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World NewsCrocs CEO defends $2.5 billion Hey Dude acquisition as shares tumble

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

Some traders usually are not seeing the enchantment of Crocs’ multibillion greenback deal to purchase the informal shoemaker Hey Dude.

But Crocs Chief Executive Andrew Rees mentioned the retailer sees the prospect to broaden the Hey Dude model to new geographies — alongside the coasts of the United States and all through the North. Crocs can be hoping to develop 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 its plans to accumulate the privately held footwear label Hey Dude for $2.5 billion, in a cash-and-stock deal. The transaction is predicted to shut within the first quarter of subsequent yr and instantly add to income and earnings development, it mentioned.

But Crocs shares tumbled about 13% by Thursday afternoon, on tempo for his or her worst buying and selling day since April 2020, as traders fretted over the information.

“We think a great way to diversify and provide a little bit more security to our investors is to not diversify away from the iconic clog within Crocs, but to add another brand, which has its own icon,” mentioned Ress, in an interview on CNBC’s “Power Lunch.” “And that provides, we think, a tremendous diversification and a really compelling reason for us to acquire this brand.”

“We think it has far more potential, both here in the U.S. and also globally,” he added about Hey Dude.

Founded in Italy in 2008, Hey Dude does greater than 40% of its enterprise on-line and is predicted to herald roughly $570 million in income in 2021, Crocs mentioned. The model’s gross sales are forecast to be between $700 and $750 million in 2022, in keeping with Ress.

In a analysis word despatched to shoppers, Piper Sandler referred to as Hey Dude “one of fastest rising brands” it has been monitoring as a part of its biannual “Taking Stock With Teens” survey. Hey Dude was the No. 8 favored model in its survey this previous fall in contrast with No. 17 final yr and No. 54 two years in the past, it mentioned.

Piper Sandler additionally mentioned that Crocs shares had been mispriced after the announcement. “We believe concerns are that investors are unfamiliar with the brand, worried about the sustainability of growth and management didn’t reiterate guidance,” it mentioned.

Crocs shares have had a large runup in 2021, rallying roughly 93% yr to this point. The firm’s market cap is about $7.2 billion.

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