Crocs CEO defends $2.5 billion Hey Dude acquisition as shares tumble

Crocs CEO defends $2.5 billion Hey Dude acquisition as shares tumble

Some buyers usually are not seeing the attraction of Crocs’ multibillion-dollar deal to purchase the informal shoemaker Hey Dude.

However Crocs CEO Andrew Rees argues the acquisition might result in strong gross sales progress, particularly within the U.S. Northeast and coastal city areas.

Crocs can be hoping to increase its portfolio of footwear past the rubber clogs that it is best identified for whereas nonetheless tapping into consolation traits, he mentioned.

On Thursday morning, the retailer announced plans to accumulate the privately held footwear label Hey Dude for $2.5 billion in a cash-and-stock deal. The transaction is anticipated to shut within the first quarter of subsequent 12 months and instantly add to income and earnings progress, the corporate mentioned.

However Crocs shares tumbled 12% on Thursday — its worst displaying since April 2020 — as buyers fretted over the information.

“We predict an effective way to diversify and supply slightly bit extra safety to our buyers is to not diversify away from the long-lasting clog inside Crocs, however so as to add one other model, which has its personal icon,” mentioned Rees, in an interview on CNBC’s “Energy Lunch.” “And that gives, we predict, an amazing diversification and a extremely compelling motive for us to accumulate this model.”

“We predict [Hey Dude] has much more potential, each right here within the U.S. and in addition globally,” he added.

Based in Italy in 2008, Hey Dude does greater than 40% of its enterprise on-line and is anticipated to usher in roughly $570 million in income this 12 months, Crocs mentioned. Gross sales are forecast to be between $700 and $750 million in 2022, in accordance with Rees.

In a analysis word, Piper Sandler referred to as Hey Dude “considered one of fastest-rising manufacturers” it has been monitoring as a part of its biannual “Taking Inventory With Teenagers” survey. It ranked No. 8 in its fall survey, up from No. 17 in 2020 and No. 54 two years in the past.

Piper Sandler additionally mentioned Crocs’ share-price drop does not sq. with the acquisition information. “We consider issues are that buyers are unfamiliar with the model, apprehensive in regards to the sustainability of progress and administration did not reiterate steering,” it mentioned.

Crocs shares have loved a large run-up in 2021, rallying roughly 93% 12 months up to now. Market capitalization is about $7.2 billion.

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