We recently compiled a list of the 10 Footwear Apparel Stocks Affected By China Tariffs. In this article, we are going to take a look at where Crocs Inc. (NASDAQ:CROX) stands against the other footwear apparel stocks.
Donald Trump’s sweeping tariffs on China, Mexico, and Canada have caused a lot of footwear and apparel stocks to crash. Even though the President paused tariffs on Canadian and Mexican goods for a month, the 10% tariffs on China are still in place.
Fashion brands provide an interesting investment opportunity. Due to their loyal following, they have the ability to raise prices to take care of tariffs. In a similar way, these brands have become quite agile in diversifying their supply chain since the pandemic, so sourcing products from outside China is also a possibility for many. More than these brands, it is the retailers that will get hurt as their value proposition to their customers may get hurt when brands raise prices. However, these retail stocks are not a part of our discussion for now.
In order to come up with our list of 10 stocks affected by Trump’s tariffs on China, we only considered stocks with a market cap of at least $1 billion and a product sourcing mix exposure to China of at least 5%.
A busy retail store full of customers trying on a wide range of footwear.
Crocs Inc. (NASDAQ:CROX)
Crocs Inc. is a casual lifestyle accessories and footwear developer, manufacturer, designer, marketer, and seller under HEYDUDE and Crocs brands. It offers a variety of footwear products including slides, boots, sandals, sneakers, clogs, flip-flops, and other products. The company sells its products through e-commerce sites, store-in-store locations, wholesalers, third-party marketplace, and retail stores. The company sources 28% of its products from China.
CROX is down nearly 30% since reporting its Q3 earnings. Even though the company beat estimates on both revenue and EPS, it was the Q4 guidance that rattled investors. The lowered guidance by as much as 17% was mainly due to weakness in the HEYDUDE brand. Turning this brand around will take some time so weakness is expected. However, in the long run, there’s reason to believe management will handle the situation.
Crocs did a great job of handling the changing consumer tastes and trends during times of high inflation and back-to-office campaigns. Based on that evidence, investors should back the company to turn around HEYDUDE as well.
But if you’re a numbers guy, the growth story is in the international market. CROCS sales in the US have slowed down since 2022. During this time, its international growth has outpaced the local growth. It makes perfect sense for the company to explore other markets while it is facing pressures at home. If the international audience takes a liking to the company’s footwear, the growth potential is massive. It would be understandable though if investors want to wait for more evidence of international success before taking a position in the stock.
Overall CROX ranks 3rd on our list of the footwear apparel stocks affected by China tariffs. While we acknowledge the potential of CROX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as CROX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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