Dive Brief:
- Crocs has agreed to acquire fast-growing casual footwear brand Heydude in a $2.5 billion deal aimed at expanding Crocs' total market, the clog maker announced Thursday.
- The deal includes around $2 billion in cash and $450 million in Crocs shares issued to Heydude founder and CEO Alessandro Rosano.
- On closing, Rosano will lead product development at Heydude as strategic adviser and creative director. Rick Blackshaw is set to become brand president of Heydude, Crocs said. Blackshaw most recently was CEO of CCM Hockey and has served in executive roles at Sperry, Keds and Converse.
Dive Insight:
Although it might be broader than many might have thought possible before Crocs came along, the market for clogs — even inclusive of those made to look like Minions or Kentucky Fried Chicken meals — has its limits.
In a presentation to investors explaining the acquisition, Crocs pointed to a vastly expanded total market opportunity with the casual brand in its fold. According to the estimates of the company's management, the market for clogs totals out at $8 billion, with sandals — a growth opportunity for Crocs — representing another $30 billion. The casual footwear market, at an estimated $125 billion, dwarfs both of those combined.
The acquisition brings the total potential market Crocs plays in to more than $160 billion, by the company's reckoning. It also adds a sizable chunk of revenue in the immediate term. Crocs projects Heydude's 2021 revenue to be $570 million, 2022 revenue at up to $750 million, and for the brand to pass $1 billion in revenue by 2024. The company also expects for Heydude to immediately add profits to its earnings per share.
Along with an expanded market and added revenue, Crocs trumpeted Heydude's digital savvy, with digital penetration of 43%. With Crocs, Heydude gets access to the clog giant's distribution network, marketing infrastructure and wholesaler relationships.
Founded in Italy in 2008, Rosano said in the release that the Heydude team has tried to develop "comfortable, versatile and accessible footwear." Crocs CEO Andrew Rees said that Heydude's "casual, comfortable and lightweight products are aligned to long-term consumer trends and are a perfect fit for Crocs."
Crocs had big ambitions even before taking on Heydude. Earlier this year, the company set itself a goal of making $5 billion in revenue by 2026, which, prior to the acquisition, implied annual growth of 17% a year. The brand has been posting feverish growth this year and through the pandemic, as consumers turned toward comfort and were swayed by the company's celebrity partnerships and social media savvy marketing.
The deal is subject to regulatory approval and the usual closing conditions. The companies expect it to close in Q1 next year.
