Crocs Inc. trimmed the annual revenue forecast for casual shoe brand HeyDude as it focuses on boosting average selling prices and market segmentation.
Even with the changed forecast, the footwear company’s executives were upbeat Tuesday on HeyDude’s performance, which was better than original projections but down 17.2% to $195 million in the quarter ended March 31.
Crocs Inc. is now estimating revenue in the current year to be down in the range of 8% to 10% for HeyDude. That compares with earlier stated guidance of flat to slightly up for the shoe brand as Crocs Inc. CEO Andrew Rees said near-term plans for HeyDude are “taking longer to play out.”
Terence Reilly, the former president of Stanley Brand, rejoined Crocs Inc. last week as executive vice president and president of HeyDude, with the hope that Reilly’s marketing prowess can be applied to the casual shoe brand.
Rees told analysts Tuesday it’s too soon for Reilly to speak to strategy for HeyDude, but said “dramatic strategy shifts” are not anticipated.
“I think as we’ve been working together on the key pillars within this strategy, we’re very much aligned that it’s going to really be about the Wally and Wendy (shoe styles), our iconic franchises,” Rees said of HeyDude under Reilly’s leadership. “We think that franchise is incredibly relevant to a broad base of consumers and, really, what we need to do is a better job around engaging the consumer and making the HeyDude brand and those iconic franchises more relevant for more consumers.”
Reilly, the former CMO of Crocs Inc., is credited with helping turn the Stanley drinkware brand into a coveted item across consumer groups in more recent years. The hope is something similar can be done in raising the awareness of HeyDude.
HeyDude Deeper Dive
In the near term, HeyDude’s sales have been pressured by the wholesale channel as the company cut ties with smaller accounts in favor of re-working its distribution strategy and focused on full-price selling.
The recently ended quarter’s revenue decline was seen across both the direct-to-consumer channel, down 11%, and wholesale, down 19.7%.
Even with the decline, Rees said the overall performance “played out as we expected.”
“Our focus for 2024 is on solidifying the business and establishing the Wally and Wendy as iconic franchises for the consumer. We’ve worked to maintain price integrity on digital, improve channel inventories and create more segmentation across wholesale partners,” the CEO said.
Rees added that while sales were strong in March, Easter and on into April “has fallen short of expectations,” with sell out softening among retail partners.
“Based on the visibility we have quarter-to-date, and given the choppy retail environment, we’re taking a more prudent approach around trends for the balance of the year,” Rees said.
The expectation for HeyDude is wholesale continues to be negative for the year, with direct-to-consumer performing better than wholesale, according to CFO and recently appointed Crocs brand President Anne Mehlman.
HeyDude will continue to open outlet stores, with 30 still in the plans for this year. Six of those locations were opened in the March quarter.
Crocs Inc. Financials
Despite the softening seen for HeyDude, Crocs Inc.’s company-wide first quarter revenue was up 6.9% in constant currency to $939 million, driven by the growth of its namesake business.
Company-wide net income increased to $152.5 million, compared to $149.5 million in the prior-year period.
The company reiterated its annual revenue projection of 3% to 5% growth for the current year. That would be driven by a projected revenue increase of 7% to 9% for the Crocs brand, which is up from a previously stated range of 4% to 6%.
