed to tariffs and strategic inventory management [11] Future Outlook - For Q2 fiscal 2025, net sales are expected to be flat to up 2% year over year, with a gross margin forecast of 41% [12][14] - Fiscal 2025 net sales growth is projected at 1-3%, with a gross margin of 44% and full-year earnings per share estimated between $3.25 and $3.60 [16][18] - Free cash flow is projected between $750 million and $850 million, with an annual dividend of 80 cents per share and $300 million planned for share repurchases [19]

Group 1: Marex Group PLC (MRX) - Marex Group provides a diversified global financial services platform and has a Zacks Rank 1 (Strong Buy) [1] - The Zacks Consensus Estimate for its current year earnings increased by 7% over the last 60 days [1] - Marex Group's shares gained 18.4% over the last three months compared to the S&P 500's decline of 0.8% [1] - The company possesses a Momentum Score of A [1] Group 2: Birkenstock Holding PLC (BIRK) - Birkenstock offers sandals, shoes, closed-toe silhouettes, skincare products, and accessories for men, women, and kids, with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its current year earnings increased by 3.9% over the last 60 days [2] - Birkenstock's shares gained 7.9% over the last three months compared to the S&P 500's decline of 0.8% [2] - The company possesses a Momentum Score of A [2] Group 3: Deutsche Bank (DB) - Deutsche Bank is one of the largest financial institutions in the world, offering a wide variety of investment, financial, and related products and services, with a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings increased by 4.2% over the last 60 days [3] - Deutsche Bank's shares gained 29.2% over the last three months compared to the S&P 500's decline of 0.8% [3] - The company possesses a Momentum Score of B [3]

Financial Data and Key Metrics Changes - The company's first quarter profits outperformed expectations by approximately 10% despite a year-over-year decrease in net income to $9.3 million or $0.34 per diluted share, down from $17.3 million or $0.63 per diluted share in Q1 of fiscal 2024 [29][30][35] - Net sales totaled $277.7 million, a decline of 7.5% compared to $300.4 million last year, with comparable store sales down 8.1% [35][36] - The company ended the quarter with $93 million in cash, up over 30% compared to the end of Q1 last year, maintaining a debt-free position [33][35] Business Line Data and Key Metrics Changes - Shoe Station achieved sales growth of 4.9% and was comp positive in the quarter, contrasting with Shoe Carnival's total sales decline of 10% [30][36] - Rogan's net sales remained consistent at over $19 million for both this year and last year, aligning with synergy and integration plans [36] - The rebanner initiative is expected to result in a $0.65 drag on EPS this year, with future benefits anticipated as the performance of rebannered stores improves [43][72] Market Data and Key Metrics Changes - The family footwear industry experienced a decline, with Shoe Carnival's performance reflecting broader industry challenges, particularly among lower-income consumers [9][36] - Shoe Station's performance in various markets, including rural and diverse demographics, indicates a strong growth opportunity, with sales growth exceeding 20% in some locations [14][17][19] Company Strategy and Development Direction - The company is focused on expanding Shoe Station to represent over 80% of its store fleet by March 2027, up from a previous target of 51% [18][50] - The rebanner initiative is seen as the best use of capital, with a two to three year payback period expected [31][44] - The company plans to maintain elevated inventory levels to navigate marketplace uncertainties and ensure product availability [21][34] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the back-to-school season, citing a compelling assortment and stable product costs [4][9] - The company does not anticipate a return to profitable sales growth in the near term but expects a moderating sales decline trend in the latter half of the year [9][45] - Management emphasized the importance of consumer sentiment as a key factor influencing future performance [84] Other Important Information - The company is committed to pursuing mergers and acquisitions to achieve its long-term vision of being the leading footwear retailer for families [25][26] - The corporate headquarters has been designated in Fort Mill, South Carolina, to enhance collaboration with vendor partners and improve operational efficiencies [27][28] Q&A Session Summary Question: What is driving the decision to expand Shoe Station stores more quickly? - Management noted that there is significant white space nationally for Shoe Station, where the competitive set is not fully meeting the needs of higher-end customers [58][60] Question: How is the performance of dress shoes in Shoe Station? - Management confirmed that the dress assortment offered is a competitive advantage, with strong performance in both men's and women's categories [61][62] Question: What is the expected impact of rebannerings on next year's earnings? - Management indicated that while there will be a drag on EPS due to accelerated costs, the performance of rebannered stores is expected to improve, potentially offsetting some of the negative impact [72][73] Question: How are trends in March and April compared to February? - Management stated that February was challenging, but March and April showed improvement, particularly for Shoe Station, although overall consumer sentiment remains a concern [88][89]