Crocs, Inc. (CROX) Earnings Call Transcript & Summary

Good day, and welcome to the Crocs Third Quarter 2026 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Elizabeth Bouquard Pizzi, Vice President and Investor Relations. Please go ahead.

Good morning, and thank you for joining us to discuss Crocs Inc.'s third quarter 2026 results. With me today are Andrew Rees, Chief Executive Officer; and Patraic Reagan, Executive Vice President and Chief Financial Officer. Following their prepared remarks, we will open the call for your questions, which we ask that you limit to one per caller. Before we begin, I would like to remind you that some of the information provided on this call is forward-looking and accordingly, is subject to the safe harbor provisions of the federal securities laws. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to differ materially. Please refer to our most recent annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics that we refer to as adjusted or non-GAAP are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. All revenue growth rates will be cited on a constant currency basis unless otherwise stated. At this time, I'll turn the call over to Andrew Reese, Crocs' Chief Executive Officer.

Thank you, Elizabeth, and good morning, everyone. Thank you for joining us today. Before I share our results for the third quarter, I'd like to welcome Elizabeth in her new role as Vice President of Investor Relations. We're excited to welcome her as part of our Crocs team. Now moving to our third quarter results. We delivered a strong quarter of growth across brands, channels and geographies. Both Crocs and HEYDUDE delivered growth driven by execution of our brand strategies, while expanding margins year-over-year through sustained operational discipline. This quarter marks an important inflection for the HEYDUDE brand with revenue growth of 6%, which is a direct result of our clear consumer focus and execution against our three-pillar growth strategy. The Crocs brand had a record third quarter, up 4%, driven by our international business, including growth in all of our Tier 1 international markets and continued momentum across our product diversification strategy. As we stated at the beginning of the year, returning to growth for both brands is a strategic goal we set out to achieve through our disciplined execution and laser focus on the consumer. As a result, we are raising our full year 2026 revenue guidance from up 1% to 2% to up approximately 3%. We remain confident in the long-term trajectory of both of our brands and are committed to executing against our strategic pillars to drive diversified growth. Additionally, we remain confident in our ability to generate significant free cash flow, which we continue to return to shareholders in the form of meaningful share repurchases and debt paydown. While Patraic will discuss our quarterly performance in more detail later, I will start by sharing several financial highlights and then review our progress by brand. During the third quarter, we delivered enterprise revenues of more than $1 billion, up 5% to prior year, driven by both of our brands, with Crocs up 4% and HEYDUDE up 6%. HEYDUDE returned to growth led by wholesale revenues up 14% and DTC revenues up slightly. Crocs Brand delivered a better-than-expected Q3, led by international revenue up double digits, including our international direct-to-consumer channel growing 24%. Another quarter of best-in-class profitability with adjusted operating margins expanding 150 basis points to reach 22.3%. Meaningful return of cash to shareholders with approximately 2 million shares repurchased for $250 million and debt paydown of $21 million. Importantly, over the last decade, we have taken our powerful value creation engine and return meaningful cash to shareholders with approximately $3 billion of share repurchases and 37% reduction in share count. We view this as a true differentiator versus our peers. Now let's move to performance by brand, starting with Crocs. This quarter was another great quarter for the Crocs brand, reflecting strong execution against our 5-pillar growth strategy. Direct-to-consumer revenues grew 8% versus prior year, led by our international business, while our diversification strategy continued to gain traction with consumers. We built on the momentum established in the first half of the year, driven by strong consumer response to our new product innovation, impactful partnerships and our differentiated digitally led approach to commerce and marketing. Turning to our 5-pillar growth strategy, starting with our first pillar, driving brand relevance globally as the clog market share leader. During the quarter, we broadened our relevance across fashion and sport through both new and existing franchises, enabling us to serve a broader range of wearing occasions. Growth in clog iterations such as the Crafted, Croc Bank, Melo and Echo franchises reinforces our conviction that innovation within clogs remains an important lever for future growth. Within Crafted, we saw further momentum as new materializations and seasonally relevant product resonated with consumers, including our vegan Sway Stitch clog. Crocband continues to gain momentum globally as we expanded our color options, ban innovations and broadened appeal across both male and female consumers with the addition of our Crocband runner. Within Melo, as we spoke about last quarter, we launched our Recovery clog, which brings Crocs innovation to the recovery category. Lastly, we expanded the Echo franchise with the launch of Echo 2.0, which delivered strong international performance and broadens our brand's reach to a more athletic sport-inspired consumer. Collectively, the momentum in these clog iterations illustrates how the consumer is increasingly embracing a broader range of clog silhouettes beyond our iconic classic franchise. Within our Classic Clog, we remain focused on strengthening and protecting the long-term health of our icon. We continue to invest in compelling brand