Crocs Q1 Earnings Call Highlights

Key Points

• Crocs reported Q1 enterprise revenue of $921 million (down 2% reported, down 4% constant currency) as DTC strength at Crocs and HEYDUDE offset planned wholesale declines; Crocs brand revenue fell 2% and HEYDUDE fell 13%, while adjusted EPS was $2.99, flat year‑over‑year and above expectations.
• Adjusted gross margin was 56.9%, down ~90 bps driven by a ~100 bp tariff headwind and new‑product/brand mix, and adjusted operating margin was 22.3%; the company raised full‑year adjusted EPS guidance to $13.20–$13.75 while still expecting tariffs and the Middle East conflict to be key variables.
• Crocs emphasized inventory discipline (footwear units down high‑single digits, turns >4x), ended the quarter with $131 million cash and >$800 million revolver capacity, and continued buybacks (QTD repurchases ~$74 million with $747 million remaining on the authorization).

Crocs NASDAQ: CROX reported first-quarter 2026 results that management said came in “better-than-expected,” driven primarily by direct-to-consumer (DTC) performance at both the Crocs and HEYDUDE brands and consumer response to new product offerings. Enterprise revenue totaled $921 million for the quarter, with the Crocs brand down 2% and the HEYDUDE brand down 13% as the company works to return both brands to growth.

Quarterly results: DTC strength offsets planned wholesale declines

Patraic Reagan, executive vice president and chief financial officer, said enterprise revenue of $921 million was down 2% year over year on a reported basis, or down 4% on a constant currency basis. Reagan attributed results to strength in DTC, “offset by planned wholesale declines as we continue to optimize and manage this channel for long-term profitable growth.”

The Crocs brand posted revenue of $767 million, down 2%. Reagan said international was the key driver, with reported revenue up 7%, including strength in China, India, Japan, and Western Europe. North America revenue declined 6%, though DTC rose 5% “despite a meaningful reduction in promotional activity,” which was partially offset by wholesale declines.

HEYDUDE revenue was $154 million, down 13%. Reagan said DTC increased 8% on “outsized digital marketplace performance and new store opening contributions,” and noted that this came with a lower level of performance marketing spend. Wholesale revenue for HEYDUDE fell 26% as the company continued to manage inventory toward its return-to-growth plan.

Margins, expenses, and earnings

Adjusted gross margin for the enterprise was 56.9%, down 90 basis points from the prior year. Reagan said the decline was driven by “100 basis points of incremental tariff impact as well as product mix,” partially offset by brand mix. Crocs brand adjusted gross margin was 59.5% (down 120 basis points) and HEYDUDE adjusted gross margin was 44.5% (down 210 basis points).

On a question about why first-quarter gross margin came in below what some expected, Reagan cited two main factors: new product mix and brand mix. He said newness was strategically important, but “select new products come with slightly lower product margins,” and that headwind was larger than anticipated. He also said HEYDUDE outperformed expectations, which pressured the gross margin rate due to mix, but aligned with the return-to-growth strategy and contributed to raising the full-year HEYDUDE revenue outlook.

Adjusted SG&A dollars were flat year over year, reflecting partial benefits from cost-savings initiatives offset by “thoughtful” DTC investments, Reagan said. Adjusted operating margin was 22.3%, down 150 basis points, excluding $5 million of implementation-related costs tied to cost-savings initiatives. Adjusted diluted EPS was $2.99, flat versus last year and ahead of management’s expectations, with a non-GAAP effective tax rate of 18%.

Inventory discipline and capital allocation

Management highlighted inventory management as a key theme. CEO Andrew Rees said total footwear units were down high single digits and inventory was turning “more than 4 times.” Reagan said inventory at March 31 was $398 million, up 2% year over year, including tariff impacts, while footwear unit inventory was down high single digits. Enterprise inventory turns were above the goal of four times on an annualized basis, he said.

The company ended the quarter with $131 million in cash and cash equivalents and more than $800 million of borrowing capacity on its revolver, Reagan said, with net leverage at the low end of its target range of 1 to 1.5 times.

Crocs also continued share repurchases. Rees said second-quarter repurchases were underway and that quarter-to-date the company repurchased 800,000 shares. Reagan put the quarter-to-date repurchase at $74 million and said $747 million remained on the existing authorization.

Brand updates: product newness, collaborations, and international momentum

Rees said consumer response to “product newness across all categories” supported a strong start to the year for Crocs, noting performance in several clog franchises including Crocband, Crafted, and Echo. He also said the company is scaling beyond clogs, pointing to a strong start to the sandal business, which the company expects to “approach half a billion dollars in revenue this year, up double digits from 2025.” Rees highlighted Saturday, a personalizable two-strap sandal introduced this spring, and said the brand’s classic ballet flat launched with “a notable sell-out globally,” prompting the company to “chase supply.”

