Crocs Stock Retains the Momentum on Robust Strategies

Crocs Inc. CROX is well-placed for long-term growth, backed by its business strategy and key initiatives, which are expected to deliver sustainable growth. Crocs witnesses favorable trends supported by solid consumer demand across the Crocs and HEYDUDE brands, accompanied by effective pricing actions and lower freight costs.
Strong demand trends led to impressive results in the first quarter of 2024, which marked the 16th consecutive quarter of earnings beat. Additionally, the company is confident about its strategies and investments, which are expected to drive long-term market share gains.
However, Crocs has been witnessing rising costs related to the HEYDUDE acquisition. Also, distribution and logistics inefficiencies have been acting as headwinds. The company expects HEYDUDE sales trends to improve each quarter, with the normalization of the sell-in and sell-through dynamic into the fourth quarter of 2024.
Shares of this Zacks Rank #2 (Buy) company have risen 24.7% in the past year against the industry's 7.7% decline. The leading footwear company also compared favorably with the sector and the S&P 500's growth of 2.5% and 23.2%, respectively.
The Zacks Consensus Estimate for CROX's current financial-year sales and earnings indicates growth of 4.4% and 5.6%, respectively, from the year-ago reported numbers.

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What Places CROX Well?

Crocs is on track with its long-term growth strategy, announced in September 2021, focused on three key initiatives to drive durable and consistent growth. As part of the strategy, the company is focused on igniting icons to enhance brand awareness and relevance. Secondly, it is keen on investing strategically in Tier 1 markets to drive market share gains via talent, marketing, digital and retail. Thirdly, CROX is diversifying its product range to attract new consumers.
Looking at the progress, Crocs has been witnessing incredible success with its diverse collaborations and partnerships. The recent collaboration with the luxury brand Simone Rocha solidifies its brand positioning in the high-end market. The launch of Echo Storm in the direct-to-consumer channel and partnerships with Foot Locker and JD Sports are on track and performing well. The company has demonstrated growth across different markets, driven by iconic brands like Toy Story and Hello Kitty and emerging ones like Klott.
Crocs' long-term targets include generating revenues of more than $5 billion, representing a five-year compounded annual growth rate (CAGR) of more than 17% by 2026. It expects to attain the revenue target, driven by strong digital sales, improved market share for sandals, growth in Asia, and innovative products and marketing. Management expects four times revenue growth in sandals by 2026.
Additionally, the company sees long-term opportunities in Asia, primarily in China, the second-largest footwear market in the world. Management expects revenue growth in Asia to witness a CAGR of 25% and represent 24% of total revenues in 2026. Crocs targets at least 50% of the total revenues from digital channels by the end of 2026.
Driven by strong revenue growth, CROX anticipates delivering improved profitability and cash flows by the end of 2026. It expects the adjusted operating margin to be more than 26% and annual free cash flow above $1 billion by the end of 2026.
For 2024, Crocs anticipates revenue growth of 3-5% from the year-earlier levels at constant currency. Revenues are expected to rise 7-9% for the Crocs brand and decline 8-10% for the HEYDUDE brand. CROX expects the gross margin to improve from a year ago at the enterprise level for 2024, with gross margin growth across the Crocs and HEYDUDE brands. It anticipates an adjusted operating margin of 25% for 2024, with adjusted earnings per share of $12.25-$12.73.

Other Solid Picks

Some other top-ranked companies are G-III Apparel Group GIII, Hanesbrands HBI and PVH Corp.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It sports a Zacks Rank #1 (Strong Buy) at present.
GIII Apparel has a trailing four-quarter earnings surprise of 571.8%, on average. The Zacks Consensus Estimate for GIII's fiscal 2024 revenues indicates an increase of 3.3% from the year-ago period's reported level.
Hanesbrands engages in the designing, manufacturing, sourcing and sale of apparel essentials. The company currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for HBI's 2024 earnings indicates growth of 666.7% from the 2023 reported figures. HBI has a trailing four-quarter average earnings surprise of 10.2%.
PVH Corp specializes in designing and marketing branded dress shirts, neckwear, sportswear, jeanswear, intimate apparel, swimwear, footwear, handbags and related products. PVH carries a Zacks Rank # 2 at present.
The Zacks Consensus Estimate for PVH's current financial-year EPS indicates growth of 5.2% from the year-ago corresponding figures. PVH has a trailing four-quarter earnings surprise of 1.6%, on average.

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