Crocs Hey Dude Deal Addresses A Major Concern From Investors – Footwear News

Crocs outlined a plan to achieve $5 billion in sales by 2026 in September. Given recent moves from the fast-growing company, that goal seems more attainable — and surpassable — than ever.

According to executives in a virtual presentations at the 24th annual ICR conference on Tuesday, Crocs could reach up to $6 billion in annual revenue by 2026, including expected revenues from the Hey Dude brand, which Crocs acquired last month.

At a valuation of $2.5 billion, the deal to acquire Hey Dude marked Crocs’ biggest investment to date and the departure from a single to multi-brand company. Crocs said it expects the brand to see between $700 and $750 million in fiscal year 2022, in line with its goal to make it a $1 billion brand by 2024.

In the Tuesday presentation, Crocs CEO Andrew Rees addressed concerns from investors regarding the sustainability of Crocs’ success, given its strong focus on a single product style and silhouette: the Classic Clog. Stifel analyst Jim Duffy noted earlier this week that much of Crocs’ growth is concentrated in North America via its classic clog, making the stock risky and more subject to fashion changes.

According to Rees, Hey Dude takes care of this problem.

“When we combine Hey Dude and Crocs, we get a much better diversification in terms of our silhouette,” Rees said. While the Classic Clog silhouette currently accounts for about 74% of Crocs’ sales, Rees predicts this will go down to about 60% once Hey Dude’s sales are taken into account.

“We’ll get immediate diversification,” Rees said.

Rees added that Hey Dude and Crocs should be viewed as synergistic, yet independent brands with strong potential for growth.

“We can leverage the playbook that we’ve effectively executed within Crocs, within Hey Dude,” Rees said, referring to innovation, focus on a core iconic silhouette, and marketing to new consumers.

To make Hey Dude even more profitable, Rees said that Crocs will invest in marketing for brand awareness, digital capabilities, and supply chain networks. Via Crocs, Hey Dude will have access to a vast retail footprint via wholesale and brand-owned stores.

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