Crocs, Inc. (NASDAQ:CROX) posted an earnings beat for the second quarter but shares of the footwear brand tumbled more than 7% on disappointing guidance.
For 3Q, revenue is expected to be down 1.5% to up 0.5% from the year-ago quarter, with the Crocs brand seen growing 3% to 5% and HEYDUDE down 16% to 14%.
This is below Street estimates of growth of 2.7% from the year-ago quarter to $1.07 billion.
Adjusted earnings per share (EPS) are seen in the range of $2.95 to $3.10, short of estimates of $3.29.
For the second quarter, revenue was $1.1 billion in line with estimates, and EPS of $3.77 topped expectations of $3.59.
Crocs brand revenue increased 9.7% to $914 million while HEYDUDE brand revenues were down 17.5% to $198 million.
Crocs also raised its full-year profit guidance to EPS in the range of $12.45 and $12.90 from its earlier guidance of $12.25 to $12.73, compared to Street estimates of $12.73.
It continues to expect revenue growth for 2024 between 3% to 5%, in line with the consensus of 4.2% growth.
Analysts at Bank of America see Crocs’ Q2 results as “encouraging.”
“We think the stock’s <10x fiscal 2025 price-to-earnings (P/E) ratio multiple remains very compelling for a high margin business (with strong capital return) that continues to consistently beat expectations,” they wrote in a note to clients.
They attributed the Q2 EPS beat to strong sales in the Crocs brand, better-than-expected gross margins and lower selling, general and administrative expenses.
Investors will be looking to management’s tone on beating its lighter-than-expected Q3 sales guidance, analysts believe.
“We expect the biggest pushback will be on whether HEYDUDE can reach its full-year guidance given the significant step up implied in Q4,” they wrote.
“That said, we were encouraged by the 200 basis points improvement in gross margin at HEYDUDE during Q2 (to 49.1%) despite sales down high teens.”
The bank’s analysts repeated their ‘Buy’ rating on Crocs and awarded it a $187 price objective.
Crocs shares had tumbled 7.2% at about $125 in early trade on Thursday.