Q1 2024 Crocs Inc Earnings Call
[music].
Erinn Elisabeth Murphy: Good day, and welcome to the Crocs Inc. first quarter earnings call. All participants are in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Erinn Murphy, Vice President of Investor Relations and Strategy. Please go ahead.
Good day and welcome to the Crocs, Inc. First quarter earnings call. All participants are in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an.
A D to ask questions to ask a question you May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please.
Please note. This event is being recorded I would now like to turn the conference over to Erin Murphy, Vice President of Investor Relations and strategy. Please go ahead.
Erinn Elisabeth Murphy: Good morning, and thank you for joining us to discuss Crocs Inc.'s first quarter results. With me today are Andrew Rees, Chief Executive Officer, and Anne Mehlman, Executive Vice President, Crocs Brand President, and Chief Financial Officer.
Erinn Elisabeth Murphy: Good morning, and thank you for joining us to discuss Crocs, Inc. First quarter results with me today are Andrew Rees, Chief Executive Officer, and Anne Mehlman Executive Vice President Crocs brand, 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.
Erinn Elisabeth Murphy: 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 on this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding our strategy, plans, objectives, expectations, and intentions, including our financial outlook.
Erinn Elisabeth Murphy: 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 quarterly report on Form 10-Q and other reports filed with the SEC for more information on these risks and uncertainties. Certain financial metrics, which 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 Rees, Crocs Inc.'s Chief Executive Officer.
Erinn Elisabeth Murphy: Before we begin I would like to remind you that some of the information on this call is forward looking and accordingly is subject to the safe Harbor provisions of the federal Securities laws.
Erinn Elisabeth Murphy: These statements include but are not limited to statements regarding our strategy plan.
Erinn Elisabeth Murphy: Jack did expectations and intentions, including our financial outlook.
Erinn Elisabeth Murphy: 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 quarterly report on Form 10-Q.
Erinn Elisabeth Murphy: Other reports filed with the SEC for more information on these risks and uncertainties certain financial metrics as we refer to as adjusted or non-GAAP. Our non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in our press release, we issued earlier this morning, all revenue growth rates.
Erinn Elisabeth Murphy: Will be decided on a constant currency basis, unless otherwise stated at this time I'll turn the call over to Andrew Rees Crocs, Inc, Chief Executive Officer.
Andrew Rees: Thank you, Erin, and good morning everyone. Thank you for joining us today. We reported very strong first quarter results which well exceeded our guidance on both the top and bottom lines. Revenue grew by 7% compared to the prior year for the enterprise, led by outsized Crocs brand growth of 16%, and Heydude Brown also performed ahead of guidance. Adjusted gross modules of 56% improved by 180 basis points versus the prior year, and we grew our adjusted earnings per share by 16% to $3.02. Our growth strategy remains consistent, and we are focused on three primary initiatives from an enterprise perspective to fuel durable and consistent growth. 1.
Andrew Rees: Thank you Erin and good morning, everyone. Thank you for joining US today, we reported very strong first quarter results, which well exceeded our guidance on both the top and bottom line.
Andrew Rees: Revenue grew by 7% to prior year for the enterprise led by outsized cross border growth was 16%.
Erinn Elisabeth Murphy: Bryan also performed ahead of guidance.
Erinn Elisabeth Murphy: Adjusted gross margins of 56% improved 180 basis points versus prior year, and we grew our adjusted earnings per share by 16% to $3 <unk>.
Erinn Elisabeth Murphy: Our growth strategy remains consistent and we are focused on three primary initiatives from an enterprise perspective to fueled durable and consistent growth.
Andrew Rees: Ignite our icons across both brands to drive awareness and global relevance for new and existing consumers, to drive market share gains across our tier one markets through a strategic investment in talent, marketing, digital, and retail, and three, attract new consumers to our brands through methodically diversifying our product range and usage occasions. Before I discuss more detail on the quarter, I want to start by saying how pleased I am to announce the hiring of Susan Healey as Executive Vice President and Chief Financial Officer.
Erinn Elisabeth Murphy: One ignite our icons across both brands to drive awareness and global relevance with new and existing consumers.
Erinn Elisabeth Murphy: To drive market share gains across our tier one markets through strategic investment behind talent marketing digital and retail.
Erinn Elisabeth Murphy: Three attract new consumers to our brands through methodically diversifying our product range and usage occasions.
Andrew Rees: Susan is a seasoned financial professional and a Wall Street veteran with broad exposure to the consumer sector, including Ulta Beauty, where she served as the SVP of finance for five years. Most recently, Susan served as the public company CFO for IAA, a global marketplace for automotive buyers and sellers.
Seasons Neely: Before I discuss more detail on the quarter I want to start by saying how pleased I am to announce the hiring of seasons Neely as executive Vice President and Chief Financial Officer.
Seasons Neely: Susan is a seasoned financial professional and wall Street veteran with broad exposure to the consumer sector, including Ulta beauty, where she served as SVP of finance with five yes.
Seasons Neely: Most recently Susan served as a public company CFO for IAA, a global marketplace for automotive buyers and sellers.
Andrew Rees: We have a deep finance bench, and I'm excited about Susan's leadership and expertise. I look forward to working with her and for the investment community to get to know her in the coming months. Starting with the Crocs brand, our socially-led, digital-first marketing playbook continues to win with consumers across the world, and the first quarter was no exception. In the US, we rank as a top 10 footwear brand in the Piper Sandler Spring Survey, taking stock with Teens, taking the number 7 spot, and maintaining our mindshare year over year.
Seasons Neely: We have a deep finance bench and I'm excited about his leadership and expertise.
Speaker Change: I look forward to working with her and for the investment community to get to Noah in coming months.
Speaker Change: Starting with the Crocs brand a socially led digital first marketing playbook continues to win with consumers across the world.
Speaker Change: And the first quarter was no exception.
Speaker Change: In the U S. We ranked as a top 10 footwear brand in the Piper Sandler.
Speaker Change: <unk> stuck with two spring survey, taking the number seven spot and maintaining a mindshare year over year.
