4. Crocs, Inc. (NASDAQ:CROX)
Number of Hedge Fund Shareholders: 30
Crocs, Inc. (NASDAQ:CROX) is the developer and distributor of a popular line of casual footwear products and accessories, which are sold in more than 90 countries worldwide.
Crocs has had a rough year on the market, losing 45% in 2022 as investors worry about the various headwinds facing the company while it also works to integrate HEYDUDE following its $2.5 billion acquisition of the casual footwear company. Crocs grew net sales by 14.3% year-over-year in Q2 and anticipates similar growth for 2022 as a whole.
Hedge funds sold off Crocs, Inc. (NASDAQ:CROX) in droves during Q1, as there was a net 32% drop in ownership of the stock, which fell to a two-year low. Ownership remained flat during Q2. Bernard Horn’s Polaris Capital Management and Steven Boyd’s Armistice Capital each sold off large stakes in CROX during the first quarter.
Money manager Choice Equities believes the market is being overly pessimistic on Crocs, Inc. (NASDAQ:CROX) future growth, laying out its thesis on the company in its Q2 2022 investor letter:
“Crocs, Inc. (NASDAQ:CROX) trades at 5x this year’s earnings and 6x EBITDA. Like many of its peers in the consumer space, the valuation implies the market regards the company as a one-time pandemic beneficiary, and business prospects offer little growth beyond this year. While it would be ill-advised to suggest the company did not benefit from the pandemic’s effects on consumer spending on goods, I think this view is incomplete and neglects to incorporate the tremendous success the management team has achieved since they arrived five years ago.
Most recall Croc’s original success as having come from pretty much out of the blue, as the funny-looking but comfortable clogs sent the stock on a meteoric rise shortly after its IPO in 2006. Many also conflate the stock chart with a fad-driven boom and bust cycle, even though a closer look at clog volumes actually shows fairly consistent growth over the last twenty years. Even so, the company was not without its problems, primarily from management missteps as an overburdened cost structure created profit headwinds.
Accordingly, when Andrew Rees became CEO in 2017, he had his work cut out for him. Initially, he focused his efforts on taking costs out and making the operation more efficient. He shrunk the store count by more than a third and began optimizing their go-to market strategy by emphasizing sales through the direct-to-consumer digital channel and through wholesaler channel partners. This enabled the company to devote greater resources to product innovation and marketing, a smart reallocation of corporate resources that offered great payoffs for the branded consumer products company…” (Click here to read the full text)