storytelling, innovation, personalization and partnership to drive relevance and keep the classic clog at the center of the Crocs ecosystem. Within our kids business, we had strong classic clog momentum during the back-to-school season, and we'll build on this assortment going forward. Next, our second strategic pillar focuses on scaling outside of clogs through category expansion. We have made tremendous progress against our broader diversification strategy, starting with our sandals category. The sandals market represents an estimated $30 billion global addressable market, where we have gained substantial market share and today represent a leading player in this category. Our sandals business continues to grow double digits, led by our Miami and Saturday franchises, where we attract new consumers, increase purchase frequency and gain market share. Sandals represent a year-round business for us as we benefit from warmer weather extending beyond summer and internationally, we're able to capture demand in counter seasonal markets. This momentum reinforces our confidence that sandals continues to represent a significant multiyear growth opportunity for the Crocs brand. Next, within our lifestyle franchise, we have seen strong response globally to new innovations, starting with the Bally Flat. Consumers' strong response to our Ballet Flat demonstrates our ability to capture relevant fashion trends while maintaining the iconic Crocs DNA. Looking ahead, we're testing into line versions of the Ballet Flat study in Asia. As we mentioned earlier, from a sports lens, we have introduced a closed heal version of our Melo franchise, giving us another offering within the growing recovery and lifestyle space. As we head into the fourth quarter and key holiday selling season, we believe we are well positioned to capture demand across a broader range of wearing occasions led by our slippers and line clogs. More specifically, we're building our unforgettable franchise after a successful test season last year, introducing new products such as the platform, the Chalet and the outbreak clog. Another key focus of our product diversification strategy is personalization, which is one of our most powerful drivers of consumer engagement and a key differentiator. For many of our consumers, purchasing Crocs shoes is not a onetime transaction, but the beginning of an ongoing journey of personalization and self-expression. As leaders within the personalization space, we're committed to finding new ways for consumers to express themselves. Following the strong response to our sandal Charms test we shared in Q2, we're accelerating plans to expand that offering in 2027. To gain further insights into consumers' personalization journey, we opened a new test and learn store, Crocs by You, in Wuhan, China that is a destination centered around personalization, where we can see firsthand how consumer loyalty and engagement around personalization can evolve. Next, our third pillar for the Crocs brand focuses on fueling consumer engagement through disruptive social and digital marketing. This quarter, our partnerships business continued to reach a wide range of consumer demographics. Key partnerships in the quarter included Dinoco Cars, UGO and Pendleton. First, our Dinoco Cars program, which celebrated the 20th anniversary of the Cars franchise, featured our Croc band as well as the Dinoco Cars collectible. The launch of this partnership was initiated at Disney's D23, which drove significant fan engagement. Dinoco Cars was a top-selling global partnership for our business based on a long history of success with the Cars franchise. Next, we partnered with Yu-Gi-Oh!, a Japanese multimedia franchise centered on a popular trading card game and anime series, which unlock broad fan engagement. The partnership was led by iterations on our classic clog paired with an exclusive trading tar. And third, we launched a limited edition collaboration with the iconic brand, Pendleton, blending Crocs comfort proposition with vibrant wool colors from Pendleton's Willer Mills. This collaboration sold out quickly across both our channels as well as Pendleton's, and more importantly, halo demand on our new crafted clog franchise. Turning to our fourth pillar. We are creating compelling consumer experiences across channels. Social commerce remains one of our strongest competitive advantages and is a meaningful growth driver across regions. Our performance in North America across key partners in the space continues to outperform our expectations, building our leadership position and our ability to integrate content, creators and commerce in a differentiated way. Internationally, momentum also remains strong with Asia and Europe delivered strong upside during our key shopping events. Notably, this quarter, we maintained our #1 footwear brand ranking on TikTok Shop in the U.S., U.K., Japan and most recently, Malaysia. During the quarter, we furthered our testing of AI-enabled shopping experiences across platforms. While early days for Argentic shopping, we see it as critical to be actively involved with all major platforms. We have also leaned into the emergence of AI-powered shopping agents and launched Rivet, Crocs' proprietary AI-powered shopping agent on our own website to help consumers discover and evaluate products. We're further experimenting and investing early with emerging shopping experiences, including third-party shopper agents to ensure Crocs is highly discoverable while gaining a deeper understanding of evolving consumer behavior. And finally, our fifth pillar for the Crocs brand focuses on gaining market share internationally. During the third quarter, we saw strong growth across all of our Tier 1 international markets. Starting with China, we launched a global marketing campaign around the Echo 2.0 collection, featuring Olympic table tennis gold medalist, Fang Dong, as our brand ambassador. This generated substantial traction in Asia, culminating 40 billion impressions, further accelerating brand awareness while highlighting the power of authentic