Core Insights - Crocs, Inc. (CROX) is trading at a significant discount compared to the industry and broader market, with a forward 12-month P/E ratio of 7.50X versus the industry's average of 20.17X [1][3] Valuation - The low P/E ratio may attract value-oriented investors but also indicates caution due to potential slowing growth, post-pandemic normalization, or brand strength concerns [3][9] - Year-to-date, CROX shares have declined by 9%, while the Consumer Discretionary sector and S&P 500 have increased by 7.5% and 2.9%, respectively [3] Stock Price Performance - CROX closed at $98.64, approximately 34.7% below its 52-week high of $151.1, and trades below its 50- and 200-day moving averages, indicating continued downward momentum [5] Company Fundamentals - Despite challenges, Crocs shows strong fundamentals with solid consumer demand across its diverse brand portfolio, particularly in clogs and sandals [10][12] - The sandals segment, especially the Style Sandals lineup, has gained market share and is viewed as a key driver for attracting new consumers [11] Growth Potential - Crocs is focusing on innovation, global expansion, and direct-to-consumer strategies, positioning itself well for long-term growth [12] - The company experienced double-digit growth in global markets in Q1 2025, with China being a significant contributor [12] Challenges - The HEYDUDE brand has underperformed, with Q1 fiscal 2025 revenues falling nearly 10% year-over-year due to weak wholesale sales [13] - Rising SG&A expenses and potential tariffs on China-based sourcing may further pressure profitability [14]

Financial Data and Key Metrics Changes - The company reported enterprise revenues of $937 million, a 1% increase compared to the prior year, exceeding guidance which anticipated a decline of approximately 1.5% [5][25] - Adjusted gross margins improved to 57.8%, up 180 basis points year-over-year, while adjusted operating margins were 23.8%, exceeding guidance by over 200 basis points [6][27] - Adjusted diluted earnings per share were $3, nearly 20% above the high end of the guidance range [7][29] Business Line Data and Key Metrics Changes - Crocs brand revenues reached $762 million, a 4% increase year-over-year, driven by double-digit growth in international markets [6][26] - Hey Dude brand revenues were $176 million, down 10% year-over-year, but better than the anticipated decline of 14% to 16% [27] - Direct-to-consumer (DTC) sales for Hey Dude grew by 8%, indicating an acceleration from the previous quarter [27] Market Data and Key Metrics Changes - International revenue for Crocs increased by 12%, with China showing over 30% growth compared to the prior year [26][18] - North American revenue for Crocs was down 3% year-over-year, which was better than expected [26][19] - The company noted robust growth in Western Europe, particularly in France and Germany [26][19] Company Strategy and Development Direction - The company is focused on maintaining competitive advantages and adapting to a volatile macroeconomic environment, including managing sourcing and cost structures [8][12] - Strategic investments are being made to enhance brand relevance and expand product offerings beyond clogs, particularly in sandals [14][15] - The company is committed to a digitally led marketing strategy, leveraging social commerce and influencer partnerships to drive brand engagement [16][17] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the unpredictability of global trade policies and their potential impact on business operations, leading to the withdrawal of full-year guidance [10][30] - The company is proactively identifying cost savings of approximately $50 million for 2025 and managing inventory levels carefully [11][34] - Despite uncertainties, management remains confident in the company's ability to generate significant free cash flow and maintain profitability [12][29] Other Important Information - The company has a diversified sourcing mix, with 47% of products anticipated to come from Vietnam in 2025, and is actively adjusting sourcing strategies in response to tariff changes [9][10] - The company repurchased 607,000 shares during the quarter, maintaining a strong liquidity position with $166 million in cash and $679 million in borrowing capacity [29][30] Q&A Session Summary Question: Can you comment on the sustainability of gross margins? - Management indicated that gross margins are sustainable due to effective vendor negotiations, investments in logistics, and favorable customer mix [40][41] Question: What is the strategy regarding pricing in light of potential cost increases? - Management acknowledged pricing as a lever to mitigate costs, with a strategic approach to potential price increases across channels [43] Question: Can you provide insights on Q2 revenue