Andrew Rees: This marks over four years of being a top 10 brand for the U.S. teen consumer. The democratic nature of our brand allows us to create a broad array of consumer moments that drive brand affinity and engagement through our partnership model. During the quarter, our success will range from Toy Story and Hello Kitty to Klott, a Chinese streetwear brand. Our Toy Story collection was one of the most successful licensing partnerships to date, with a global offering available across select wholesale partners and our own DTC. In addition, we launched our second collaboration with Simona Rocha, a luxury brand. A seven-style collection was priced between $175 and $225.
Speaker Change: This marks over four years of being a top 10 brand for the U S T consumer.
Speaker Change: The Democratic nature of our brand allows us to create a broad array of consumer moments.
Speaker Change: To drive brand affinity and engagement through a partnership model.
Speaker Change: During the quarter, our successful Brian from Toy story, and Hello, Kitty the clock, a Chinese street, what Brian.
Speaker Change: Our toy story collection was one of the most successful licensing partnerships to date.
Speaker Change: It was a global offering available across select wholesale partners and our own DTC.
Speaker Change: In addition, we launched our second collaboration with Simona, Russia luxury brand of seven style collection was price between $175 and $225.
Andrew Rees: It launched in 20 markets and sold out globally almost immediately. As we think about product, we continue to prioritize our three pillars, clogs, sandals, and personalization. Growth in our first quarter was led by our classic Clarks, and we are seeing both new and existing consumers come to the brand through our icons. Kids' business was another highlight, with double-digit growth in the quarter. We continue to create multi-product franchises that broaden users' opportunities for the consumer.
Speaker Change: Launched in 20 markets and sold out globally almost immediately.
Speaker Change: As we think about product we continue to prioritize our three pillars clogs sandals plus amortization.
Speaker Change: Growth in our first quarter was led by our classic clogs and we are seeing both new and existing consumers come to the brand through our icons.
Speaker Change: Kids business was another highlight with double digit growth in the quarter.
Speaker Change: We continue to create multi product franchises that broaden usage occasions for the consumer.
Andrew Rees: Building on the success of our ECHO franchise, we launched the ECHO Storm, a fully molded sneaker. This was launched in our DTC channels, as well as Foot Locker and JD Sports during the quarter and performed well. In fact, 59% of our Echostorm purchases on our own.com were new consumers. Just in time for NBA All-Star Weekend, we further expanded visibility of our Echo franchise through the Crocs NBA slide. And players like Nikola Jokic and Steph Curry were spotted wearing them.
Speaker Change: Building on the success of our eco franchise launching Iqos store are fully molded sneak.
Speaker Change: Since launching our DTC channels as well as foot locker and JD sports during the quarter and performed well.
Speaker Change: In fact, 59% of our Echostar <unk> purchases on our own dot com with new consumers.
Speaker Change: Just in time for NBA, All Star weekend, we further expanded visibility echo franchise. So.
Speaker Change: So the crux NBA slide and players like Nikola Yokich, Steph Curry with body wearing them.
Andrew Rees: Here in the first quarter, we rolled out two new saddle franchises, the 2.0 version of our classic slide and two strap and the Getaway. The Getaway leverages our newest proprietary material known as FreeFill technology. Within this franchise, we've seen positive momentum with the strappy and flip styles and have found that these resonate with a broad consumer set. For the year, we continue to expect sandals to grow in excess of our overall growth and increase in penetration.
Speaker Change: During the first quarter, we rolled out two new shuttle franchises. The 2.0 version of a classic slide into scrap on the getaway.
Speaker Change: The getaway Leverages, our newest proprietary material known as free fuel technology.
Speaker Change: Within this franchise with some positive momentum with distress and the flip styles.
Speaker Change: And have found that these resonate with a broad consumer segment.
Speaker Change: For the year, we continue to expect sandoz to grow in excess of our overall growth and increase in penetration.
Andrew Rees: A personalization vehicle, Gibbets, grew double digits in the quarter, led by growth in Asia. We continue to see ample white space for personalization, and our strategies focused around three pillars. Number one, driving higher penetration within digital and host; 2. Continuing to create photo-freshness through our elevated gibbets, including metallic, texture, and jewelry, and free speech marking.
Speaker Change: Our personalization vehicle Kibitz grew double digits in the quarter.
Speaker Change: Led by growth in Asia.
Speaker Change: Continue to see ample white space for personalization and our strategies focused around three pillars.
Speaker Change: Number one driving higher penetration within digital and wholesale.
Speaker Change: Two continuing to create product freshness to our elevated gigabits, including metallic next year I'm sure I'm pretty speed to market.
Andrew Rees: Moving on to distribution strategy, we are pleased by the broad-based strength across geography and, particularly, in several of our TAY markets. North America was well ahead of expectations and took meaningful market share during the quarter. North American revenues grew 9% versus the prior year, supported by underlying strength in wholesale sellout and better than expected trends in our DTC channel. International revenues grew 24% versus the prior year.
Speaker Change: Moving on to distribution strategy, we are pleased by the broad based strength across geography, and particularly in several of our tier one markets.
Speaker Change: The North American market was well ahead of expectations and took meaningful market share during the quarter.
Speaker Change: America revenues grew 9% versus the prior year supported by underlying strength in wholesale sellout and better than expected trends in our DTC channels.
Andrew Rees: And once again, we saw triple-digit growth in China and Australia. Our direct markets in Western Europe grew double digits, driven by growth in the UK, France, and Germany. We continue to have significant opportunities in China and will remain bullish on the long-term growth prospect. During the quarter, we won our first ever Super Brand Day on Tmall and announced our two new brand ambassadors for 2024. Lo Hsiu-Hsien and Jun Kai Wang
Speaker Change: International grew 24% versus prior year and once again, we saw triple digit growth in China and Australia.
Speaker Change: Our direct markets in Western Europe grew double digits led by growth in the U K, France and Germany.
Speaker Change: We continue to have significant opportunity in China, and we remain bullish on our long term growth prospects.
Speaker Change: During the quarter, we won our first Super brand day on Tmall and announced our two new brand Ambassador So 2020 full low.
