Crocs Inc Increase PT on Beat and Raise Report but Stay Neutral

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Crocs Inc Increase PT on Beat and Raise Report but Stay Neutral

Crocs Inc UBS Research

UBS Research THESIS MAP Thesisa guideMapto our thinking and what´s where in this report

Pivotal Questions Q: How much can the global footwear industry grow?

We expect it to rise at a 5% to 6% CAGR, highly skewed to sports footwear. Athleisure should

continue driving this category at a compelling 8% annual pace, underpinned by leading industry

players pushing for innovation and prevailing themes like casualization and healthy lifestyles. We

think the trend has extended to casual and comfort styles, likely benefiting Crocs.

Q: Will Crocs sales growth prevail post FY25?

Doubtful. We forecast +1% revenue growth over the next 5 years, in-line with a 0.8% annual growth

rate in the 5 years leading to the pandemic. We anticipate the Crocs brand's North America revenue

growth rate continues to steadily moderate. Revenues should benefit from: (1) investments in brand

awareness, new categories for the Crocs brand, and the HEYDUDE brand; (2) Crocs' own

eCommerce business gaining traction with consumers; and (3) increased wholesale channel

distribution via e-tailers.

Q: Can CROX maintain operating margins above 20% post FY24?

Unlikely. FY21 operating margins reached ~30%, well above 18.9% in FY20 and single-digits in the

years prior to the pandemic. We forecast CROX margins falling to ~18% by FY30E. We believe

CROX's EBIT margins will continue to normalize over the next several years as the brand’s top-line

growth slows in North America and stabilizes in the LSD% range. Plus, we anticipate the HEYDUDE

business will be dilutive to the company's EBIT margins.

UBS VIEW We rate CROX Neutral. We forecast a ~1% 5-year EPS CAGR (FY25-FY30E). Yet, the stock's current