Despite Inflation and Russia Disruption, Crocs Looks Set for Long-Term Growth

Between inflation and the ongoing conflict in Ukraine, many retail businesses are projecting a financial hit in the next few quarters. But when it comes to Crocs Inc., at least one analyst predicts the clog-maker will still see growth in the short and long term.

In a Monday note following an investor meeting with Crocs’ leadership, Williams Trading analyst Sam Poser maintained his confidence in the company’s position despite current retail disruptions.

“We came away more confident than we were prior to the meetings, and that’s saying something, that Crocs is very well positioned in both near term and long term, and that the HeyDude acquisition will prove successful,” Poser wrote.

When it comes to Russia, Crocs is one of the multiple companies that halted its business in the country. Last week, the firm said it stopped all DTC operations in Russia, including e-commerce and retail stores, and had also stopped importing products into the country, though it is still paying employees there.

“Crocs is devastated by the tragic war in Ukraine and stands in solidarity with those impacted by and enduring this humanitarian crisis,” the company said in a statement. Crocs also made a donation to UNICEF to support humanitarian efforts amid the conflict.

According to Poser, Crocs owns its business in Russia, which makes up just 2% of total sales for the company.

However, the firm’s success in other geographies will likely mitigate the headwinds from its Russia business. Poser specifically called out Crocs’ impactful global collaborations, the momentum of its sandal offerings and Jibbitz, as well as its growing presence in Europe and its recent deal to acquire the privately owned footwear brand Hey Dude.

Given these benefits, Poser maintained that Crocs will be able to achieve $5 billion in sales by 2026. (Crocs also plans to make Hey Dude a $1 billion brand by 2024.)

“Management recognizes the benefit that the Crocs brand achieved during the pandemic,” wrote Poser. “At the same time, management is convinced that Crocs will be a long-term beneficiary of the comfort trend that appears here to stay, and clog sales are expected to continue to increase.”

Poser was also unconcerned about the impact of inflationary trends on Crocs’ business, citing a management-wide confidence in the company’s “price/value relationship” and “ongoing product innovation” that will not deter consumers from purchasing shoes at a higher price point.

U.S. footwear prices grew 7% in February year-over-year, according to data from the Footwear Distributors and Retailers of America (FDRA). This marked the second-fastest year-over-year increase in 33 years.

Poster recently included Crocs as one of his top three picks for success in 2022. The footwear giant reported revenues in the fourth quarter of $586.6 million, an increase of 42.6% from the same period last year. Revenues for the full fiscal year of 2021 were $2.3 billion, up 66.9%, or 65.2% on a constant currency basis, over 2020.

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