Speaker Change: <unk> fusion and June Qairwan, Although shooshan announcement came ahead of international Women's day and features a classic T O clock.
Andrew Rees: Our Lo Hsiu-Hsien announcement came ahead of International Women's Day and featured a classic geoclub. This campaign had substantial reach and continued to create buzz with the Dongmen community. Junkai Wang played it into club relevance with a robust campaign on Super Brand Day, generating one million views during a one-hour livestream, and drove Crocs to the number one spot within the women's football category on T-Mobile.
Speaker Change: This campaign drove substantial substantial reach and continue to create buzz with the domain community.
Speaker Change: Q1 played into a clog relevance with a robust campaign on Super brand day, generating 1 million views during a one hour livestream and drove crux to the number one spot in the women's footwear category on Tmall.
Speaker Change: Our corporate responsibility efforts continued to progress well.
Andrew Rees: We're expanding our All Crocs New Life Consumer Take Back program to all Crocs stores in the U.S. This fall, we're furthering our circularity commitment by repurposing materials from well-loved Crocs in the form of a new limited-edition classic clock.
Speaker Change: We're expanding our all cross new life can seem to take that program to old crop scores in the U S.
Speaker Change: This fall, we're furthering our celerity commitment are repurposing materials from well loved crocs into a form of a new limited edition classic clog.
Andrew Rees: As it relates to the Hayfield brand, our focus for 2024 is on solidifying the business and establishing Wally & Wendy as iconic franchises for the consumer. We have worked to maintain price integrity on digital, improve channel inventories, and create more segmentation across wholesale partners. Our overall first quarter performance largely played out as we expected, with strength in March driving a slight upside to our guided revenue range. That said, performance around Easter and into April has fallen short of expectations, with sellout rates softening in wholesale.
Speaker Change: As it relates to the hatred Bryan I'll focus for 'twenty 'twenty four is on solidifying the business and establishing the wallet Wendy as iconic franchises for the consumer.
Speaker Change: We have worked to maintain price integrity on digital improved channel inventories and create more segmentation across wholesale partners.
Speaker Change: Our overall first quarter performance largely played out as we expected we strengthened march driving slight upside to our guided revenue range.
Speaker Change: That said performance around Easter and into April as falling short of expectations when sellout rates softening in wholesale.
Andrew Rees: Based on the visibility we have quarter to date, and given the choppy retail environment, we're taking a more prudent approach around trends for the balance of the year. As we have discussed, our focus is on making sure that the end of the year with sell-in and sell-out trends converging, and we have better segmented inventory in the challenge. Before I discuss a few T1 highlights, I'd like to touch on our recent leadership announcement
Speaker Change: Based on the visibility we have quoted state and given the choppy retail environment.
Speaker Change: We're taking a more prudent approach around trends for the balance of the year as.
Speaker Change: As we have discussed our focus is on making sure.
Speaker Change: We ended the year with sell in and sell out trends converging and.
Speaker Change: And we have better segmented inventory in the channel.
Andrew Rees: Several weeks ago, we announced a new president for Hey Dude, who we see as a strong leader for the next phase of growth for the brand. We are thrilled to be welcoming back Terrence Riley to our Crocs Inc. family. Erinn started last week and brings with him a best-in-class reputation from brands including Stanley and Crocs. In addition to providing global leadership perspectives, he has a proven track record of creating and executing brand building playbooks by leveraging iconic products, driving brand relevance, and ultimately building communities. Now turning to the Q1 highlights.
Speaker Change: Before I discuss a few Q1 highlights I'd like to touch on our recent leadership announcements.
Speaker Change: Several weeks ago, we announced a new brand president for Hey, Dude.
Speaker Change: She is a strong leader for the next phase of growth for the brand.
Speaker Change: We're thrilled to be welcoming back parents Friday to a Crocs, Inc family.
Speaker Change: Kevin started last week and brings with him a best in class reputation from brands, including Stanley and Crocs.
Speaker Change: In addition to providing global leadership perspectives. He has a proven track record of creating and executing brand building playbooks by leveraging iconic products driving brand relevance and ultimately building communities.
Speaker Change: Now turning to Q1 highlights.
Andrew Rees: HeyDude was the number eight preferred footwear brand in the Piper Sandler Taking Stock with Teens survey this spring, consistent with its rank last year. From a product perspective, we continue to establish a Wendy and Wally icon through color, graphic, and height, which has proved successful during the quarter. In Q1, we expanded our collegiate program to five additional schools just in time for March Madness. We also launched The Big Lebowski, an online exclusive, the unique collaboration so impressive sellout with 80% of consumers new to brands.
Speaker Change: Hey, Dude was the number eight preferred footwear brand and the Piper Sandler taking stock with teens. So they just spring consistent with this rank last year.
Speaker Change: From a product perspective, we continue to establish a Wednesday and Wally icons through color graphic height, which has proved successful during the quarter.
Speaker Change: In Q1, we expanded our collegiate program to five of their fuel schools just in time for March Madness.
Speaker Change: We also launched the big Lebowski, an online exclusive the unique collaborations saw impressive sell out with 80% of consumers need to Brian.
Andrew Rees: Our sneaker franchise gained a new addition with the Hudson for him and the Hudson Lift for her. We chose to introduce the new silhouettes in our own DTC channels and with an exclusive wholesale partner. We saw the Hudson left quickly become a hit for our younger female consumers, who continue to choose height while maintaining a brand promise of lightweight comfort.
Speaker Change: Our sneaker franchise gain a new addition, with the Hudson for him on the Hudson Elisa.
Speaker Change: We chose to introduce new silhouettes in our own DTC channels and with an exclusive wholesale partner.
Speaker Change: We saw the Hudson less quickly become a hit for our younger female consumers.
Speaker Change: Who continue to choose height, while maintaining our brand promise of lightweight comfort.
Andrew Rees: From a distribution perspective, we opened six new outlets for the HADES brand. Overall performance is in line with our expectations, and we plan to open approximately 30 more outlets this year. On the wholesale side, we're pleased with the work we have done to clean up our account base. Our go-forward focus is around improved customer segmentation. Finally, we introduced the brand to the UK and Germany, supported by dedicated digital sites, as well as placement with key wholesale partners in both markets during Q1. These launches were supported by key influencers and media events.
