2. Crocs Inc. (NASDAQ:CROX)
Year-to-Date Performance as of October 11: 45.92%
Forward Price-to-Earnings Ratio: 9.98
Number of Hedge Fund Holders: 40
Crocs Inc. (NASDAQ:CROX) is a global footwear company, operating in over 80 countries, known for its iconic, comfortable, and colorful clogs. It offers a range of footwear for men, women, and children, including casual shoes, sandals, and boots. Unique design and comfortable fit have made it a popular choice for people of all ages, and it continues to innovate and expand its product line.
This company heavily invests in collaborations and is actively evolving its partnership model to strengthen consumer engagement and brand popularity. In Q2 2024, it celebrated SpongeBob’s 25th anniversary with a limited-edition clog release at the Las Vegas Sphere. It’s pursuing sneaker and lifestyle opportunities, as demonstrated by the highly successful launch of the Salehe Juniper sneaker.
In the second quarter of 2024, it made $4.01 per share. The revenue was up 3.65% from a year-ago period, accounting for $1.11 billion. The company is focused on three key strategies: boosting brand awareness and global appeal, investing in talent to increase market share, and expanding its product offerings to attract new customers.
It experienced strong growth in the Tier 1 markets. In North America, it outperformed expectations with a 3% revenue increase, driven by strong D2C sales and increased demand from retailers. Internationally, revenue grew by 22%, with China and Australia showing significant growth. China’s growth was particularly impressive, reaching ~70% on top of last year’s triple-digit growth.
The company is celebrating its annual Croctober festivities by bringing some of its most requested fan creations to life. New products include Pet Crocs, Classic Lined Clogs, and a life-sized Crocs Costume, as announced on October 9. Crocs Inc.’s (NASDAQ:CROX) strong fundamentals and strategic initiatives have positioned it as a promising stock.
Silver Beech Capital stated the following regarding Crocs, Inc. (NASDAQ:CROX) in its first quarter 2024 investor letter:
“In October 2023, we invested in Crocs, Inc. (NASDAQ:CROX), the manufacturer/retailer of iconic foam casual footwear, at an attractive mid-teens FCF yield. Crocs is a well-managed, capital light, high margin, growing consumer-favorite brand.
We believe a combination of cognitive and institutional biases prevented the market from correctly evaluating the company, including anchoring sales expectations to the company’s pre-pandemic sales volume, overextrapolating sales slowdowns at the company’s relatively small HeyDude subsidiary, and focusing on questionable short-term oriented alternative data. The market misunderstood (and perhaps still does) the company’s growth profile, earnings quality, and earnings power. In the year ahead, we forecasted there was a straightforward path to Crocs posting strong near-term topline and FCF growth while deleveraging.
After a few months, the market agreed with us that Crocs was simply too cheap and quickly rerated the company. The Fund does not own a stake in Crocs today. The Fund’s investment in Crocs generated a 248% gross IRR / 40% total gross return over our 4-month investment period.”