Rees also pointed to collaborations and social-driven initiatives, including a multi-year partnership with Lego and a micro-drama miniseries on ReelShort that he said generated more than 10 million views. He added that Crocs was awarded “Top Seller of the Year” on TikTok Shop for 2025 and said TikTok Shop expansion is a medium- to long-term focus, with scaling in the U.K. and Malaysia and a planned launch in Japan.

Internationally, Rees said the Crocs brand saw “outsized growth” in China, India, Japan, and Western Europe. He highlighted initiatives including a Super Brand Day on Douyin in China and a campaign in India featuring Echo RO with cricketer KL Rahul. Rees said the company opened about 40 monobrand stores and kiosks in the quarter, including six owned and operated stores internationally. He also noted that on April 1 the company converted its Malaysia distributor business to a directly owned and operated model, absorbing 21 retail stores.

At HEYDUDE, Rees said the quarter was ahead of expectations, “tied largely to outperformance in DTC,” despite reduced performance marketing spend. He cited collaborations including Houston Rodeo, Chevy, Jelly Roll, and Naruto, and said HEYDUDE received a “top gross seller of the year” award on TikTok Shop. Rees said the brand continues to focus on slip-ons led by Wally and Wendy, and highlighted Stretch Jersey as a newer franchise that launched across channels and “outperformed expectations.” He also pointed to traction in sandals and continued response in work offerings such as the Wally Compto.

Guidance updated; Middle East conflict and tariffs remain key variables

For full-year 2026, Reagan said the company now expects enterprise revenue growth to range from up 1% to down 1% on a reported basis, assuming currency rates as of April 27. He said guidance reflects the “country-specific impact from the war in the Middle East” and related pressure from elevated distribution and logistics costs.

Brand-level guidance calls for Crocs brand revenue to be flat to up 2%, led by international growth and offset by North America declines, with DTC expected to outperform wholesale. For HEYDUDE, Crocs now expects revenue to decline about 5% to 7%, improved from prior guidance of down 7% to 9%. Reagan said the updated range “embeds our increasing confidence” that both DTC and wholesale return to growth in the second half.

Reagan said the company continues to expect full-year adjusted gross margin to be “slightly up versus last year,” despite tariffs, with partial offsets from supply chain cost-saving initiatives. Adjusted SG&A dollars are implied to be roughly flat year over year, and the company expects adjusted operating margin to expand modestly versus the 22.3% level reported in fiscal 2025, excluding approximately $25 million of non-recurring costs. The company raised its adjusted diluted EPS outlook to $13.20 to $13.75, and reiterated capital expenditures of $70 million to $80 million.

For the second quarter, Reagan said the company expects revenue to be down slightly at April 27 currency rates, with Crocs brand revenue up 1% to 3% and HEYDUDE down 12% to 14%. Adjusted operating margin is expected to be about 24.7%, with adjusted gross margin down about 150 basis points year over year due to tariffs. Adjusted diluted EPS is expected to be $4.15 to $4.35.

Management also discussed evolving tariff conditions. Reagan said the company is managing through a “blended rate” in the second quarter and emphasized that tariffs are becoming part of the company’s base as it moves into the second half. He added that Crocs believes it is “well-positioned to collect refunds” on incremental tariffs paid in 2025 and into this year following Supreme Court rulings, but said the company has not embedded any related upside in guidance.

On the Middle East conflict, Rees said it was too early to fully quantify the impact, but he outlined three ways Crocs expects effects: reduced revenues from the Middle East distributor business, increased raw material and transportation costs tied to elevated oil prices, and potential broader macroeconomic impacts. In Q&A, Rees said the most immediate cost impact was transportation, including fuel surcharges on inbound and outbound freight, and said those costs are embedded in guidance.

Rees also said the company is not seeing a “discernible negative trend” in consumer behavior in North America, Europe, and Asia, despite broader concerns around consumer confidence, while noting that sustained high oil prices could weigh on some regions, including Western Europe and parts of Southeast Asia.

About Crocs NASDAQ: CROX

Crocs, Inc is a global footwear designer, developer and distributor best known for its lightweight, proprietary Croslite™ foam-clog construction. The company's product portfolio encompasses a range of styles, including clogs, sandals, slides, boots and sneakers, all featuring the slip-resistant, odor-resistant and cushion-providing qualities of the Croslite material. Crocs distributes its products through an omnichannel network that includes e-commerce platforms, company-owned retail stores, authorized dealers and wholesale partners.

Founded in 2002 by Scott Seamans, Lyndon “Duke” Hanson and George Boedecker Jr., Crocs launched its first clog on the island of Vail, Colorado.

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