Speaker Change: From a distribution perspective, we opened six new outlet locations, where the heyday brand.
Speaker Change: Well performance is in line with our expectations and we plan to open approximately 30 outlets a ship.
Speaker Change: On the wholesale side, we're pleased with the work we have done to clean up our account base. Our go forward focus is around improved customer segmentation.
Speaker Change: Finally, we will introduce the brand to the UK and Germany supported by dedicated digital sites.
Speaker Change: As well as placement with key wholesale partners in both markets during Q1. These.
Speaker Change: These launches were supported by key Influencer on media events.
Andrew Rees: While we're starting to see awareness of the brand internationally, our priority in 2024 is around improving the long-term health of the North American market as we build a core offering and drive growth for the brand. We have laid plans to continue to invest in marketing, talent, digital, and retail to further support our market share opportunity. While our near-term plans for Hey Dude are taking longer to play out, our record Q1 performance led by Crocs showcases the diversification of our portfolio and enabled us to raise our earnings per share outlook for the year.
Speaker Change: Well, we're starting to see the willingness of the brand internationally a priority in 2024 is around improving the long term health of the North American market.
Speaker Change: As we build our core offering and drive heat for the brand.
Speaker Change: We've laid plans to continue to invest behind marketing talent digital and retail to further support our market share opportunity.
Speaker Change: While our near term plans for Hey, Dude, that's taking longer to play out a record Q1's performance led by Crocs showcases the diversification of our portfolio and enabled us to raise our earnings per share outlook for the year.
Andrew Rees: We will continue to make offensive investments fueled by strong growth margins to set ourselves up for long-term growth and durable market share gains. I will now turn the call over to Anne to walk through our financials for the quarter.
Speaker Change: We will continue to make offensive investments fueled by strong gross margins to set ourselves up for long term growth and durable market share gains.
Speaker Change: I will now turn the call over to al to walk through our financials for the quarter.
Anne Mehlman: Thank you, Andrew, and good morning, everyone. I am extremely pleased with our first quarter results, which exceeded the high-end guidance across all metrics. We generated $939 million in consolidated revenues, growing almost 7% over last year, led by the Crocs brand. For the quarter, Adjusted Gross Margin gained 180 basis points to 56%, and Adjusted Operating Margin was 27.1%. Adjusted earnings per share of $3.02 came in well ahead of our guidance of $2.15 to $2.25. For the Crocs brand, revenues were $744 million, growing 16% relative to the prior year, driven by DTC growth of 19% and wholesale growth of 14%. Brand ASPs were up 11% to $23.36.
al: Thank you Andrew and good morning, everyone.
al: I'm extremely pleased with our first quarter results, which exceeded the high end of guidance across all metrics, we generated $939 million in consolidated revenues growing at almost 7% over last year led by the Crocs brand for.
Anne Mehlman: The brand sold 32 million pairs of shoes, an increase of 3% versus last year. By geography, North America revenues were ahead of our expectations in data market share, growing 9% versus the prior year to $383 million. Growth was led by GTC at 13%, and wholesale was up 5%, driven by strong double-digit growth in brick and mortar. During the quarter, our North American wholesale partners opted to take product earlier than we had previously anticipated, based on the strong sellout performance of the Crocs brand. International revenues of $361 million were up 24% from 2023, led by DTC growth of 37% and wholesale growth of 20%. As Andrew noted, Australia and China grew triple digits again this quarter.
al: For the quarter adjusted gross margin gained 180 basis points to 56% and adjusted operating margin was 27, 1%.
al: Adjusted earnings per share of $3. Two pence came in well ahead of our guidance of $2 15.
al: $2.25.
Speaker Change: So the crocs brand revenues were $744 million growing 16% relative to prior year, driven by DTC growth of 19% and wholesale growth of 14%.
Speaker Change: Brand Asps were up 11% to $23.36. The brand saw 32 million pairs of shoes, an increase of 3% versus last year.
Speaker Change: By geography, North America revenues were ahead of our expectations and gain market share growing 9% versus the prior year to $383 million.
Speaker Change: This was led by DTC at 13% and wholesale was up 5% driven by strong double digit growth in brick and mortar.
Speaker Change: During the quarter, our North American wholesale partners opting to take products earlier than we had previously anticipated based on the strong performance of the Crocs brand.
Speaker Change: International revenues about $361 million were up 24% from 2023 led by DTC growth of 37% and wholesale growth at 20%.
Speaker Change: Andrew noted, Australia, and China grew triple digits again this quarter, we saw strong double digit growth in our direct markets in western Europe with growth led by the UK, France and Germany.
Anne Mehlman: We saw strong double-digit growth in our direct markets in Western Europe, with growth led by the UK, France, and Germany. Turning to Hey Duke, revenues were $195 million, ahead of our guidance, but down 17% from last year. The brand sold 7 million pairs of shoes, a decrease of 21% from last year, as we lapped pipeline fill and focused on improving our full price selling. Paydue to average selling price was $27.68, up 5% from last year.
Speaker Change: Turning to Hey, Duke revenues were $195 million ahead of our guidance, but down 17% from last year. The brand sold 7 million pairs of shoes, a decrease of 21% from last year as we lacked pipeline fill and focused on improving our full price selling.
Speaker Change: Due to average selling price was $27 68 up.
Speaker Change: <unk>, 5% from last year realm.
Anne Mehlman: Relative to Q4, our Q1 Marketplace ASPs were up 10%, a continued tailwind from reduced price matching online. Wholesale revenues were down 20% from last year as we focused on continuing inventory management in the channel. The DTC channel was down 11% as a result of prioritizing brand health through higher ASPs.
Speaker Change: Relative to Q4 or Q1 marketplace Asp's were up 10% a continued tailwind from reduced price matching online.
Speaker Change: Wholesale revenues were down 20% from last year as we focused on continued inventory management in the channel. The D. T. C channel was down 11% as a result of prioritizing brand health through higher Asps.
