Anne Mehlman: Hi Jim, so on the Crocs revenue assumptions, obviously as we move through, we had a better Q1 than anticipated really on the North America side. And then as we get into Q2, we definitely have pretty good visibility into order books, and we can also see DTC trends. So I would say — I think the other thing is we’re really seeing our international markets do very well, as we talked about China, Australia, but also some strength in Europe, so that gives us confidence, and that’s really what led to the revenue raise. On the gross margin side, we saw a couple of things. One, we saw some better full price selling in which supports that overall gross margin. We also have seen a little bit of input cost pressure relief on the Crocs side.
And so we’ve seen our costs as we negotiate those kind of in the first quarter come down. And so we’ve taken those assumptions for the remainder of the year as we kind of look through that. So those are really supporting the higher gross margin assumptions on the Crocs side.
Jim Duffy: Got it. Thank you Anne. And can you speak to the HEYDUDE margin view for 2024. Does the lower revenue come with incremental margin pressure? Or is there some place where you have savings as an offset? And then, Anne the GAAP charges for the HEYDUDE ERP implementation is new — can you talk about that effort, the timing, the rationale and so forth?
Andrew Rees: Sure. Yes. So from a margin — we’re not anticipating incremental margin pressure from the lower revenue — some of the revenue reduction that HEYDUDE. I think we — the margin is sort of playing out our pricing, promotional strategy, channel mix is playing out pretty much where we thought it would be. And obviously, the reduction is really coming from wholesale revenues — so as our DTC revenues are obviously higher margin than wholesale revenues, we don’t see a margin reduction. We think our margin guide is good for HEYDUDE, and I’ll let Anne talk about the ERP.
Anne Mehlman: Yes. And one thing supporting those gross margins that kind of I’ll talk about that relates to the ERP is actually, we’ve implemented that — or we’ve taken live the new HEYDUDE Las Vegas warehouse, which is shipping our distribution center. And so that obviously, throughout the year, will support us being more efficient on the HEYDUDE side for storage and things like that. From that is also related to — we implemented that new DC, and we also implemented technology for HEYDUDE. And so we took an impairment on the other piece related to that technology implementation. As we are now live on technology for HEYDUDE. So really excited about that.
Jim Duffy: Okay, thank you guys.
Anne Mehlman : Thank you.
Operator: The next question comes from Chris Nardone with Bank of America. Please go ahead.
Chris Nardone: Thank you guys. Good morning. For HEYDUDE, do you mind just clarifying if your 2Q guidance reflects the trend you’re seeing quarter-to-date? Or if there is an improvement embedded in the guidance? Then as a follow-up longer term, I recognize Terence just took over the President’s role last week. But do you envision major strategic shifts in how you’ll run the brand? And if so, can you elaborate on maybe some of his early plans? Thank you.
Anne Mehlman: Yes. So let me talk through HEYDUDE guidance and then I’ll — Andrew will talk through the other piece. So on HEYDUDE guidance, it reflects the current trends that we are seeing. So we are not anticipating an improvement for Q2 at this time.
Andrew Rees: Great. Thank you, Anne. So Terence has obviously been on board essentially 1.5 weeks at this point. So I think, it’s not fair for him to articulated a new strategy. But I would say, we do not anticipate dramatic strategy shifts. I think, as we’ve been working together on kind of the key pillars within this strategy, we are very much aligned that it’s going to be really about the Wally and Wendy our iconic franchise. We think that franchise is incredibly relevant to a broad base of consumers. And really, what we need to do is a better job around engaging the consumer and making the HEYDUDE brand and that franchise, those iconic franchises more relevant for more consumers. And I think that’s the same strategy we put in place for Crocs a number of years ago, where we wanted to make the classic relevant for more consumers around the world, which is what we’ve done.
So we don’t see a major strategy shift from a product perspective, from a marketing perspective or from a distribution channel perspective.
Chris Nardone: Okay. Got it. And then just as a quick follow-up. Can you just talk about your confidence in the gray market issues on Amazon abating by midyear, which was your prior message? Any change to that?
Andrew Rees: So we’re still seeing a headwind from gray market for HEYDUDE on Amazon. We anticipate that will continue through the first half of the year and that headwind is embedded in the guidance that we provided.
Chris Nardone: Okay, thank you.
Operator: The next question comes from Laura Champine with Loop Capital. Please go ahead.
Laura Champine: Hi, I’d like to drill down into what’s happening with the HEYDUDE Direct business. I mean, I think you mentioned a shift to more full price selling. I’m wondering what happened with units in that business? And I’m also wondering how long you would expect that business to be pressured by a shift in your ASP goals?
Andrew Rees: Yes. So you’re essentially right, Laura. So as we’ve raised prices in our HEYDUDE Direct business, which is mostly on Amazon, where we’re a three-piece seller for HEYDUDE. We have seen a drop in units. We expected that. And I think net-net, that’s been productive for the brand and productive for our margin ends, but we have seen a drop in unit sales. I would say, as we’re introducing new products and our marketing is kicking in for HEYDUDE, there is some evidence that — that will mitigate over time.
Laura Champine: Got it. And is over time — I mean, is an improvement in the direct business implied in your full year guidance for HEYDUDE or not?
Anne Mehlman: So I would say what we have said is that our full year guidance that our direct business, which includes our Marketplace business, our own.com, as well as our retail business will outperform our wholesale business this year. And so that’s included in our full year guidance.
