Crocs, Inc. 2026 Q3 Earnings Call

Please go ahead. Good morning, and thank you for joining us to discuss Crocs, Inc.'s third quarter 2026 results.

With me today are Andrew Rees, Chief Executive Officer, and Patraic Reagan, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties, and other factors which may cause our actual results, performance, or achievements to differ materially. Please refer to our most recent annual report on Form 10-K, quarterly report on Form 10-Q, and other reports filed with the SEC for more information on these risks and uncertainties.

Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I'll turn the call over to Andrew Rees, Crocs' Chief Executive Officer.

Thank you, Elizabeth, and good morning, everyone. Thank you for joining us today. Before I share our results for the third quarter, I'd like to welcome Elizabeth in her new role as Vice President of Investor Relations. We're excited to welcome her as part of our Crocs team. Now moving to our third quarter results. We delivered a strong quarter of growth across brands, channels, and geographies. Both Crocs and HEYDUDE delivered growth driven by execution of our brand strategies while expanding margins year over year through sustained operational discipline. This quarter marks an important inflection for the HEYDUDE brand, with revenue growth of 6%, which is a direct result of our clear consumer focus and execution against our three-pillar growth strategy.

The Crocs brand had a record third quarter up 4%, driven by our international business, including growth in all of our tier 1 international markets and continued momentum across our product diversification strategy. As we stated at the beginning of the year, returning to growth for both brands is a strategic goal we set out to achieve through our disciplined execution and laser focus on the consumer. As a result, we are raising our full year 2026 revenue guidance from up 1%-2% to up approximately 3%. We remain confident in the long-term trajectory of both of our brands and are committed to executing against our strategic pillars to drive diversified growth. Additionally, we remain confident in our ability to generate significant free cash flow, which we continue to return to shareholders in the form of meaningful share repurchases and debt paydown.

While Patrick will discuss our quarterly performance in more detail later, I will start by sharing several financial highlights and then review our progress by brand. During the third quarter, we delivered enterprise revenues of more than $1 billion, up 5% to prior year, driven by both of our brands, with Crocs up 4% and HEYDUDE up 6%. HEYDUDE returned to growth led by wholesale revenues up 14% and DTC revenues up slightly. Crocs brand delivered a better-than-expected Q3 led by international revenue up double digits, including our international direct-to-consumer channel growing 24%. Another quarter of best-in-class profitability with adjusted operating margins expanding 150 basis points to reach 22.3%. Meaningful return of cash to shareholders with approximately 2 million shares repurchased for $250 million and debt paydown of $21 million.

Importantly, over the last decade, we have taken our powerful value creation engine and returned meaningful cash to shareholders with approximately $3 billion of share repurchases and 37% reduction in share count. We view this as a true differentiator versus our peers. Now let's move to performance by brand, starting with Crocs. This quarter was another great quarter for the Crocs brand, reflecting strong execution against our five-pillar growth strategy. Direct-to-consumer revenues grew 8% versus prior year, led by our international business, while our diversification strategy continued to gain traction with consumers. We built on the momentum established in the first half of the year, driven by strong consumer response to our new product innovation, impactful partnerships, and our differentiated digitally led approach to commerce and marketing. Turning to our five-pillar growth strategy, starting with our first pillar, driving brand relevance globally as the clog market share leader.

During the quarter, we broadened our relevance across fashion and sport through both new and existing franchises, enabling us to serve a broader range of wearing occasions. Growth in clog iterations such as the Crafted, Crocband, Mellow, and Echo franchises reinforces our conviction that innovation within clogs remains an important lever for future growth. Within Crafted, we saw further momentum as new materializations and seasonally relevant product resonated with consumers, including our Vegan Suede Stitch Clog. Crocband continues to gain momentum globally as we expanded our color options, band innovations, and broadened appeal across both male and female consumers with the addition of our Crocband Runner. Within Mellow, as we spoke about last quarter, we launched our recovery clog, which brings Crocs innovation to the recovery category.

