Crocs Stock plummets After Warning of cautious Consumer Spending & Reduced Orders
Crocs (CROX) shares experienced a significant drop, falling almost 30% on Thursday, following the company’s proclamation of reduced orders for the latter half of the year and a pessimistic outlook on consumer behavior. This marked the stock’s largest single-day decline since October 2011.
During the company’s second-quarter earnings call, CEO Andrew Rees described the current consumer environment as “concerning,” noting a trend of cautious discretionary spending driven by both existing and anticipated price increases. He stated that retail partners are responding by decreasing their purchasing commitments for future seasons.
“we strongly believe this is a time to make bold decisions for the future to sustain and advance a durable cash flow mode,” rees emphasized.
The company anticipates a revenue decline of 9% to 11% year-over-year for the third quarter, falling short of Wall Street’s expectations of a slight increase. Adjusted operating margin is projected to be between 18% and 19%, a decrease from 25.4% in the same quarter last year. Due to the uncertain environment, Crocs has refrained from providing full-year guidance.Crocs reported a second-quarter net loss of $492.3 million, or $8.82 per share, compared to a net income of $228.9 million, or $3.77 per share, in the prior year. This loss was largely attributed to a $737 million non-cash impairment charge related to its Heydude brand. However,adjusted earnings per share reached $4.23, exceeding analyst estimates of $4.01.
Revenue for the second quarter totaled $1.15 billion, a 3.4% increase year-over-year and aligning with LSEG’s estimate of $1.14 billion.To protect profitability amidst these challenges, Crocs is reducing promotional activities with retailers and taking back older Heydude inventory to “reset” retail partners with newer stock. The company acknowledges this will likely lead to lower sales volumes in the coming quarters.
Crocs also highlighted previously implemented cost savings of $50 million.Rees stated that while these actions may temporarily impact revenue, they are intended to improve margins and support long-term cash flow.
The company’s supply chain is heavily reliant on imports from countries including Vietnam, China, Indonesia, and Cambodia, all of which are currently subject to significant import tariffs.