5. Crocs Inc. (NASDAQ:CROX)
5-Year Net Income CAGR: 29.08%
TTM Net Profit Margin: 20.02%
Number of Hedge Fund Holders: 40
Crocs Inc. (NASDAQ:CROX) is a footwear company that manufactures and markets the Crocs brand of foam footwear. It has expanded its product line to include other footwear styles, such as sandals, sneakers, and boots, focusing on providing casual and comfortable footwear for both adults and children.
Q2 2024 revenue increased by 3.65% from a year-ago period. In North America, revenue grew by 3%, exceeding expectations due to strong D2C sales and increased retail demand. Internationally, revenue grew by 22%, with China and Australia showing particularly impressive growth.
The company’s focus on collaborations and partnerships is driving consumer engagement and brand recognition. In the second quarter, it celebrated SpongeBob’s 25th anniversary by creating a SpongeBob and Patrick clog, along with strategic partnerships with popular brands like Pringles, Naruto, Treasure, and Minions. It’s expanding into sneakers and lifestyle products, as evidenced by the successful launch of the Salehe Juniper sneaker. The iconic Classic Clog continues to drive growth. It’s also introducing highly anticipated fan-requested products, including Pet Crocs, Classic Lined Clogs, and a life-sized Crocs Costume, to celebrate its annual Croctober festivities.
Its brand, HEYDUDE, partnered with musician Jelly Roll to create a limited-edition shoe inspired by his new album. The shoes cost come with a free vinyl copy of the album (while supplies last). Part of the proceeds will go to Big Brothers Big Sisters youth mentoring organization. Crocs Inc. (NASDAQ:CROX) recently broke above the 50-day moving average, indicating a potential bullish trend. Its recent share price gains, and positive earnings estimate revisions make it a promising investment opportunity.
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.”
