| Author | Message | ||
     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3906 Registered: 05-2011 Posted From: 24.164.46.35 Rating: N/A |
Crocs is looking out of style today after providing Q4 and FY22 guidance (117.61 -8.09) Perhaps more than any other company, the old adage that "beauty is in the eye of the beholder" aptly applies to casual footwear company Crox (CROX). Like the resin-based shoes that it sells, the financial guidance issued by CROX this morning can be viewed as appealing or as off-putting, depending on the vantage point. For fans of the stock, the company's upside Q4 revenue guidance, which calls for strong yr/yr growth of 42%, is validation that its resurgence in popularity is here to stay. On the other end of the spectrum, bears are pointing to the expected sharp slowdown in expected sales growth for FY22 (to ~20%+ from ~67%) and the rising pressure on margins due to higher costs. With shares down sharply today, control still rests with the bears as the stock continues a downward spiral that began in mid-November. While the rotation out of growth stocks partially explains the stock's 34% plunge during this span, there are also company-specific fundamental reasons for the slide, including: The shift towards casual wear that accelerated during the pandemic greatly benefited CROX as comfort trumped style. However, with more people returning to office settings and with social activities increasing, the trend should swing back towards more dressy apparel and footwear. At the same time, CROX will be lapping much more difficult yr/yr comparisons next quarter and beyond. In 1Q21, net sales jumped by 57%, followed by growth of 64% and 93% in Q2 and Q3, respectively. CROX's acquisition of Italian casual footwear company HEYDUDE has not gone over well with investors. Although the acquisition is expected to be immediately accretive to operating margin and earnings, the sheer size of the $2.50 bln deal has raised some integration concerns. Taking on a major risk in an environment in which investors are shunning higher-risk assets isn't working in CROX's favor, especially since little is known about HEYDUDE's financials. Rising commodity and freight costs are still an issue. In today's press release, CROX estimated that air freight costs will negatively impact gross margin by $75 mln in FY22. Relatedly, the company is anticipating non-GAAP operating margin to slip to 26%, inclusive of HEYDUDE, compared to the forecasted 30% for FY21. The main takeaway is that CROX's strong Q4 guidance indicates that its momentum carried into the holiday shopping season, but there's angst that the best days of its revival are now behind it. In a change of strategy, CROX is turning to M&A to stoke future growth, signaling that its organic growth opportunities may be losing some steam. Combined with escalating margin pressures, these growth concerns continue to weigh on the stock. |