ambassadors to engage core consumers. In India, growth was broad-based across both direct and wholesale channels as we capitalized on the virality of our -- Let Them Talk campaign with local cricketer and celebrity KL Raul, driving demand across both our mainline Echo product as well as our newly introduced Echo 2.0. As we look ahead, we remain confident in the significant international opportunity for the Crocs brand and our ability to leverage product innovation, personalization and digital leadership to continue to gain market share across key markets. Now turning to HEYDUDE. As we have communicated earlier this year, we expected HEYDUDE to return to growth in the second half of the year. I am pleased to report that we achieved this goal with revenues growing 6% this quarter compared to last year. Over the past year, we've consistently improved the trajectory of the HEYDUDE business, progressing from double-digit declines to now returning to growth. At the same time, we have reengineered our cost structure and built a stronger financial foundation through higher ASPs, better inventory management and a focused cost efficiencies across the organization. Compared to last year, gross margin increased 350 basis points, while SG&A decreased 9%. This performance reinforces our confidence that our 3-pillar growth strategy is working, and we believe that this positions HEYDUDE on a stronger financial foundation to unlock sustainable growth. Turning to our first strategic pillar for HEYDUDE. We are laser-focused on our core consumer. During the quarter, we saw clear signs of positive engagement of our core consumer. We launched a campaign hooked on HEYDUDE, which outperformed prior campaigns and drove meaningful consumer engagement with the brand. Another way we drove engagement during the quarter was through partnerships. During Q3, we launched 8 unique collaborations, each one selling out and in turn, reinforcing our ability to deliver culturally relevant product to targeted consumers. Starting with Burlebo, an innovative outdoor lifestyle brand, we built upon the success of our viral Q2 camo collaboration to launch an extended partnership featuring our American flag H2L. This brought Burlebo's distinctive outdoor aesthetic to one of our top silhouettes. Next, we partnered with Bucky's, iconic Southern travel destination known for its highly engaged and loyal following. This collaboration sold out in just 24 hours and brought Bucky's distinctive brand identity and passionate fan base to HEYDUDE in an authentic regionally relevant way. Collectively, these launches accelerated awareness, amplified consumer demand and further solidified our go-to-market partnership model. Next, our second pillar focuses on building the core and thoughtfully adding more. We remain focused on optimizing our core assortment while introducing new product innovation to drive growth and broaden consumer reach. Within our core collection, we are growing key iterations of our icons, the Wally and Wendy through our stretch socks and Jersey programs. Most notably, our branded Wally, which features elevated upper materials is growing nicely, while our H2O, the water-friendly slip-on evolution of the Wally continues to perform strongly. Beyond our core collection, our sandals business has outperformed our expectations as well as also diversifying our product offering. Going forward, we see sandals as a strategic growth driver for our business into 2027. Additionally, we have seen success in our work category through leading silhouettes, the Wally CE and the Bradley comp toe boot. For our core consumer, this category is a natural add-on, and we believe we can keep taking meaningful market share in the work segment. As we move into the fourth quarter, we're focused on our seasonal newness across our [indiscernible] collection. Our boots franchise has been led by our new Bradley II silhouette that gives the consumer an easy on and off boot at a compelling value. Our boots for our female consumer has also driven excitement led by the Remy. Both of the examples I have just shared were redesigned for comfort and durability, featuring lightweight construction and new tooling. And lastly, heading into the holiday, we're building on our success with seasonal products such as slippers. Moving to our third and last strategic pillar, we are focused on stabilizing the North America marketplace while planting seeds internationally. Our return to growth during the quarter, coupled with international momentum reflects the meaningful progress we've made against this strategic pillar. Our return to growth in North America was driven by wholesale, which grew 14%, reflecting our progress in building deeper wholesale relationships and driving increased order volumes as partners expand their commitment to our brand. At-once demand was stronger than anticipated as retailers reordered key products and sold through faster than expected. Within our direct-to-consumer business, we're focused on driving higher full price selling and seeing ETVs as well as conversion improve within our retail stores year-to-date. We're encouraged by the trajectory of HEYDUDE and the way the team is executing across our prioritized strategies. The work we did over the past 12 months to clean up the marketplace, focus on our core consumer and sharpen our marketing created short-term pressure, but is now translating into a broader-based growth opportunity. Building on the success of the quarter, we're excited about what lies ahead for HEYDUDE. In many ways, we're just getting started. To conclude my remarks, we remain focused on finishing the year strong by executing the strategies that drive diversified, sustainable growth across our brands, channels and geographies. These efforts are underpinned by consumer-led innovation, scalable global platforms and a disciplined financial model. We remain confident in the long-term trajectory of both brands and our ability to generate significant free cash flow and ultimately, shareholder value. I will now turn the call over to Patraic.