Anne Mehlman: Consolidated Adjusted Gross Margin for the first quarter was 56%, up 180 basis points from last year. Crocs brand adjusted growth margin was 58.1%, or 180 basis points higher than last year. During the quarter, the primary drivers of margin expansion were lower inbound freight and favorable product costs, coupled with select price increases internationally and lower discounting. Hey dude brand adjusted growth margin came in at 47.8%, in line with our expectations, but 180 basis points below the prior year driven by investment in distribution and logistics, partially offset by reduced freight. Our first quarter adjusted SG&A dollars increased 16% compared to the prior year.
Speaker Change: Consolidated adjusted gross margin for the first quarter with 56% up 180 basis points from last year.
Speaker Change: Crocs brand adjusted gross margin was 58, 1% or 180 basis points higher than prior year during the quarter. The primary drivers of margin expansion were lower inbound freight and favorable product costs, coupled with select price increases internationally and lower discounting Haydu brand adjusted gross margin came in at 47, 8% in line with our <unk>.
Speaker Change: Expectations, but 180 basis points below prior year, driven by investment in distribution and logistics, partially offset by reduced freight.
Speaker Change: Our first quarter adjusted SG&A dollar increase 16% to prior year, our SG&A rate with 28, 8% and up 250 basis points compared to prior year driven by continued investment in talent marketing and DTC to support long term market share gains or.
Anne Mehlman: Our SG&A rate was 28.8% and up 250 basis points compared to the prior year, driven by continued investment in talent, marketing, and DTC to support long-term market share gains. Our first quarter adjusted operating margins declined 80 basis points to 27.1% compared to 27.9% for the same period last year, but it was favorable to our expectations on higher gross margins and favorable revenue, leveraging our costs. In the first quarter, adjusted diluted earnings per share increased 16% to $3.02, and our non-GAAP tax rate was 17.2%.
Speaker Change: Our first quarter adjusted operating margin declined 80 basis points to 27, 1% compared to 27, 9% for the same period last year, but was favorable to our expectations on higher gross margins and favorable revenue leveraging our cost base.
Speaker Change: First quarter adjusted diluted earnings per share increased 16% to $3 <unk>.
Speaker Change: And our non-GAAP tax rate was 17, 2%.
Anne Mehlman: We ended the quarter with clean inventory on our balance sheet and in our channel. Our inventory balance on March 31st, 2024, was $392 million, a decline of 18% against this time last year. We are pleased that both brands achieved inventory terms at our goal of four times. Our liquidity position remains strong, comprised of $159 million of cash and cash equivalents and $484 million of borrowing capacity on our resolver.
Speaker Change: We ended the quarter with clean inventory on our balance sheet and in our channel our inventory balance on March 31, 2024 with $392 million a decline of 18% against this time last year. We are pleased that both brands achieved inventory turns are goal of four times.
Speaker Change: Liquidity position remains strong comprised of a hiring $59 million of cash and cash equivalents and $484 million of borrowing capacity on our revolver.
Anne Mehlman: As a reminder, Q1 is a high-networking capital quarter, and we typically limit buyback and debt paydown activity as a result. We ended the quarter with total borrowings of $1.7 billion and remain with our net leverage target of 1 to 1.5 times. In 2024, we intend to buy back stock and pay down debt, enabled by our best-in-class cash flow generation. Now, turning to guidance.
Speaker Change: As a reminder, Q1 is the high net working capital quarter, and we typically limit buyback and debt pay down activity. As a result, we ended the quarter with total borrowings of $1 $7 billion and remain with our net leverage target of one to one and a half time.
Speaker Change: In 2024, we intend to buy back stock and pay down debt enabled by our best in class cash flow generation.
Anne Mehlman: For Q2, we expect consolidated revenues to be up 1% to 3% at currency rates as of March 31st, with the Crocs brand growing 7% to 9%, led almost entirely by international growth. As I mentioned earlier, several of our North American wholesale partners opted to take product earlier in Q1. We expect paydued revenue to be down between 19% to 17%, extrapolating the trends we are seeing quarter to date.
Speaker Change: Now turning to guidance for Q2, we expect consolidated revenue to be up 1% to 3% at currency rates as of March 31, with the crocs brand growing 7% to 9%, but almost entirely by international growth.
Speaker Change: As I mentioned earlier several of our North American wholesale partners opted to take product earlier in Q1, we expect revenue to be down between 19% to 17% extrapolating a trend we're seeing quarter to date.
Anne Mehlman: We expect adjusted operating margin to be approximately 26.5% and adjusted diluted earnings per share of $3.40 to $3.55. For the full year 2024, we are raising our underlying earnings per share outlook, supported by the strength in Q1. We are maintaining our revenue outlook of growth between 3% and 5%, assuming quarter-end currency rates. For the Crocs brand, we now expect revenues to grow between 7% and 9% from our prior expectations of 4% to 6%, with growth continuing to be led by international growth.
Speaker Change: We expect adjusted operating margin to be approximately 26, 5% and adjusted diluted earnings per share of $3 40 to $3 55 and for the full year 2024, we are raising our underlying earnings per share outlook supported by the strength in Q1, we are maintaining our revenue outlook of growth between three and 5% assuming quarter end.
Speaker Change: Currency rates.
Speaker Change: For the Crocs brand, we now expect revenues to grow between 7% and 9% from our prior expectations of 46% with growth continuing to be led by international.
Anne Mehlman: For Hey Dude, we expect revenues to contract down 10% to down 8% below our former expectation of flat to slightly up. We expect Hey Dude sales trends to improve each quarter and expect the sell-in and sell-through dynamic to normalize in Q4. As we discussed in our Q4 call, we expect wholesale to be negative for the year and DCC trends to be better than wholesale. As it relates to retail, we plan to open approximately 30 stores in 2024, six of which were opened during Q1.
Speaker Change: Hey, Dude, we expect revenues to contract down 10% to down 8% below our former expectation of flat to slightly up.
Speaker Change: We expect he do sales trends to improve each quarter and expect to sell in and sell through dynamic to normalize in Q4 as we discussed in our Q4 call. We expect wholesale to be negative for the year and DCC trends to be better than wholesale.
