While many brick-and-mortar stores were closed during the second quarter, Crocs saw record sales in e-commerce, as consumers migrated to online shopping during the pandemic.
Revenues for the three months ended on June 30 declined by 7.6 percent from the year-ago quarter to $331.5 million, or by 6.0 percent on a constant-currency basis. Overall, sales in Europe and Asia-Pacific were down but the company achieved revenue growth in the U.S., as well as in Korea, China, and Germany. Global e-commerce soared by 67.7 percent, with strong growth in all regions.
The virus has impacted the business globally, including through store closures or reduced operating hours and decreased retail traffic. Many of the 360 company-operated stores, as well as many partner stores and wholesale customers’ stores were shuttered at some point during the quarter. However, as of June 30, 2020, 98 percent were open.
The management took several defensive measures in response to the outbreak, which it said started to show results, as evidenced by the second quarter performance. Selling, general and administrative expenses were $123.3 million this quarter, down from $141.5 million in the second quarter of 2019, as Crocs slashed expenses during the pandemic. The group reduced compensation for senior management and furloughed retail employees, but has retained store managers and assistant store managers, albeit with reduced hours in North America. The company’s owned distribution centers globally remained operational. In the U.S., its distribution center qualified as an “essential business” and is being used to distribute and supply companies with essential products for healthcare workers.
The gross margin improved by 1.5 percentage points to 54.3 percent, due to product mix, higher prices on certain products, and lower levels of promotions and discounts. The operating margin rose by 3.8 percentage points to 17.1 percent, and net income jumped by 44.3 percent to $56.5 million.
Wholesale revenues decreased by 19.5 percent to $144.8 million, while retail sales dropped by 41.8 percent to $60.2 million due to store closures, with an increase on a comparable store basis of 10.5 percent upon reopening.
By region, the Americas rose by 0.7 percent to $171.6 million, with store comparable sales jumping by 18.2 percent.
In Asia, revenues tumbled by 18.7 percent in constant currencies to $93.6 million, due to store closures. The group recorded in the region a growth of 22.7 percent in direct-to-consumer (DTC) sales, including e-commerce, and a gain of 8.5 percent in comparable retail store sales.
In Europe, the Middle East and Africa, sales were down by 1.8 percent to $66.4 million in constant currencies. Comparable retail stores sales fell by 14.0 percent. However, the group saw robust online sales, with DTC comparable sales growing by 40.6 percent. They represented 63.4 percent of revenues compared with 40.3 percent for the same period in 2019.
Crocs closed 12 stores and opened 5 during the quarter. The number of stores in the EMEA region was down to 53 from 55.
For the remainder of the year, the company expects revenues to be approximately flat compared to the back-half of 2019.