Analysts Are Bullish on Crocs But Lukewarm on Hey Dude Ahead of Earnings This Week

Hey Dude currently projects revenues to decline between 10 and 8 percent for the full year.

Analysts are generally optimistic about Crocs Inc. ahead of its first second earnings report on Thursday, but many still expect its Hey Dude brand to stagnate.

In a Monday note to investors, Wedbush analyst Tom Nikic said he is bullish on the company and views its Q2 guidance as “extremely conservative.”

Last quarter, Crocs Inc. said it expects to see revenues grow between 1 and 3 percent over the prior year, with Crocs brand growth expected to be between 7 and 9 percent and Hey Dude sales expected to be down between 19 and 17 percent. Adjusted diluted earnings per share was projected to be in the range of $3.40 and $3.55.

“We believe the core Crocs brand continues to perform well,” Nikic said in his note. “We think Hey Dude continues to struggle, as much of the excitement around the brand seems to have died down, and some big wholesale partners seem to have meaningfully de-emphasized the brand.”

In November, Crocs unveiled a retail strategy for Hey Dude based off of the current one in place for the Crocs brand. This involves strengthening strategic wholesale partnerships in the family channel, sporting goods sector, mall-based specialty channel and larger regional chains. It also means exiting accounts with smaller and less essential wholesale partners. Results thus far have been slow to come, though some analysts say that recovery is more likely to happen in the second half of the year.

According to Stifel analyst Jim Duffy, Hey Dude sales will likely hit their deepest declines in Q2, but could be on the upswing after that. Looking forward, Duffy says he sees “sightlines to moderating declines” in the third quarter and even the chance for positive inflection in the fourth quarter.

“Grey market pressures at Amazon have improved and the channel is noticeably cleaner into late July,” Duffy wrote in a note last week. He also said he was “optimistic” about the recent hiring of Terence Reilly as Hey Dude president last month.

Baird analyst Jonathan Komp took a similar view and projected “sequential improvements in year-over-year performance for Q3 and Q4” for Hey Dude in a note last week. This view, he said, was “based on cycling prior-year pullbacks, greater DTC store contribution (now up to 33 locations) and international distributor sell-in ahead of 2025,” he said.

“With new brand president Terence Reilly likely to have greater impact on marketing and product after 2024, we think Hey Dude can again be viewed as a long-term growth driver,” Komp added.

Williams Trading analyst Sam Poser was a little more critical of Hey Dude’s growth potential and said he expects the brand to reduce its full year guidance, which currently projects revenues to decline between 10 and 8 percent for the full year.

“The expected second half of 2024 improvement of the Hey Dude business is expected to be driven by 30 new outlet stores, and improvement in wholesale order flow,” Poser wrote in a note to investors last week. “While the 30 stores will help, we do not anticipate an improvement in wholesale orders.”