Andrew Rees: Yes, good question, Tom. In essence, no. We think the brand has significant global relevance. We’ve talked about in the past we’ve reshaped the international business. When we bought the brand, their distribution strategy was distributor-orientated, so they had a portfolio of about 35 distributors across the world, most of which were doing a poor job. We’ve terminated most of those distributors. There are two that continue to do a good job. I think we’ve highlighted this in the past, the distributor in Italy and the distributor in Spain. Those are both really nice businesses. They do well. They do a great job distributing the brand in the marketplace. And if I think about what is really a U.S.-centric brand, if they can succeed in those markets, those are some of the tougher markets in my view, for a U.S.-centric brand to perform.
I think it gives you evidence that the brand can perform well poorly — sorry, perform well across a broad range of international markets. We are putting some time and effort into, I would say, experiments as we try and understand which are the right markets to penetrate internationally. We know brand awareness is very, very low, but we are putting time, effort, and some resources against that. It will take kind of two to three years, but it does start next year.
Tom Nickik: All right. Thanks, Andrew, best of luck this holiday season.
Andrew Rees: Thank you.
Operator: The next question comes from Sam Poser from Williams Trading. Please go ahead.
Samuel Poser: Thank you all for taking my questions. I want to follow up on Monday morning quarterbacking here a little bit, Andrew. Could you make the argument that you focus much more on supply than on demand as you are selling goods in, and you are shifting to more of a demand-based way you are looking at the HEYDUDE business now?
Andrew Rees: Yes. I would not say it quite like that, but I think, in essence, you end up in the same place, Sam. Yes, we are certainly cutting supply into the wholesale arena to ensure that supply is pegged at or below demand. That is a demand-based environment. I think, as we sold in historically, we did not know where demand was going to be, but I do think we now have a lot more know where demand was going to be, but I do think we now have a much stronger lens on that. Yes, that is a reasonable way of saying it.
Samuel Poser: If you had to do it all over again, would you have grown the business as quickly as you did last year?
Andrew Rees: I probably would have done, but probably would have hoped that we could have had, I would say, stronger segmentation between the accounts such that we could give everybody the opportunities to succeed, and they were not competing against each other. I do think it was important to grab shelf space, which we were able to do very effectively. Obviously, it is not great if you are a public company to have one year of great growth and the next year of flat to contracting growth, but net-net, I think we have put ourselves in a good position from a brand and consumer perspective. I probably would do it, but probably do it in a better way and maybe slightly moderated.
Samuel Poser: Is the Las Vegas Distribution Center up and running now?
Anne Mehlman: Yes, this is Anne. We are mostly through construction, and it will be up and running in Q1.
Samuel Poser: Thanks. And then you talked about the sell-through rates or the sell-through of 28% in your strategic wholesale accounts. But what were the — how much of that was at the — how much of that was on sale? I mean, did the ASPs go down to drive that given the gray market and the amount of inventory in the marketplace?
Andrew Rees: The ASPs in the strategic wholesale accounts were actually up over the prior year. They were strong. So that wasn’t a sell. That wasn’t a promotional. Obviously, there are promotions during back-to-school, but that wasn’t more promotional than the year before. The compression on ASPs was really on Digital, on Amazon, and on our own dot-com. So hopefully that answers your question.
Operator: The next question comes from Rick Patel from Raymond James. Please go ahead.
Rick Patel: Thank you. Good morning. I’m looking for additional color on the distribution of HEYDUDE. So can you paint a picture for what HEYDUDE distribution looked like earlier this year, perhaps in terms of number of doors, and where you expect it to shrink to as the brand right sizing goes on? And then as you think about 2024 and leaning into some of the growth areas and higher quality points of the business, where do you see this distribution evolving to?
Andrew Rees: Yes. I think I’d probably go back further than the beginning of this year. What I’d say is when we bought the brand, the brand had about 1,300 points of distribution that was regional and very much orientated towards small mom-and-pop accounts, right?. So of that 1,300 doors, we’ve closed over 600 accounts, so that’s probably more doors than that. But we’ve closed over 600 accounts, many of them with single doors, but some might have had one or two. And we’ve really extended the brand into large national chains. And as we kind of think about the HEYDUDE brand, we see the HEYDUDE brand essentially being sold almost everywhere that the Crocs Brand is sold. So I think about the primary chain, we’re talking about family footwear, we’re talking about sporting goods, we’re talking about mall-based specialty, and then I want to say also some sort of super regional chains.
So I think we’re mostly in the customers that we want to be in. In a lot of those customers, were all doors, and there are a few of those customers we are partial doors, so we’ve got expansion opportunity. So it’s been a pretty dramatic reshaping above the overall customer portfolio, and I think the future growth comes from a number of things. What comes from some customers extending to a broader proportion of their doors, it comes from a greater share of shelves in some doors, it also comes from accelerating sell-through with that demand perspective that Sam highlighted. So hopefully that answers your question, Rick.
Rick Patel: That’s very helpful. Thank you. Can you also talk about what your fourth quarter operating margin expectations are by brand? And then what should we extrapolate from fourth quarter operating margins overall as we think about what the potential could be in 2024?
Anne Mehlman: Yes, so we don’t guide fourth quarter operating margins by brand. Obviously, I think it’ll be — we’ve had strong operating margins in both of our brands. Our overall operating margin guide of 27% remains in its best-in-class. I wouldn’t extrapolate Q4 to other quarters. As you said, we’re going to invest in SG&A, so that we can continue to support from a marketing perspective and a consumer perspective the long-term growth potential of both of our brands and not manage for a quarter. But I think 27% operating margin overall, I feel really good about that overall.
Operator: Our next question comes from Laura Champine from Loop. Please go ahead.
Laura Champine: Thanks for taking my question. I first wanted to ask more about this guide for Q4 for HEYDUDE, just because it’s such a significant downgrade from what we previously expected. If you bucket the change, how much of it is due to decisions that Crocs made to control distribution, and how much of it is something that happened to you, meaning wholesale customers ordering less and this sort of glut of inventory in the resale channel?
