Crocs‘ (NASDAQ: CROX) stock has seen substantial growth recently, climbing 19% over the past week to $107 (as of Feb. 18), significantly outperforming the S&P 500’s 1% increase. This surge is primarily due to the company’s strong Q4 results, which exceeded forecasts, driven by robust international sales and digital expansion. Revenue reached $990 million, surpassing the $961 million estimate and reflecting a 3% year-over-year (y-o-y) rise, while adjusted earnings per share of $2.52 (a 2% y-o-y decline) exceeded projections.
Looking forward, Crocs anticipates a 3.5% y-o-y decline in Q1 2025 revenues. Adjusted diluted earnings per share for the first quarter are expected to range between $2.38 and $2.52. For the full year 2025, Crocs projects mid-single-digit revenue growth for the Crocs Brand, while proactively addressing an anticipated 7-9% revenue decline in the HeyDude segment. To counteract currency and tariff fluctuations, the company is aiming for an adjusted operating margin of 24%. Adjusted earnings per share for 2025 are projected to be between $12.70 and $13.15. Investors should focus on Crocs’ digital transformation, international expansion, and disciplined SG&A expense management as key drivers of sustained growth in 2025. Separately, for a smoother investment ride compared to individual stocks, consider the High Quality portfolio, which has consistently outperformed the S&P 500 with returns exceeding 91% since inception.
Crocs’ recent performance presents a mixed picture, with its core brand thriving while the HeyDude brand, acquired in 2022, has faced challenges. The Crocs Brand achieved a 4% revenue increase in Q4, whereas the HeyDude Brand remained flat. Investor frustration with HeyDude is understandable, given its $2.5 billion acquisition cost and underwhelming growth. However, the company’s reliance on the Crocs Brand, which contributes 80% of its business, is a positive factor. With the majority of profits coming from Crocs, the stock may justify a higher valuation multiple due to its strong revenue growth and margins. Crocs’ Q4 adjusted operating margin exceeded 20%, outperforming industry averages, though down from last year’s 24%. By comparison, Nike’s (NYSE: NKE) operating margin in Q2 stood at 11%. Despite this, Crocs’ stock trades at a forward price-to-earnings ratio of just 8x this year’s expected earnings, potentially signaling undervaluation.
In fiscal 2024, Crocs reported consolidated revenue of $4.1 billion, a 3.5% y-o-y increase. Adjusted EPS rose 9.5% to $13.17, while diluted EPS surged 24% to $15.88. By segment, Crocs Brand revenue climbed 9% y-o-y to $3.3 billion, driven by a 10% growth in direct-to-consumer sales and an 8% increase in wholesale. Conversely, HeyDude revenue fell 13% to $824 million, with direct-to-consumer sales declining 4% and wholesale dropping 20%.
Over the last four years, CROX stock has exhibited notable volatility compared to the S&P 500. Annual returns were 105% in 2021, -15% in 2022, -14% in 2023, and 17% in 2024. The Trefis High Quality Portfolio, comprising 30 stocks, has been far less volatile while consistently outperforming the market. Why? HQ Portfolio stocks have historically delivered better returns with lower risk, avoiding the steep fluctuations seen in individual stocks, as illustrated by the HQ Portfolio performance metrics.
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