- Crocs beat expectations once again, with third-quarter revenue growing 73% year over year to $626 million. Digital sales were up nearly 69% and accounted for 36.8% of all revenue.
- Direct-to-consumer revenue grew 60.4% while wholesale revenue grew more than 88%. Operating income more than doubled to $203.1 million, according to a company release
- This came even as the clogs brand faced factory closures in Vietnam and "and widespread disruption in the global supply chain." For the quarter, the company made $75 million in capital expenditures on its supply chain to support its growth.
Crocs had to overcome multiple supply chain challenges to maintain its growth through the quarter. At the top of its earnings release, the company called out supply chain disruptions, including the Vietnamese factory closures.
Retailers and brands shipping out of Asia have also had to contend with clogged ports, scarce containers and space on ocean carriers, and multiple other headaches making it shipping slower and more costly.
On a conference call Thursday, Crocs CEO Andrew Reese said that factories in Vietnam that the company relies on were closed several weeks during the quarter. They began operating earlier this month, though are in "various stages" of restarting.
Crocs has worked to minimize the impact on its business by shifting production — including to China, Indonesia and Bosnia — improving factory throughput, shipping by air freight, and adding East Coast shipping capabilities in the U.S. so that the company isn't as reliant on West Coast ports, according to the company and Reese. Additionally, Crocs has been strategically allocating goods to key sales channels, including e-commerce and its most important retail customers.
Reese noted that the simple configuration of Crocs' core product makes it easier to shift production when necessary, giving the company an edge in a disrupted manufacturing environment.
On the demand side, Crocs has posted stellar financials this year as comfort and casual have taken center stage during the pandemic. The company also has a versatile marketing operation that capitalizes on limited editions and partnerships of all sorts. Just in Q3, Crocs featured collaborations with cosmetics brand Benefit, apparel brand Free & Easy, influencer Bretman Rock and the rebooted Space Jam movie.
In spite of the global supply chain bottlenecks, Crocs expects revenues to grow 20% this year. The company has set for itself an ambitious goal of hitting $5 billion in revenue in the next five years, which implies an annual growth rate of 17% per year. Included in its long-term goal is growing its digital channel so that it makes up half of all sales.
Crocs, like fellow footwear brands Nike and Adidas, is chasing sales growth through digital and DTC channels. The promise of the strategy is that brands can keep more margin for themselves through direct sales. One group of analysts at BMO Capital Markets have questioned the strategy, finding that pivoting to DTC sales can have a negative impact on both sales and profits for brands.