Thank you, Andrew, and good morning, everyone. We are very pleased with our third quarter performance, which reflects continued progress across both brands and disciplined execution against our strategic priorities. During the quarter, we delivered revenue growth at both Crocs and HEYDUDE brands with both brands exceeding our expectations. We also expanded adjusted operating margin by 150 basis points compared to last year as we recognized the benefit from our cost savings initiatives while maintaining disciplined promotional activity. Importantly, as Andrew discussed, the HEYDUDE brand returned to growth, while the Crocs brand delivered a record third quarter, supported by strong international results and momentum across an increasingly diversified product portfolio. Around the globe, we are playing to win each and every day, running our business with a mindset of ambition, decisiveness and agility. We are aggressively actioning our strategic priorities, which are focused on innovating on behalf of our consumers around the world, and we are making measurable progress. Now let's move to our results. For the third quarter, we delivered enterprise revenue of just over $1 billion, up 5%, with Crocs brand revenue increasing 4% and HEYDUDE brand revenue increasing 6%. Results were supported by continued strength in direct-to-consumer, particularly international DTC for the Crocs brand as well as better-than-expected wholesale performance at HEYDUDE. For the quarter, Crocs brand revenue was $873 million, up 4% year-over-year. International revenue increased approximately 12%, including growth in all of our Tier 1 markets. Our international performance was led by the direct-to-consumer channel, up 24%, which included broad-based growth across marketplaces, retail and our own dot-com. North America revenue declined approximately 2%, in part driven by the previously communicated impact of our business model shift from the direct-to-consumer to wholesale segment. This shift represents a 270 basis point headwind to the North America DTC channel, reflecting approximately 1 month of impact to the quarter as we began implementing. Excluding this business model shift, North America DTC is anticipated to be positive for the year. It is important to note that we are increasingly confident in the underlying health of our North America business across all channels and the steps we have taken this year to set the stage for return to growth as we look forward. As Andrew spoke to earlier, growth in the Crocs brand was driven by strong consumer response to our product diversification strategy. This included outperformance within sandals, new clog iterations such as crafted with new materials and seasonally relevant product resonating with consumers and new innovations, including the on-trend Bet flat. We have built a broad, diverse and durable portfolio of products, and we'll continue to innovate on behalf of the consumer. Moving to HEYDUDE. The HEYDUDE brand delivered revenue of $170 million, up 6% to prior year, exceeding our expectations and marking the brand's return to growth. This represents a significant milestone in the brand's turnaround journey, evidenced by sequential improvement from the trends over the last several quarters. By channel, wholesale was ahead of our expectations, up 14%, supported by higher at-once and replenishment orders. D2C was up slightly to prior year, driven by continued marketplace strength despite our planned pullback in promotions. Now I want to take a moment to highlight HEYDUDE's improvement in inventory composition and full price selling, both of which have improved significantly year-to-date. Throughout the year, we have been aggressively working to bring inventory levels in channel to be in line with sell-through, and we have made dramatic progress. Within DTC, we have pulled back on discounting across our own dot-com and marketplaces. Taken together, these are important indicators of the progress we are making to build a healthier, more profitable HEYDUDE business, giving us confidence in the sustainability of our long-term growth moving forward. Now moving to adjusted gross margins. Enterprise adjusted gross margin of 60.3% was up 180 basis points to prior year as we saw gross margin expansion across both Crocs and HEYDUDE brands, driven by disciplined execution of our cost savings initiatives and lower tariffs. We continue to benefit from the cost savings initiatives we implemented during 2025 with focus on supply chain efficiencies such as simplification of our distribution and negotiations with factories to drive lower product costs. Gross margin expansion was partially offset by planned product mix headwinds resulting from our diversification strategy. Notably, adjusted gross margin excludes $64 million of tariff refunds, which we received during the quarter. Please reference our non-GAAP gross profit and gross margin reconciliation