Lastly, we expanded the Echo franchise with the launch of Echo 2.0, which delivers strong international performance and broadens our brand's reach to a more athletic, sport-inspired consumer. Collectively, the momentum in these clog iterations illustrates how the consumer is increasingly embracing a broader range of clog silhouettes beyond our iconic Classic Clog franchise. Within our Classic Clog, we remain focused on strengthening and protecting the long-term health of our icon. We continue to invest in compelling brand storytelling, innovation, personalization, and partnerships to drive relevance and keep the Classic Clog at the center of the Crocs ecosystem. Within our kids business, we had strong Classic Clog momentum during the back-to-school season, and will build on this assortment going forward. Next, our second strategic pillar focuses on scaling outside of clogs through category expansion. We have made tremendous progress against our broader diversification strategy, starting with our sandals category.

The sandals market represents an estimated $30 billion global addressable market, where we have gained substantial market share, and to date, represent a leading player in this category. Our sandals business continues to grow double digits led by our Miami and Saturday franchises, where we attract new consumers, increase purchase frequency, and gain market share. Sandals represents a year-round business for us as we benefit from warmer weather extending beyond summer, and internationally, we are able to capture demand in counter-seasonal markets. This momentum reinforces our confidence that sandals continues to represent a significant multi-year growth opportunity for the Crocs brand. Next, within our lifestyle franchise, we have seen strong response globally to new innovations, starting with the Ballet Flat. Consumers' strong response to our Ballet Flat demonstrates our ability to capture relevant fashion trends while maintaining the iconic Crocs DNA.

Looking ahead, we are testing into lined versions of the Ballet Flat starting in Asia. As we mentioned earlier from a sports lens, we have introduced a closed heel version of our Mellow franchise, giving us another offering within the growing recovery and lifestyle space. As we head into the fourth quarter and key holiday selling season, we believe we are well-positioned to capture demand across a broader range of wearing occasions led by our slippers and lined clogs. More specifically, we are building our Unfurgettable franchise after a successful test season last year, introducing new products such as a platform, the Chalet, and the Après Clog. Another key focus of our product diversification strategy is personalization, which is one of our most powerful drivers of consumer engagement and a key differentiator.

For many of our consumers, purchasing Crocs shoes is not a one-time transaction, but the beginning of an ongoing journey of personalization and self-expression. As leaders within the personalization space, we are committed to finding new ways for consumers to express themselves. Following the strong response to our sandal charms test we shared in Q2, we are accelerating plans to expand that offering in 2027. To gain further insights into consumers' personalization journey, we opened a new test and learn store, Crocs by You, in Wuhan, China, that is a destination centered around personalization, where we can see firsthand how consumer loyalty and engagement around personalization can evolve. Next, our third pillar for the Crocs brand focuses on fueling consumer engagement through disruptive social and digital marketing. This quarter, our partnerships business continued to reach a wide range of consumer demographics. Key partnerships in the quarter included Dinoco Cars, Yu-Gi-Oh!, and Pendleton.

First, our Dinoco Cars program, which celebrated the 20th anniversary of the Cars franchise, featured our Crocband, as well as a Dinoco Cars collectible. The launch of this partnership was initiated at Disney's D23, which drove significant fan engagement. Dinoco Cars was a top-selling global partnership for our business, based on a long history of success with the Cars franchise. Next, we partnered with Yu-Gi-Oh!, a Japanese multimedia franchise centered on a popular trading card game and anime series, which unlocked broad fan engagement. The partnership was led by iterations on our Classic Clog, paired with an exclusive trading card. Third, we launched a limited edition collaboration with the iconic brand Pendleton. Blending Crocs comfort proposition with vibrant wool colors from Pendleton's Woolen Mills, this collaboration sold out quickly across both our channels as well as Pendleton's, and more importantly, haloed demand on our new Crafted Clog franchise.