Crocs Stock Weakness: Hey Dude Brand Continues to Struggle with Sales Decline

A heavy blow for Crocs shareholders: The company's shares suffered a nearly 19 percent loss in value on Tuesday on Wall Street. The reason for this is the ongoing revenue decline of the Hey Dude brand. Nevertheless, the footwear brand from Broomfield, Colorado, reported overall positive figures for the third quarter of the fiscal year 2024. Consolidated revenue increased by 1.6 percent compared to the same period last year, reaching 1.062 billion dollars. This surpassed the company's own expectations, which had forecast revenue growth between a decrease of 1.5 percent and an increase of 0.5 percent. The net income for the quarter amounted to 199.8 million dollars, a pleasing increase from 177.0 million dollars in the same period last year. The diluted earnings per share rose by 17.1 percent to 3.36 dollars. Differences were evident in the individual business segments: Direct-to-consumer revenues grew by 4.4 percent in the third quarter, while wholesale revenue declined by 1.4 percent. The Crocs brand's revenue was again the driving force behind the strong results, with a growth of 7.4 percent to 858 million dollars in the third quarter. Among these, direct-to-consumer revenues increased by 7.7 percent to 463 million dollars and wholesale revenues by 7.1 percent to 396 million dollars. In contrast, the Hey Dude brand recorded a revenue decline of 17.4 percent in the third quarter to 204 million dollars. Direct-to-consumer revenue fell by 9.3 percent to 91 million dollars, while wholesale revenue decreased by 22.9 percent to 113 million dollars. During a conference call, Crocs CEO Andrew Rees pointed out that early positive signs of recovery for the Hey Dude brand are visible. However, it may take longer than initially anticipated to achieve the turnaround. Rees praised his team for the swift implementation of the new strategic direction, which has been in effect since September 2023. This includes, among other things, increasing the average selling price, closing over 50 percent of accounts, improving inventory turnover rates, and opening 29 premium outlets. According to Rees, they are on track to establish a solid foundation for profitable growth at Hey Dude, and further investments have been made in talent and market investments to enhance the brand's relevance and appeal.