guidance? - Management expressed satisfaction with April's performance but emphasized caution due to the unpredictable global trade environment [48][49] Question: How are you planning to mitigate the potential impact of tariffs? - Management outlined a diversified sourcing strategy and indicated that they would cancel orders if tariffs remain high, rather than incur losses [50][51] Question: What is the approach to marketing spend in 2025? - Management plans to maintain marketing investments to engage consumers, despite the uncertain environment [55] Question: How is the company managing wholesale versus DTC pricing? - Management stated that while DTC pricing can be adjusted, they prefer coordinated pricing changes across channels [89][90] Question: What are the drivers for international growth? - Management highlighted brand penetration as a key driver, with significant focus on markets like China and India [78][80]

Financial Data and Key Metrics Changes - The company reported enterprise revenues of $937 million, a 1% increase compared to the prior year, exceeding guidance which anticipated a decline of approximately 1.5% [4][24] - Adjusted gross margins improved to 57.8%, gaining 180 basis points year-over-year, while adjusted operating margins were 23.8%, exceeding guidance by over 200 basis points [5][26] - Adjusted diluted earnings per share reached $3, nearly 20% above the high end of the guidance range [6][28] Business Line Data and Key Metrics Changes - Crocs brand revenues were $762 million, up 4% year-over-year, driven by a 5% increase in wholesale and a 3% increase in direct-to-consumer (DTC) sales [25] - Hey Dude brand revenues declined by 10% to $176 million, but DTC sales grew by 8%, indicating a recovery from previous quarters [26] - Adjusted gross margin for the Crocs brand was 60.7%, up 260 basis points, while Hey Dude's adjusted gross margin was 46.6%, down 120 basis points due to supply chain cost pressures [27] Market Data and Key Metrics Changes - International revenue grew by 12%, with China showing over 30% growth compared to the prior year, supported by the addition of 40 new partner doors [17][25] - North American revenue was down 3% year-over-year, but performance exceeded expectations [19][25] - Western Europe also saw robust growth, particularly in France and Germany [25][78] Company Strategy and Development Direction - The company is focused on maintaining competitive advantages and adapting to a volatile macroeconomic environment, including managing sourcing and cost structures in response to tariffs [6][10] - Strategic investments are being made to enhance brand relevance and expand product offerings beyond clogs, particularly in sandals [12][13] - The company aims to leverage social commerce and digital marketing to drive brand engagement and sales [16][15] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the unpredictability of the global trade environment and its potential impact on consumer demand [10][48] - The decision to withdraw guidance for 2025 was primarily due to the difficulty in predicting the financial impact of tariffs [29][30] - Despite challenges, management remains optimistic about the company's ability to generate significant free cash flow and maintain profitability [11][28] Other Important Information - The company identified an additional $50 million in cost savings for 2025 and is actively managing inventory levels [10][32] - The liquidity position is strong, with $166 million in cash and $679 million in borrowing capacity [28] Q&A Session Summary Question: Comments on sustainability of gross margins and pricing opportunities - Management indicated confidence in the sustainability of gross margins due to vendor negotiations and improved efficiencies, while also acknowledging pricing as a lever to mitigate costs [36][39][41] Question: Thoughts on not guiding Q2 revenue and mitigation strategies - Management noted strong performance in April but emphasized caution in predicting future trends due to the uncertain global trade environment [45][48][49] Question: Level of marketing spend in 2025 - The company plans to maintain elevated marketing spending to engage consumers, despite the uncertain backdrop [53][54] Question: Drivers for Crocs international growth - Management highlighted brand penetration as a key driver, with significant growth opportunities in China, India, and Western Europe [75][78] Question: Impact of price increases on wholesale and DTC channels - Management stated that while they have flexibility in DTC pricing, they prefer coordinated pricing strategies across channels [84][86] Question: Current state of wholesale channel and inventory management - Management confirmed that major retailers are planning conservatively, aligning with the company's strategy to avoid excess inventory [90][91]