Crocs CEO defends acquisition of Hey Dude for $ 2.5 billion as shares fall
Some investors do not see the appeal of Crocs’ multi-billion deal to buy the casual shoemaker Hey Dude.
But Crocs chief Andrew Rees said the retailer sees the chance to expand the Hey Dude brand to new geographies – along the coast of the United States and across the north. Crocs also hopes to expand its portfolio of shoes beyond the rubber clogs it is best known for, while still taking part in comfort trends, he said.
On Thursday morning, the retailer announced its plans to buy the privately owned footwear brand Hey Dude for $ 2.5 billion, in a cash-and-stock deal. The transaction is expected to end in the first quarter of next year and immediately increase revenue and revenue growth, it says.
But Crocs shares fell around 1[ads1]3% on Thursday afternoon, in line with their worst trading day since April 2020, when investors worried about the news.
“We believe that a great way to diversify and give a little more security to our investors is not to diversify away from the iconic clog in Crocs, but to add another brand, which has its own icon,” Ress said in an interview on CNBC’s “Power Lunch.” “And that gives us, we think, a huge diversification and a really compelling reason for us to buy this brand.”
“We think it has far more potential, both here in the US and globally,” he added of Hey Dude.
Founded in Italy in 2008, Hey Dude makes up more than 40% of its online business and is expected to bring in approximately $ 570 million in revenue by 2021, Crocs said. The brand’s sales are predicted to be between $ 700 and $ 750 million in 2022, according to Ress.
In a research note sent to customers, Piper Sandler called Hey Dude “one of the fastest growing brands” it has tracked as part of the biannual “Taking Stock With Teens” survey. Hey Dude was the No. 8 favorite brand in his survey this past fall compared to No. 17 last year and No. 54 two years ago, it was said.
Piper Sandler also said that the Crocs shares were incorrectly priced after the announcement. “We believe the concerns are that investors are unfamiliar with the brand, concerned about the sustainability of growth and that management did not repeat the guidance,” it said.
Crocs shares have had a massive rise in 2021, and have risen by about 93% so far this year. The company’s market value is around $ 7.2 billion.
