Published on 18 Feb 2022 on Zacks via Yahoo Finance
Crocs' (CROX) HEYDUDE Acquisition to Boost Top & Bottom Lines
Shares of Crocs Inc. CROX rose 1% in the after-hours session on Feb 17, as the company completed its previously announced acquisition of HEYDUDE. The privately-owned HEYDUDE sells lightweight, casual shoes and sandals for men, women and children. With the acquisition, Crocs looks to add value to its fast-growing footwear business.This is the second high-growth, highly profitable brand added to the Crocs portfolio. Crocs believes that HEYDUDE’s consumer-insight-driven casual, comfortable and lightweight products perfectly fit its existing portfolio. The acquisition is likely to diversify Crocs’ brand portfolio and add to its digital penetration, as HEYDUDE already has a strong online presence.The acquisition is expected to be immediately accretive to Crocs’ revenues, operating margins and earnings. The company expects HEYDUDE to generate revenues of $700-$750 million, including the period prior to the closing of the acquisition. It expects HEYDUDE to deliver revenues of $620-$670 million on a reported basis, beginning Feb 17, 2022.HEYDUDE will operate as a stand-alone division. HEYDUDE’s founder and chief executive will continue to overlook the innovative product development of the brand designated as the strategic advisor and creative director.Crocs paid for the deal through $2.05 billion in cash and issued 2,852,280 shares to HEYDUDE’s founder and chief executive, Alessandro Rosano. Simultaneously, the company entered a $2-billion Term Loan B Facility, maturing in 2029. It raised its senior revolving credit facility commitments by $100 million to $600 million. It also borrowed $50 million under its existing senior revolving credit facility to fund the remaining consideration.
What’s More?
The Zacks Rank #1 (Strong Buy) company has been gaining from the increasing popularity of casual footwear as consumers switched from formal wear to more comfortable footwear.The company reported impressive performance in fourth-quarter 2021. Both top and bottom lines not only surpassed the Zacks Consensus Estimate but also improved year over year. Solid consumer demand, as well as broad-based growth across all markets, channels and categories, contributed to the quarterly results. Clogs, sandals and Jibbitz remained the key growth drivers.However, factory closures in Vietnam last year, along with continued extended transit times, are likely to have adverse impacts on supply and product introductions in the first half of 2022. As a result, Crocs’ shares declined 0.2% in the past year, although it fared better than the industry’s decline of 8.4%.