Shares of Crocs tumbled 18% after the comfy shoe maker posted disappointing profits, blaming its struggling loafer brand, HeyDude.
Crocs executives admitted during a Tuesday earnings call that its 2022 HeyDude acquisition is dinging its otherwise strong growth.
The Broomfield, Colo.-based company said overall 2024 sales will rise 3% compared with its previous estimate of 3% to 5% — crushed by a 14.5% sales decline of HeyDude merchandise.
By comparison, the Crocs brand is expected to grow by 8% this year, the company said.
Crocs’ overall sales in the third quarter, which includes the crucial back-to-school shopping period, rose 1.6% to $1.06 billion.
“HeyDude’s recent performance and the current operating environment are signaling it will take longer than we had initially planned for the brand to turn a corner,” Crocs chief executive Andrew Rees said on the call.
Crocs bought the 16-year-old Italian footwear company – known for its focus on comfort over style – for $2.05 billion.
“It has not gone as we would have hoped and expected,” Rees added.
Crocs hit its stride during the pandemic and rode a wave of celebrity endorsement including Justin Bieber and Post Malone.
But nearly from the start, HeyDude has been a disaster, exacerbated by a $1.9 million lawsuit by the Federal Trade Commission in August.
The agency said HeyDude “hid negative product reviews from its website,” and that some 36,000 customers were impacted by shipping delays or canceled orders.
HeyDude also “illegally” sent customers gift cards “instead of refunds for out-of-stock items,” and “didn’t tell customers about shipping delays,” the agency said in a statement.
“We were constantly out of stocking” Rees said on the call. “That was wrong.”
Meanwhile, the Crocs brand – a pandemic darling whose most famous customer previously was celebrity chef Mario Batali – is having its own troubles, according to a Bloomberg report.
Dozens of schools in at least 12 states have forbidden students from wearing Crocs to school, citing a growing number of trips and falls involving the clogs. Many students don’t use the safety strap behind the heel, which is partly to blame for the accidents, school officials say.
Other schools say the shoes are a distraction as students play with the collectible charms or throw their shoes at classmates, according to the report.
“Whenever someone mentions a foot injury, the first thing everyone says is, ‘I bet you they were wearing Crocs,’” Oswaldo Luciano, who has two kids and works as a school nurse in New York, told Bloomberg.
According to the school uniform policy at Lake City Elementary near Atlanta, Ga. “all students must wear closed toe shoes for safety (No Crocs),” while LaBelle Middle School of Florida implemented a “No Crocs” ban as part of its dress code for the current school year.
Anne Mehlman, president of the Crocs brand told Bloomberg that the company isn’t aware “of any substantiated data that bans have been increasing.”