Speaker Change: As it relates to retail we plan to open approximately 30 stores in 2024 six of which were opened during Q1.
Anne Mehlman: We expect growth margin to be up for 2024 versus 2023 at the enterprise level. Based on the strength in Q1, we now expect Crocs brand growth margin to be up for the year and continue to expect Hadoop growth margin to be up for the year. We plan to invest in brand new creative and strategic SG&A initiatives, resulting in consolidated adjusted operating margins for the year of approximately 25%. For full year 2024, we still expect our underlying non-GAAP tax rate, which approximates cash taxes paid, to be approximately 18% and the GAAP tax rate to be 21.5%.
Speaker Change: We expect gross margin to be up for 2024 versus 2023 at the enterprise level based on the strength in Q1, we now expect crocs brand gross margin to be up for the year and continue to expect Hadrian gross margin to be up for the year, we plan to invest into brand accretive and strategic SG&A initiatives, resulting in consolidated adjusted operating margin for the year of approximately 25.
Speaker Change: Per cent.
Speaker Change: For full year 2024, we still expect our underlying non-GAAP tax rate, which approximate cash taxes paid to be approximately 18% and GAAP tax rate to be 21, 5%.
Anne Mehlman: We are raising our non-GAAP diluted earnings per share to a range of $12.25 to $12.73 in 2024, from $12.05 to $12.50 previously. This range incorporates future debt repayment but does not assume any impact from future share repurchase. Our annual capital expenditure guidance of $120 to $130 million remains unchanged, and we continue to expect exceptional cash flow generation. At this time, I'll turn the call back over to Andrew for his final thoughts.
Speaker Change: We are raising our non-GAAP diluted earnings per share to a range of $12 25.
Speaker Change: The $12 73 in 2024 from $12 five to $12 <unk> previously.
Speaker Change: This range incorporates future debt repayment, but does not assume any impact from future share repurchases, our annual capital expenditure guidance of $120 million to $130 million remains unchanged and we continue to expect exceptional cash flow generation at.
Speaker Change: At this time I'll turn the call back over to Andrew for his final thoughts.
Andrew Rees: We are pleased with our strong first quarter results and believe that our brands and strategies can and will continue to win. With the best we have made in talent and marketing, I'm confident in driving long-term market share again. At this time, we'll open the poll for questions.
Andrew Rees: Thank you.
Andrew Rees: We are pleased with our strong first quarter results and believe that our brands on strategies can and will continue to win with.
Andrew Rees: It was the best since we have made in talent and marketing I am confident in driving long term market share gains.
Speaker Change: At this time, we will open the call for questions.
Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star and then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question.
Unknown Executive: If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. Please limit yourself to one question and one follow-up. The first question comes from Jonathan Komp with Baird. Please go ahead.
Speaker Change: You May press Star and then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star and then two please.
Speaker Change: Please limit yourself to one question and one follow up the first question comes from Jonathan Komp with Baird. Please go ahead.
Jonathan Robert Komp: Yeah, hi, good morning. Thank you.
Jonathan Robert Komp: Yes, hi, good morning, Thank you all.
Jonathan Robert Komp: Just ask maybe a two part question.
Jonathan Robert Komp: Andrew if you could talk a little bit more about hey, dude, if you've been able to isolate.
Andrew Rees: I'll just ask maybe a two part question. Andrew, if you could talk a little bit more about Hey, Dude, if you've been able to isolate some of the recent softness, you know, maybe what's related to the environment or background versus anything new, brand-specific, and how should we think about D2C trending within the new guidance for Hey Dude here? And then, just separately, Crocs North America, could you comment on what you're seeing in the D2C performance and how you feel about the pipeline looking forward there? Thanks.
Jonathan Robert Komp: Some of the recent softness maybe what's related to the environment or background versus anything new brand specific and how should we think about D to C trending within the new guidance for Hey, Dude here.
Jonathan Robert Komp: And then just separately Crocs North America could could you comment on what you're seeing in the DTC performance and how youre feeling about the pipeline looking forward there. Thanks.
Speaker Change: Great. Thank you Jonathan So yeah, I think what I'm, what I'd say on the hatred, we havent really we had a good Q1, we came in slightly ahead of our expectations and the guidance we provided.
Speaker Change: It was it was it was solid.
Andrew Rees: But what we've seen from Easter into April is really a softening of our wholesale sellout, which has made us nervous. I think part of that is maybe a lack of promotion. We tried to be less promotional during the Easter period than we were the prior Easter. Easter early is also always tough.
Speaker Change: But what we'd see from Easter into April is really a softening of our wholesale sellout, which has made us nervous.
Speaker Change: Part of that is maybe lack of promotion that we tried to be less promotional during the Easter period and the weather.
Speaker Change: Prior to Easter Easter early is also always tough so I think we might have made some missteps there relative to what we were going to do relative to the market.
Andrew Rees: So I think we might have made some missteps there relative to what we were going to do relative to the market. But we've seen continued softness, and we are concerned about the robustness of the consumer market. So, as we talked about, our goal for 2024 for Hey Jude wholesale is to get sell-in and sell-out in balance, to get our inventories down in the channel, and make sure that we're driving a really healthy business for our wholesale partners. So we think at this point, it's prudent to lower our expectations and manage the business accordingly. I'll let Anne hit on the DTC trends. Yeah.
Speaker Change: But we can see continued softness.
Speaker Change: Concerned about the robustness of the consumer consumer market. So.
Speaker Change: As we talked about our goal for 2020 for Haiti wholesale is to get sell in and sellout imbalance to get our inventories down in the channel and make sure that we're.
Speaker Change: We will drive in a really healthy business for our wholesale partners. So I think at this point is prudent to take down our expectations and manage the business Accordingly, I'll, let Ann hit on the DTC trends.
Anne Mehlman: Yeah, and Jon, just to answer your specific question around retail contribution for Hey Dude, so as we think about just the Hey Dude guidance, just to give you a little bit more flavor there, so the building blocks for the year, right, we're opening approximately 30 stores, and we expect that revenue contribution to build throughout the year, and then obviously that's supported by a strong pipeline of new products and new product introductions, but at the highest level, we still expect wholesale to be down for the year, as well as leap year, so we had an extra data.
