Crocs, Inc. ( CROX ) reported stronger-than-expected second-quarter earnings and sales, yet its shares fell as the company faces a revenue decline in its HEYDUDE brand and a cautious third-quarter forecast.

The company reported adjusted earnings per share of $4.01 (+12%), beating the street view of $3.56. Quarterly sales of $1.112 billion (+4%) beat the analyst consensus of $1.102 billion.

Crocs Brand revenues increased 9.7% to $914 million, while HEYDUDE Brand revenues decreased 17.5% to $198 million.

“Strength in the quarter was led by our Crocs Brand with exceptional growth internationally. As it relates to HEYDUDE, we are making improvements to support long-term brand health and are focused on driving brand heat by accelerating marketing in the second half of the year,” said Andrew Rees, Chief Executive Officer.

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Adjusted gross margin improved 330 basis points to 61.4% compared to 58.1%.

Direct-to-consumer revenues grew 8.9%, or 10.0% on a constant currency basis. Wholesale revenues contracted 1.3%, flat on a constant currency basis.

The company exited the quarter with cash and equivalents of $168 million compared to $166 million. Inventories at quarter end were $377 million.

“Our terrific cash flow generation provides us the flexibility to reinvest in our business, pay down debt and repurchase shares,” Rees adds.

Outlook: Crocs ( CROX ) projects third-quarter revenue to be down 1.5% to up 0.5% year-over-year, at currency rates, with adjusted EPS estimated between $2.95 and $3.10, falling short of the $3.33 estimate.

Crocs ( CROX ) continues to forecast FY24 revenue growth of 3% to 5% year-over-year, with adjusted EPS expected to range from $12.45 to $12.90, slightly above the $12.64 estimate (prior view: 12.25 to $12.73).

Price Action: CROX shares are trading lower by 5.80% to $126.57 premarket at last check Thursday.

Photo via Wikimedia Commons

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