Why Crocs Stock Skyrocketed Today
Key Points
Crocs expects its growth to accelerate in the fourth quarter.
HeyDude sales are back on the upswing.
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Shares of Crocs (NASDAQ:CROX) leaped more than 25% on Thursday after the footwear designer announced revenue and profits that surpassed investors' expectations.
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Crocs' revenue rose 4.6% year over year to over $1 billion in the third quarter.
The company's namesake Crocs Brand saw sales grow by 4.4% to $873 million, driven by an 8.2% rise in direct-to-consumer revenue. International markets enjoyed particularly strong growth, with sales climbing 11.8% to $434 million.
Additionally, the casual footwear maker's previously struggling HeyDude brand returned to growth. HeyDude sales were up 6.1% to $170 million, fueled by a 14% jump in wholesale revenue to $79 million.
"We delivered a strong third quarter with growth across brands, channels, and geographies," CEO Andrew Rees said.
Better still, higher average selling prices, tighter inventory controls, and efficiency initiatives are helping to expand Crocs' profit margins. Adjusted gross margin improved to 60.3% from 58.5% in the year-ago quarter.
Crocs' adjusted operating income, in turn, climbed 11.7% to $232 million, while its adjusted earnings per share jumped 26.4% to $3.69. That was well above Wall Street's estimates of $3.31.
Crocs also generated more than $275 million in free cash flow. This bountiful cash production is enabling the company to reward shareholders with sizable stock buybacks. Crocs has repurchased a whopping 37% of its shares over the past decade.
Accelerating growth
Looking ahead, management expects sales growth to accelerate to 7%-9% in the fourth quarter, with Crocs Brand sales up 6%-8% and HeyDude Brand sales up 10%-12%. Crocs is also targeting fourth-quarter adjusted earnings per share of $3.25 to $3.45.
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Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool recommends Crocs. The Motley Fool has a disclosure policy.
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