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February 22, 2022

Crocs flags impending supply issues despite FY jubilation

Supply chain disruptions linked to factory shutdowns in Vietnam last year and ongoing transportation disruptions will continue to weigh for the remainder of the year, Crocs CEO Andrew Rees has said.

By Hannah Abdulla

Speaking on a call with analysts in the wake of the group’s first-quarter results, CFO Anne Mehlman said the group benefitted in 2021 from implementing price increases early on and executing fewer promotions and discounts, but ongoing supply issues will weigh through the year.

The warning came as Crocs revealed record revenues for the full year of US$2.31bn, marking an increase of 66.9%, or 65.2% on a constant currency basis, over 2020. Net income, meanwhile, increased to $725.69m from $312.86m a year earlier. Gross margin of 61.4% increased 730 basis points compared to 54.1% last year. Adjusted gross margin of 61.6% rose 700 basis points.

Mehlman warned transportation-related delays – a combination of delays in loading, delays in transit, and unloading – was starting to impact the business, particularly in the EMEA region.

Rees said the greatest impact from the disruptions was to the current quarter, with Mehlman adding that $40m of revenue associated with the EMEA business that it would have fulfilled in the first quarter has been impacted by the supply delays.

In addition to expanded transit times, Crocs is anticipating other logistics challenges to persist throughout 2022 and to drive inventory increases in certain periods.

Overall, management said they remained confident in the Crocs brands, especially pending the acquisition of Heydude.

Crocs acquired the casual footwear in a $2.5bn deal at the end of last year.

“Throughout 2021, we delivered strong revenue growth, profitability and cash flow,” Mehlman said. “With the underlying strength of the Crocs core business and the addition of Heydude, we are confident we have positioned ourselves for sustained profitable growth and strong cash flow generation.”

Rees added: “Crocs brand had a tremendous year in 2021. We’re confident in the trajectory of the Crocs brand and excited by the pending acquisition of Heydude. By leveraging the proven Crocs playbook to enhance Heydude’s growth trajectory, we see a tangible pathway to a highly profitable combined company and tremendous value creation for shareholders.”

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