bridge in our earnings press release for more information. Turning to Crocs brand. Adjusted gross margin was 63.4%, up 160 basis points to prior year, driven by lower tariffs, favorable channel mix and lower product costs, partially offset by product mix as we continue to execute on our diversification strategy. HEYDUDE brand adjusted gross margin was 45.8%, up 350 basis points to prior year, driven by lower tariffs, improved ASPs and product mix. Moving to expenses. Adjusted SG&A dollars were $397 million, up 6% to prior year, driven by choiceful DTC channel investments to support revenue growth, in part offset by the benefit from our cost savings initiatives. Adjusted operating margin of 22.3% was up 150 basis points to prior year. Adjusted diluted earnings per share of $3.69 was up 26% to prior year and ahead of our guidance of $3.20 to $3.30 per share. And finally, our non-GAAP effective tax rate was 17%. Now turning to a discussion of our strong balance sheet and exceptional cash flow. We ended the quarter with just over $163 million of cash and cash equivalents and approximately $890 million of borrowing capacity on our revolver. Our inventory balance as of September 30 was $413 million, up 4% to prior year. And notably, enterprise inventory turns were above our goal of 4x on an annualized basis. The power of our business model drives exceptional free cash flow, which provides us with significant flexibility in how we allocate capital and generate shareholder value. During the quarter, we repurchased approximately 2 million shares for $250 million, another proof point of our commitment to returning capital to shareholders. At the same time, we strengthened our balance sheet. During the quarter, we paid down an additional $21 million of debt and ended the quarter with net leverage at the low end of our target range of 1 to 1.5x. Now moving to the full year 2026 outlook versus prior year. We now expect enterprise revenues to grow approximately 3%, up from our prior guidance range of up 1% to 2%, assuming currency rates as of October '26. Moving on to revenue guidance by brand. For the Crocs brand, we now expect revenue to be up approximately 4% versus our previous guidance range of up 2% to 3%, led by international growth. We expect North America revenue to continue to improve versus prior year as we execute our return to growth strategy. Turning to HEYDUDE. We now expect revenue to be approximately flat, an improvement from our previous guidance range of down 2% to down 4%, which reflects our confidence in HEYDUDE's return to growth. We are also raising our bottom line expectations for adjusted diluted earnings per share to now be in the range of $14.45 to $14.65, up significantly from our previous guidance range of $13.70 to $14. Consistent with our previous guidance, this range does not assume any impact from future share repurchases. Moving to margin guidance. We continue to expect adjusted gross margin for the year to be up slightly versus last year, driven by our cost-saving efforts, primarily in our supply chain, offset in part by product mix. Adjusted SG&A dollars are implied slightly up to prior year, reflecting investments we are making into growth drivers for the enterprise, offset in part by benefits from our previously announced cost savings programs. Taken together, we are raising our expectations for adjusted operating margin to expand modestly from 22.5%. This excludes a non-GAAP net benefit of approximately $40 million associated with tariff refunds and our cost reduction initiatives. Our GAAP tax, non-GAAP tax as well as capital expenditure guidance are unchanged for the full year. Now turning to our fourth quarter outlook versus prior year. For the fourth quarter, we expect enterprise revenue to be up 7% to 9%. For the Crocs brand, we expect revenues to be up 6% to 8%. And for HEYDUDE, we expect revenues to be up 10% to 12%. As Andrew had mentioned, we are quite pleased with the growth trajectories for both of our brands. As a reminder, our year-over-year compares do include anniversary-ing prior year inventory cleanup actions taken in the North America marketplace. Adjusted operating margin is expected to be approximately 20.5%, which embeds adjusted gross margin up approximately 200 basis points to prior year. Finally, adjusted diluted earnings per share is planned to be in the range of $3.25 to $3.45. To close, we are pleased with our continued outperformance this year and the momentum we continue to see across the business. The results we delivered reflect the strength of our brands, broad-based consumer demand, focus on product innovation and disciplined execution by our teams around the world. As always, we remain focused on driving long-term profitable growth and generating and deploying our exceptional free cash flow to return value to shareholders. At this time, Andrew and I are happy to take your questions. Operator?

