MW 'Almost everybody' in the U.S. has a pair of clogs. BofA analysts say there's still a lot to like about Crocs.

By Bill Peters

'We think Western Europe, China and India will continue to be the key growth drivers' for Crocs, the analysts said

Shares of Crocs Inc. are down more than 30% over the past 12 months, with its U.S. consumers and retailers continuingly worried about inflation and tariffs. During a conference this month, the clog and sandal maker's chief executive said "almost everybody" in the U.S. already had a pair of clogs, and that the category was "well penetrated."

But BofA analysts, in a note on Monday, said there is still a lot to like about the company - including opportunities for bigger growth internationally and within its own stores and e-commerce network. And they noted that greater caution among the U.S. retailers who sell Crocs was already was priced into the company's shares $(CROX)$.

"We think Western Europe, China and India will continue to be the key growth drivers, as Crocs has less than 2% market share in all three markets (besides U.K. in Western Europe)," the BofA analysts wrote. "In India, we think a growing middle class and an improvement in the supply situation should now allow Crocs to meet demand."

A marketing campaign that leans heavily on K-drama and Bollywood was also helping those efforts, they said. China is Crocs's fastest-growing market, they added, representing 6% of the company's total brand sales.

Management, the analysts said, "continues to remain confident for continued growth in the Chinese market despite the macro volatility." They cited "accessible" prices, the ability for shoppers to customize their footwear with Crocs's Jibbitz shoe charms, and a "digital-first approach" to attracting customers.

The BofA analysts kept their buy rating on the stock; however, they cut their price target to $135 from $140. Shares of Crocs were down 1.5% on Monday.

The BofA analysts also cut their full-year demand forecasts for Crocs's namesake line and its Heydude shoes, at least within the retail chains in North America that sell them. But they said they still expect "modest" growth in North America for those brands within Crocs's direct-to-consumer segment, noting that growth would be "more indicative of brand health." Crocs acquired Heydude in 2022.

Crocs's management, the analysts wrote, "has made it clear that they would rather miss sales and have clean inventory to help preserve margins" - a move they interpreted as a response to a weaker retail backdrop.

Retailers have largely stayed cautious on their financial outlooks, BofA said. In May, Crocs itself withdrew the full-year outlook it offered in February, citing "macroeconomic uncertainties stemming from global trade policies." Hibbett Sports, Famous Footwear and Dick's Sporting Goods Inc. $(DKS)$ were among the biggest sellers of Crocs, the analysts noted.

The BofA analysts said that the U.S.'s current 10% baseline tariffs on all imports, along with 55% tariffs on goods from China, was "manageable" for Crocs. But Vietnam is Crocs's most important supplier, they said, accounting for 47% of the company's production this year.

Crocs CEO Andrew Rees said at a conference this month that within the U.S., the clogs market had become saturated and that he didn't expect a lot of growth from it.

"Almost everybody has a pair," Rees said. "Everybody's kids have a pair. They have multiple pairs, and we think that's well penetrated."

But he added that the situation was different internationally.

"The clog, and particularly the classic clog, which is the iconic product that you can all just envisage in your minds, still has a lot of penetration opportunity in many very large international markets - including China, including India, including Southeast Asia," Rees said. "And I think if you add up those markets, you're talking about 3 billion people, so a huge market.

"Sandals, which is a category we've focused on for some time now, is actually showing really strong performance," he continued. "We talked about it at Q1 earnings. I think we're having a really great sandal season both here in the U.S. and really strong performance overseas."

-Bill Peters

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June 30, 2025 13:08 ET (17:08 GMT)

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