Crocs (CROX) Stock Soars on Investor Day Notes, Upbeat View

·4 min read

Investors applauded Crocs Inc. CROX shares on its upbeat revenue forecast, additional share repurchase commitments and accelerated efforts to reduce carbon footprint. The company in its Investor Day presentation outlined its long-term strategy and key initiatives to deliver sustainable growth. It expects to generate revenues of more than $5 billion by 2026, which means witnessing compounded annual growth rate (CAGR) of more than 17% in the next five years.

The company stated that it is well-positioned to attain the aforementioned revenue target, driven by strong digital sales, improved market share for sandals, growth in Asia, and innovative product and marketing. Of these, it expects the expansion of digital avenues to be a key growth driver. The company targets about 50% of the aforementioned total revenue growth to come from its digital business. It reiterated its earlier view for 2021, anticipating revenue growth of 60-65%. It expects the adjusted operating margin to be almost 25% in 2021.

Driven by strong revenue growth, the company anticipates improved profitability and cash flows through 2026. It expects the adjusted operating margin to be more than 26% and annual free cash flow in excess of $1 billion by the end of 2026.

The company also reiterated its commitment to reward shareholders by reaffirming its share repurchase target for 2021. It expects to complete share repurchases worth $500 million under the current program by the end of third-quarter 2021. Further enhancing shareholder returns, the company announced an accelerated share repurchase program worth $500 million, which is expected to be completed by the end of 2021. This will bring its total share repurchases in 2021 to $1 billion.

The company also stated that the board raised its share repurchase authorization in September. This will result in $1.05 billion being available for share repurchases, following the completion of the aforementioned accelerated share repurchase plan.

As part of its sustainability efforts, the company is on track to reach its previously stated target of becoming a net zero-carbon brand by 2030. It took a leap in its sustainability initiatives with plans to introduce a shoe made of bio-based material called “Croslite”. It expects the shoe to be launched by the end of 2021. This will place the company on a fast track to achieve the planned 50% reduction in its carbon footprint per pair of Crocs by the end of 2030.

Shares of the company rallied as much as 8.5% after the news on Sep 14, 2021, surpassing its 52-week high mark. We have seen shares of the Zacks Rank #2 (Buy) company surge 138.4% so far this year compared with the industry’s growth of 15.1%.

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Crocs reported better-than-expected top and bottom lines in second-quarter 2021, which also improved year over year. Results gained from solid demand for its products as well as continued business momentum. Revenues skyrocketed 93.3% year over year, with wholesale and retail revenues improving 112.1% and 78.6%, respectively. The metric also surged 79% from second-quarter 2019.

Solid performances in all regions along with a healthy demand in its key products, including Clogs, Sandals and Jibbitz, have been driving top-line growth. The company is also making significant progress in expanding digital and omnichannel capabilities. It witnessed a 25% year-over-year increase in digital sales in the second quarter, marking the 17th successive quarter of double-digit growth. E-commerce sales also surged 99% from second-quarter 2019.

Gains from strategic collaborations, influencer campaigns, and digital and social marketing efforts remained upsides. Management expects growth in the digital platform to continue in the days ahead as consumers’ shift to online shopping is likely to outlast the pandemic.

Other Stocks to Watch

Columbia Sportswear Company COLM has a long-term earnings growth rate of 33.5%. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PVH Corp. PVH, also a Zacks Rank #1 stock, has a long-term earnings growth rate of 38.5%.

Ralph Lauren Corporation RL has an expected long-term earnings growth rate of 15%. It currently flaunts a Zacks Rank #1.

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