[Operator Instructions] Our first question comes from Jonathan Komp with Baird.

I want to start on Crocs North America. Could you maybe talk more about the underlying health you're seeing for the North America D2C business? And what you're expecting going into the fourth quarter for the underlying trend as well as the business model shift impact? And maybe just more broadly, how are you thinking about maintaining positive growth in D2C and really the path to North America growth overall for Crocs looking forward here?

Thanks, Jonathan. I'll start kick us off and then pass it over to to Patraic. So first, congratulations to your brewers. We're in their first ever World Series last night. So recognition of that. So Patrick will do the kind of numbers and get all of the business model shifts squared away so everybody clearly understands that, and I'll talk more broadly about the strength of the business.

Yes. So Jonathan, great question. And I know this has been a hot topic. So let me just kind of get context base for everyone on the call. So number one, for the business model shift, we announced this in Q3 on our last call. And what it's really focused on is -- and what we're focused on is the upside for us from a Crocs standpoint. Essentially, it's a more efficient, and it's a more profitable model. That does mean that there's less revenue in the DTC channel, more revenue in the wholesale channel. But overall, from a profitability standpoint and efficiency standpoint, we feel great about it. I do think it's exceptionally important to underline that there's no change to units in the market or market share. It's purely just a business model shift. So just a few of the numbers a little bit more specific, and we can be a little bit more specific now because we've got some time under our belt. So we effectuated the change during the quarter. So it was in effect partially through the quarter. And you can think about it roughly in effect for about roughly a month or so. Within the quarter, we had about 270 basis points of headwinds in the D2C channel. So to be clear, DTC would have been up roughly about 2% in North America, excluding the shift. So what does that mean then for Q4, Q1, Q2 until we anniversary the change in Q3 of next year? So what it roughly means from a modeling standpoint is that you can think of in the neighborhood of 700 to 800 basis points of headwinds for the D2C channel as we make our way through the next several quarters. And then as we get to a year from now, this will be in the base and will no longer be an item. So hopefully, that paints a little bit of a perspective from just what the numbers say. And Andrew can give a little bit more context on where we're going strategically and what we're excited about from North America.