Ann: Yeah, and John just to answer your specific question around retail contribution for he did so as we think about just the heated guidance just to give you a little bit more flavor. There. So the building blocks for the error rate. We're opening approximately 30 stores and we expect that revenue contributors you shouldn't to build throughout the year.
Ann: And then obviously got supported by a strong pipeline of new products and new product introductions, but at the highest level, we still expect wholesale to be down for the year, but in DTC to perform better than wholesale.
Ann: And then when you kind of think through that in Q4 will be the strongest in terms of revenue growth because of that.
Ann: Retail contribution we will also lap easier a wholesale comparisons and then we will really realize since I went ahead and select international markets. There just as you're thinking through your.
Ann: Hey, Dude kind of revenue trend for the year and then on the crop side for DTC.
Ann: We saw 13% growth from a DTC perspective in Q1, which in North America, which was definitely better than our expectation that that was really supported by really good products and continued pipeline of that I feel great about the pipeline for product kind of coming out of Q1, we do expect Q2 to be more muted.
Ann: Good for North America growth as Q1 was supported by the Easter shift Andrew talked about as well as leap year. So we had an extra day there.
Ann: Yes.
Jonathan Robert Komp: Great, thanks, and best of luck, Anne, in the new role.
Speaker Change: Great. Thanks, and best of luck in the new role.
Speaker Change: Thanks, John.
Unknown Executive: The next question comes from Adrienne Yee with Barclays. Please go ahead.
Speaker Change: The next question comes from Adrienne <unk> with Barclays. Please go ahead.
Adrienne Eugenia Yih: Good morning and congratulations on a nice start to the year. I guess my first question is on the forward order book. You talk about seeing sort of earlier deliveries or earlier shipments; that's typically, you know, a channel that's improving in visibility. And I get that, you know, it shifts from one place to the other. But generally speaking, is the quality of the conversation and everything that you're hearing about fall and beyond sort of starting to get more optimistic?
Adrienne: Good morning, and congratulations on a nice start to the year.
Adrienne: I guess my first question is on the forward order book, you talked about seeing sort of earlier deliveries earlier shipments that's typically.
Speaker Change:
Adrienne: Channel, that's improving on visibility and I get that you know they're at.
Adrienne: It fit from one place to the other but generally speaking is the quality of the conversation and everything that you're hearing about fall and beyond sort of starting to get more optimistic and then my second quick follow up if I can't believe I'm asking this but your inventories down 18% very very clean what would need to happen.
Adrienne Eugenia Yih: And then my second follow-up is, I can't believe I'm asking this, but your inventory is down 18 percent, very, very clean. What would need to happen, sort of, as you're looking at the channel, I know there's a lot of consumer uncertainty for you to start kind of working that down 18 percent back to maybe a more normalized level, or is it at a normalized level? Thank you.
Adrienne: Sort of as you're looking at the channel I didn't know if there's a lot of consumer uncertainty for you to start kind of working that down 18% back to maybe a more normalized level or is it at a normalized level. Thank you.
Andrew Rees: Great, thank you, Erinn. So, you know, what do I say for? You know, I think you're trying to get at what is the reason for the pull forward and how are our customers or how are our big retailers feeling about the back end of the year. I think really, I probably answered that in two pieces. I think the reason for the pull forward was that they were seeing strong sell-through on the Crocs product.
Speaker Change: Great. Thank you again so.
Speaker Change: Why do I say four.
Speaker Change: I think youre trying to get at what is the reason for the pull forward and how our customers are how big retailers are feeling about the back end of the year I think really it.
Speaker Change: Can you answer that in two pieces I think the reasons to the pull forwards was they were seeing strong sell through on the cross product Theyre.
Andrew Rees: They're not seeing strong sell-through on all of their brands, so they wanted more product earlier. I think they had probably underestimated the kind of the Easter shift and were trying to pull stuff in earlier. So I think it's a closer assessment of the market than them kind of saying that we're off to the races and this is going to be a strong market for the rest of the year. I think it's really a sort of quarter to quarter adjustment.
Speaker Change: We're not seeing strong sell through on all of our brands. So they wanted more products earlier I think they have probably underestimated the Easter shift and we're trying to pull stuff in L. A.
Speaker Change: So I think it's a closer in assess.
Speaker Change: Assessment of the markets than kind of saying that we're off to the races and this is going to be a strong market for the rest of the year I think.
Speaker Change: It's really a sort of a sort of quarter to quarter adjustment what I would say is from a we feel great about our order books. Our order books are definitely solid for both brands and they support the.
Andrew Rees: What I would say is that we feel great about our order books. Our order books are definitely solid for both brands, and they support the underlying guidance that we provided, but I would not say the channel is super buoyant about the back end of the year yet. I think they're looking for more definitive signals.
Speaker Change: Your line guidance that we provided.
Speaker Change: But I would not say that channel is super buoyant about the back end of the year, yet I think they are looking for more definitive signals.
Anne Mehlman: Yeah, and then the inventory question, and welcome, by the way. But the inventory question is really related to the 18% down. We feel really good about inventories. We think that's the right level because we're at kind of four times turns for both brands, which is where we target inventory turns. For the rest of the year, I don't expect it to be down 18%. In Q1, last year, we were still cleaning up some of our inventories on the Hey Dude side.
Speaker Change: Yeah.
Speaker Change: And the inventory question and welcome by the way.
Speaker Change: But and the inventory question is really related to the 18% down we feel really good about inventories. We think that's the right level because we're at the kind of four times turns for both brands, which is why are we target inventory turn for the rest of the year I don't expect it to be down 18% in Q1 last year, we were still cleaning up.
Speaker Change: Some of our inventories on on.
Speaker Change: On the <unk> side, and then even on the craft side. They were still kind of just starting to see transit times return to normal so I actually expect that to be much flatter year over year.
Anne Mehlman: And then even on the Crocs side, we were still kind of just starting to see transit times return to normal. So I actually expect that to be much flatter year over year in Q2, and then it will move throughout the year. So the best way to kind of look at it for us is to model about four times turns. Perfect.
