Crocs Poised For Negative Earnings Revision On Over-Inventoried Footwear Channel & Weak Sales Momentum: Analyst Downgrades

B.Riley Securities analyst Jeff Lick downgraded Crocs Inc CROX to Neutral from Buy at a lowered price target of $101 from $125.

The analyst sees roughly $2.4 billion or 16% more footwear inventory in stores, warehouses, and DCs entering the BTS and fall selling seasons.

The analyst notes that footwear/apparel/accessories sales momentum generally slows/ turns negative Y/Y on a nominal basis in September/through the remainder of FY23. 

Based on the finding and CROX’s internal HEYDUDE situation of select excess inventory and retailer digestion from LY’s significant “sell-in” and gray market product in the channel, the analyst has lowered the 2H23 estimates and revised estimates for 2024. 

The analyst sees EBITDA growth turning modestly negative in Q3 FY23 (0.6%), Q4 FY23 (2.5%) and Q1 FY24 (1.5%). Lick also sees FY24 EBITDA to be roughly flat with FY23. 

The analyst expects revenue, EBITDA, and adjusted EPS of $3,941.0 million, $1,132.0 million, and $11.74, respectively, for FY23.  

Lick estimates revenue, EBITDA, and adjusted EPS of $3,959.2 million, $1,131.1 million, and $12.04, respectively, for FY24.

Nevertheless, Lick is confident in CROX's management, the CROCS and HEYDUDE brands, and the considerable cash flow generation in the long term. 

Price Action: CROX shares are trading lower by 2.16% at $94.28 on the last check Thursday.