Exceptional Growth in China and India: Crocs Sees Strong Market Opportunities
2023-07-30
The company recently held an earnings call meeting to discuss its financial performance and address questions from analysts and investors. One of the most intriguing topics discussed during the meeting was the exceptional growth and performance of the company's product in China. The company was recognized for its effective launch of a new product integrated marketing program, which led to remarkable growth on Tmall, a popular online marketplace in China. Despite the challenges posed by the pandemic, the company's investments in marketing and strengthening its team in China paid off as consumers returned to shopping. The company experienced strong performance across all channels, including its own digital platforms, Tmall, and partner-operated stores. The speaker expressed excitement about the potential of the Chinese market and also highlighted India as a strong market. This indicates that the company sees significant growth opportunities in both China and India.
The market outlook for the company appears positive based on the meeting outcome. The company is confident in its inventory position with strategic wholesale customers and believes it is well-prepared for future growth. Despite challenges such as adverse weather conditions and a weaker tax refund season, the company remains optimistic about the traffic it is seeing to its mono-branded environment and the strength of its brands. Sandals, in particular, performed exceptionally well in the quarter, with a 65% increase driven by both wholesale sell-in and strong sell-through in direct-to-consumer channels. Overall, the company is optimistic about its market outlook.
The key drivers of the company's business include in-market inventories, weather conditions, tax season, the sandals category, and newness and marketing. The company plans to maintain good inventories, focus on the sandal category, and expand its HEYDUDE business. They are pleased with the growth of sandals and believe that newness and marketing efforts in this category are driving strong growth. Additionally, they mentioned the momentum and newer franchise and styles in the HEYDUDE business, with significant penetration of the Wally and Wendy styles.
Looking ahead, the company's outlook for the quarter and year includes significant growth in China, although the growth in Q1 was somewhat muted. On a two-year basis, the company projects growth in China to be upwards of 85% in reported numbers and around 95% in constant currency, indicating strong growth even when accounting for the impact of lockdowns. The company believes there is still potential for further growth in China. Furthermore, they anticipate that Q2 operating margins will be better than Q1, following the usual pattern. However, there will be an increase in SG&A expenses in Q2.
During the earnings call meeting, various participants were present, including key individuals from the company's management team and representatives from Piper Sandler, Robert W. Baird and Company, Wedbush Securities, B. Riley Financial, UBS, Loop Capital Markets, Stifel Financial Corp., Seaport Research Partners, Exane BNP Paribas, and Barclays. The company expressed gratitude towards the participants for their interest and thanked them for their participation in the meeting.
Overall, the company's inventory position was discussed, with the CEO highlighting that they are well-positioned in the market with good inventories at strategic wholesale customers. The inventory is performing well, and the company believes it is in good shape to support future growth. They are also actively working through any legacy inventory. With a positive market outlook, strong growth in China, and a focus on key drivers of the business, the company appears poised for continued success in the coming months.