Yes. Great. And I think, look, we acknowledge that everybody is super focused on this because they're really trying to get a sense of the strength of the Crocs brand in our critical and important North American market. Although I would highlight our international business is actually bigger than our North American business today. I would say, looking forward, we are increasingly confident in the underlying health of the Crocs brand in North America and its performance across all channels. So if you normalize for this business model shift, as Patrick said, we do see North America Crocs growing for the year. Really, the drivers of our confidence come from three critical areas. The first is just a strong pipeline of product innovation. I think in our prepared remarks, hopefully, we elucidated lots of different ways that we see new products performing strongly. We acknowledge there are some headwinds from a consumer perspective. But as we deliver innovation at incredible value, we see the consumers responding. Second layer is really go-to-market innovation. As we lean into social selling, we're seeing it as a very productive way to both sell products to consumers, but also engage consumers so that they shop in other channels. So leaning into social selling and innovating how we go to market. We see the next layer of innovation associated with go-to-market likely coming around Agentic shopping. And as we talked about again in our prepared remarks, we are actively engaged in working with all of the key platforms around social shopping. It's still incredibly small today, not social shopping. Agentic shopping, it's incredibly small today. And I just think it's a question of when it starts to accelerate because it will accelerate extremely rapidly. And really, the third thing, I just want to reiterate, our wholesale business is super important to us. We work very carefully and in great collaboration with all of our wholesale partners. It's important to be able to have that breadth of reach to reach what is a very democratic consumer base. So building those relationships and making sure we maintain strong relationships is very important to us. I hope that gets all of your question, Jonathan.

; Yes, that's really clear. And for the congrats. On the brewers, hopefully, you've stocked up on the Milwaukee Brewers Jibbitz online in terms of the units there. And that's great. And maybe if I could just one more on HEYDUDE. Given the stronger at-once and reorders you cited, how are you viewing the channel dynamics for there looking forward since the brand is back to growth here? And maybe more broadly, I mean, if we look back a few years, this is a brand that was generating over $900 million of revenue and over $200 million of profit at one point. So how are you thinking about kind of the broader context of where you are in the journey and what the potential might be here?

Yes. Thank you, Jonathan. So look, we're excited that HEYDUDE returned to growth this last quarter, up 6% for the quarter. Positive in both channels, but the strongest growth in the wholesale channel. I think the critical thing to kind of bear in mind from a wholesale channel perspective is we are up against a weak compare. We did do significant returns and significant work on wholesale inventories in Q3 and Q4 of last year. So we acknowledge that. But I would say, even without that, we're very encouraged by the health of our business, both on DTC and wholesale. So let me hit DTC quickly. I think from a DTC perspective, the growth was smaller, but we see tremendous health in that growth. We see high conversion rates, larger baskets and lower discounting, and you can see that coming through in greater profitability. And from a wholesale channel perspective, as we look at our inventories in the channel, we look at the performance of those inventories, we are outselling our inventory in the channel. So we're excited about the future for HEYDUDE. I would say, as we kind of think about Q3 and Q4 together, and we remove the cleanup that we did last year, we're looking at about a low single to mid-single sustainable growth rate for the brand, and we think that's where it will be in the short term. And longer term, to your kind of question around $900 million and $200 million of profit, we're very optimistic about the growth of this brand. It resonates extremely well with consumers. It gives the consumer incredible value. We see we have, I would say, penetration opportunities here within the United States. We still have pockets in the United States where the brand is much weaker than in its heartland, and we're actively working on penetrating those areas and have discrete initiatives in place to do that. And we really still have international in front of us. We have -- we're making, I would say, careful, cautious investments in our international growth, seeing some modest signs of success, but we will build and lean into international, and that provides a long runway for growth. And our experience from our Crocs brand does elucidate to us that, that could be very big.

The next question comes from Adrienne Yih with Barclays.

Congratulations on the inflections that we're seeing in the business. Andrew, I wanted to start kind of higher level. We're hearing a lot within the footwear realm of kind of leisure lifestyle, kind of the athletic shifting into this brown shoe. You're sort of epitomize both from the clogs and the boat shoe aspect of it. Wondering if you can tell us how you think that evolves over the next 1 to 3 years. It seems like it has some legs here, but you're actually building a foundational business in each of these businesses. So a little help on that front. And then number two, within international, can you give a little bit more color on the countries -- performance by country, and where you see the biggest opportunities there?

