Crocs is set to decrease its orders for the latter half of the year, as CEO Andrew Rees describes the consumer environment as ‘concerning.’
Order Reduction Amid Consumer Caution
The casual footwear company Crocs intends to reduce its orders for the second half of the year. CEO Andrew Rees highlighted a ‘concerning’ consumer environment during the company’s second-quarter earnings call. He noted that U.S. consumers are cautious with discretionary spending due to current and anticipated price increases, affecting retail partners’ future purchasing decisions.
Impact on Stock and Profitability
Following the announcement, Crocs’ shares fell nearly 30%, marking the worst day for the stock since October 2011. The company imports most products from countries facing high import tariffs, including Vietnam and China. To protect profitability, Crocs is scaling back promotional activities and retrieving older inventory from retailers.
Financial Performance and Outlook
In the second quarter, Crocs reported a net loss of $492.3 million, driven by a $737 million non-cash impairment charge related to its Heydude brand. Despite this, adjusted earnings per share were $4.23, exceeding Wall Street’s expectations. Revenue increased by 3.4% to $1.15 billion, aligning with estimates. However, Crocs projects a 9% to 11% revenue decline for the third quarter.
Strategic Decisions for Future Growth
Rees emphasized the importance of bold decisions to maintain cash flow and drive margins. Although short-term sales volume may be impacted, these actions aim to position Crocs for long-term success.
