Footwear company Crocs (NASDAQ: CROX) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 3.4% year on year to $1.15 billion. On the other hand, next quarter’s revenue guidance of $956 million was less impressive, coming in 10.7% below analysts’ estimates. Its non-GAAP profit of $4.23 per share was 5.3% above analysts’ consensus estimates.

Is now the time to buy CROX? Find out in our full research report (it’s free).

StockStory’s Take

Crocs’ second quarter met Wall Street’s revenue expectations but was met with a significant negative market reaction as management highlighted caution around U.S. consumer spending and a challenging retail environment. CEO Andrew Rees detailed that while international growth and strong gross profit supported free cash flow, North American sales faced headwinds due to reduced discounting and softer consumer demand. Management took a notably cautious tone, emphasizing the need for “bold decisions” to protect long-term brand health and profitability. The shift away from promotional activity in direct channels and the clean-up of aged inventory for HEYDUDE were among the key actions impacting results.

Looking forward, Crocs’ guidance reflects a conservative approach, with management projecting continued headwinds from cautious U.S. consumers and wholesale partners reducing open-to-buy volumes. Rees stated that the second half outlook is “concerning,” and the company is focusing on inventory discipline and cost savings to navigate uncertainty. The company expects persistent margin pressure from tariffs and anticipates further sales declines, especially in North America, as it prioritizes brand health over near-term revenue. Management is not reinstating full-year guidance and noted that a weakening U.S. consumer backdrop and cost inflation would shape near-term performance.

Key Insights from Management’s Remarks

Management attributed Q2 performance to international expansion, new product traction, and strategic pullbacks in U.S. discounting, while highlighting cost-saving measures and actions to stabilize HEYDUDE.

• International business drives growth: The Crocs Brand achieved 16% growth outside North America, with China and India leading gains. Management credited digital marketing, partnerships with local celebrities, and expansion of mono-brand stores as effective tools for boosting engagement, particularly during key retail festivals in China.

• North America faces headwinds: U.S. sales declined as Crocs pulled back on promotions to support long-term brand value. Rees noted a “cautious” consumer and lower traffic, especially among lower-income shoppers, while acknowledging shelf space losses to athletic brands as these competitors re-embrace broader distribution strategies.

• HEYDUDE reset accelerates: The brand’s wholesale business remains challenged, with efforts focused on taking back aged inventory and reducing marketing spend to reset the channel. While direct-to-consumer sales for HEYDUDE grew, management emphasized the importance of refreshing product assortments and elevating the brand’s wholesale presentation.

• Cost-saving actions underway: The company has already realized $50 million in cost savings this year, with a focus on reducing SG&A and improving supply chain efficiency. Management is engaged in further efforts to simplify operations and cut incremental costs, especially in light of the current revenue outlook.

• Tariffs weigh on margin: Tariff-related costs are now embedded in inventory and are expected to reduce operating margins by roughly 170 basis points in the next quarter. Management is pursuing selective price increases, mainly in international markets and specific styles, but does not plan broad-based price hikes given the broad consumer base.

Drivers of Future Performance

Crocs’ outlook is shaped by persistent U.S. demand uncertainty, tariff headwinds, and a strategic focus on brand health over short-term sales gains.

• U.S. demand caution persists: Management cited ongoing cautiousness among U.S. consumers, particularly at lower price points, which is expected to continue depressing wholesale and outlet traffic. Rees emphasized that reduced promotions and lower order volumes will likely weigh on North American sales in the near term.

• Margin impact from tariffs and costs: Tariffs are set to remain a headwind, with management estimating about $90 million in annualized costs. The company’s cost-saving program will seek to mitigate some of these pressures, but adjusted operating margins are expected to decline as revenue softens and expense deleverage intensifies.

• Focus on inventory discipline and brand reset: The company plans to limit inventory receipts, especially for HEYDUDE, while prioritizing new product introductions and SKU refreshes to maintain shelf appeal. Adjusted marketing spend and selective price increases are expected to help balance brand health and profitability, but management is not expecting a quick rebound in U.S. consumer demand.

Catalysts in Upcoming Quarters

Looking ahead, our analysts will be focused on (1) the pace of international expansion, especially in China and India, (2) the effectiveness of Crocs’ pullback on promotions and the resulting impact on margins and U.S. market share, and (3) progress in HEYDUDE’s channel reset, including inventory clean-up and any improvement in wholesale sell-through. Additional signposts include management’s ability to offset tariff headwinds and drive cost efficiencies.

Crocs currently trades at $76.55, down from $105.23 just before the earnings. At this price, is it a buy or sell? See for yourself in our full research report (it’s free).

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