All right. Let me take your questions in reverse. So from an international perspective, incredibly important part of our business, as you're well aware, particularly for Crocs, nascent for HEYDUDE. So I think what we're really pleased about this quarter, and it's been consistently through the year, the international business is performing strongly. The biggest drivers of that growth are actually the big markets, right? So #1, China, #2, India and also Japan. And if I think about the rank ordering of footwear markets outside the U.S., it is essentially #2, China, #3, Japan. So we're really pleased that, that is driving our growth. It's been where we've been focused for a number of years and where we see a long runway of continued growth as we adapt our brand into those markets. We have programs around China for China, where we make our products specifically for the China market. There are programs where we adapt for the specific channels of distribution that are relevant in those markets. And importantly, also, the growth was DTC led with 24% growth in DTC in international for the Crocs brand. Coming back to your broader question around lifestyle and industry trends. I guess the way we think about it is actually a little bit different. I've done this for a long time and seen many of these trends come and go. And I think they are often quite exaggerated in terms of their impact. What we think about is how do we deliver value to our consumers, how do we bring new products, innovation that are trend right, how do we deliver go-to-market innovation to our consumers so that we can excite them and drive traction. And I think we've got a good formula there, right? As we look at HEYDUDE, they're up 14% in the quarter for the North American wholesale channel. A lot of that was really driven by two things. One was greater restock or greater at-once selling during the quarter because of sell-out. But I would also acknowledge probably there were a little bit weaker order base by some of our wholesale partners. So they saw selling ahead of what they planned for and restocked. So that was pleasing to see. And then from a Crocs perspective, it was really innovation that drove our success in the channel. It was the sandal season, which we talked about now a couple of quarters was particularly strong. And it was also clog innovation, right? It was diversifying our clog platform, not away from the classic to a broader set of clogs that have slightly different wearing occasions, crafted across [indiscernible], Echo, et cetera. So it's really product innovation. And I think as we look forward, it's just critical we maintain a very high cadence of innovation and a very astute and carefully listening to the consumer so that we can move in sync with them.

And the next question comes from Tom Nikic with Needham.

I want to follow up on some of the HEYDUDE questions. Where do you think HEYDUDE is right now from an awareness perspective? And I guess, what do you have to kind of do to kind of bring HEYDUDE into the limelight?

Yes. Great question, Tom. So as we look at HEYDUDE, I kind of alluded it to in my question -- in my answer to John's question. HEYDUDE is still what I would describe as a super regional brand in North America. Now we sell it nationally, but we see very distinct patterns, geographical patterns of higher awareness, higher brand relevance and higher conversion rates. We call it kind of the lower case H, right? So it comes down through the center of the United States down into Texas. It goes up through the Carolinas and down into Florida, right? That is HEYDUDE Heartland. And we see growing but weaker awareness on the -- in the Northeast. We definitely see awareness creeping up the Eastern Seaboard, and we see growing but weaker awareness on the West Coast. So we're very focused on building out those weaker areas. And what does it take? I think what it takes is time and money, right? So it takes Building brand awareness is not an immediate thing. It requires, I would say, creative programs. It requires creative approaches. It requires a bit of patience, and it requires sustained investment so that you can build that brand awareness. We've been doing that for some time, and we see progress on that, but it's not where we'd like it to be ultimately. And then you've got also the whole overseas component where we've been focusing mainly on Western Europe and mainly on the Mediterranean countries, where we see actually really nice traction for the brand, but we've got to build beyond that.

Understood. And if I could just follow up on the DTC side. So you built a bunch of stores, predominantly outlet stores in the last couple of years. Do you kind of feel like the footprint you have now is sort of appropriate for where the brand is? Or would you expect to kind of do more store build-out in the near term?

Yes. At this stage, we don't see a lot more store build-out. We like the portfolio that we have. It performs all the roles that we are looking for it to perform, which is some help in terms of building brand awareness and showing the consumers a broader range of HEYDUDE product than they would actually typically see in their local wholesale environment. And it also is an important cleanup and liquidation vehicle for aged or excess inventory. So we like that portfolio. We don't intend to significantly add to it over the next 12 to 24 months. We're mainly focused on building out our digital business and building out our wholesale business. We see that as a more cost-effective way to reach our intended consumer.