Speaker Change: In Q2, and then moving throughout the year. So the best way to kind of look at it for US is to model about four times turns.
Adrienne Eugenia Yih: Perfect. Okay, thanks. Thanks very much. Best of luck.
Speaker Change: Perfect. Okay. Thanks, Thanks, very much best of luck.
Speaker Change: Thank you.
Unknown Executive: The next question comes from Jim Duffy with Stifel. Please go ahead.
Speaker Change: The next question comes from Jim Duffy with Stifel. Please go ahead.
James Vincent Duffy: Good morning. Thanks for taking my question. I have a question on Crocs and then one on KD Margins. Starting with the Crocs brand, can you speak to the reasons responsible for the more optimistic view on brand revenue and the factors behind the changes in Crocs margin assumptions?
James Vincent Duffy: Good morning, Thanks for taking my question.
James Vincent Duffy: Our trucks and then one on <unk> margins.
James Vincent Duffy: Starting on the Crocs brand can you speak to the regions responsible showed a more optimistic view on brand revenue and the factors behind the changes in the cross margin assumptions.
Andrew Rees: Yes. Hi Jim.
James Vincent Duffy: Yes, hi, Jim So on a crux revenue assumptions, obviously, you know as we move through we had a better Q1 than anticipate eat it really on the North American side.
James Vincent Duffy: And then as we get into Q2, we definitely have pretty good visibility.
Speaker Change: <unk>, we can also see DTC trends, so I would say I think the other thing is we're really seeing our international markets do very well as we talked about China, Australia, but also some strength in Europe. So that gives us confidence and that's really what led to the revenue weighed on the gross.
Andrew Rees: So on the Crocs revenue assumptions, obviously, you know, as we move through, you know, we had a better Q1 than anticipated really on the North America side. You know, and then as we get into Q2, we definitely have pretty good visibility into order books, and we can also see DTC trends. So I would say, you know, I think the other thing is we're really seeing our international markets do very well, as we talked about China, Australia, but also some strength in Europe.
James Vincent Duffy: Inside.
James Vincent Duffy: A couple of things one we saw some better full price selling in Q1, which supports that overall gross margin. We also have seen.
James Vincent Duffy: A little bit of input cost pressure relief on the crop side and so we've seen our cost as we negotiate those kind of in the first quarter come down and so we've taken those assumption.
James Vincent Duffy: For the remainder of the year as we kind of look through that so those are really supporting the higher gross margin assumptions on the crop side.
Andrew Rees: So that you know, give this confidence, and that's really what led to the revenue increase. On the growth margin side, we saw a couple things. One, we saw some, you know, better full price selling in Q1, which supports that overall growth margin. We also saw a little bit of input cost pressure relief on the Croc side, and so we've seen our costs as we negotiate those kind of come down, and so we've taken those assumptions for the remainder of the year as we kind of look through that. So those are really supporting the higher gross margin assumptions on the Croc side.
Anne Mehlman: Got it. Thank you, Anne.
Speaker Change: Got it. Thank you and can you speak to the reduced margin view for 2020, Florida is a lower revenue come with incremental margin pressure or so or someplace, where you have savings isn't offset and then M. The GAAP charges for the ERP implementation is new can you talk about that afterwards to timing.
Speaker Change: The rationale and and so forth.
Andrew Rees: And can you speak to the HeyDude margin view for 2024? Does the lower revenue come with incremental margin pressure, or is there some place where you have savings as an offset? And then Anne, the gap charges for the HeyDude ERP implementation are new. Can you talk about that effort, the timing, the rationale, and so forth?
Speaker Change: Sure Yeah. So from a margin yeah, we're not anticipating incremental margin pressure from the lower revenue.
Anne Mehlman: Sure. Yeah, so from a margin point of view, we're not anticipating incremental margin pressure from the lower revenue from the revenue reduction for Hay Day. I think, you know, we're sort of playing out our pricing, our promotional strategy, our channel mix is playing out pretty much where we thought it would be. And obviously, the reduction is really coming from wholesale revenues. And so, as our DCC revenues are obviously higher margin than wholesale revenues, we don't see a margin reduction. We think our margin guide is good for Hay Day. And I'll let Anne talk about the ERP system. Yeah.
Speaker Change: Some of the revenue reduction, but he did I think.
Speaker Change: The margin is sort of playing out pricing promotional strategy channel mix is playing out pretty much where we thought it would be and obviously with the reduction is really coming from the wholesale revenues.
James Vincent Duffy: DTC revenues, obviously higher margin than our wholesale revenues you don't see a margin reduction.
James Vincent Duffy: We think our margin guide is good for all the talk about the ERP, Yeah, and one thing supporting those gross margins that kind of all talked out that relates to the ERP is actually we implemented that.
Anne Mehlman: Yeah, and one thing supporting those gross margins that I'll talk about that relates to the ERP is actually, you know, we implemented or we've taken live the new Hey Dude Las Vegas warehouse, which is shipping our distribution center. And so, you know, that obviously throughout the year will support us being more efficient on the Hey Dude side for storage and things like that. But that is also related to we implemented that new DC, and we also implemented technology for Hey Dude. And so we took an impairment on the other piece related to that technology implementation as we are now live on technology for Hey Dude. So I'm really excited about that. Okay?
James Vincent Duffy: And then we've taken live venue, Hey, Dude, Las Vegas warehouse, which is shaping our distribution center and so that obviously throughout the year will support.
James Vincent Duffy: US being more efficient on the heating side first.
James Vincent Duffy: For storage and things like that.
James Vincent Duffy: That is also related to you we implemented that new DC also implemented technology for Hey, Dude and so.
James Vincent Duffy: The chicken impairment on.
James Vincent Duffy: The other the other piece related to that technology implementation as we are now live on technology for Egypt, So really excited about that.
Unknown Executive: Okay, thank you, guys.
Speaker Change: Okay. Thank you guys.
Speaker Change: Okay. Thank you.
Unknown Executive: The next question comes from Chris Nardone with Bank of America. Please go ahead.
James Vincent Duffy: The next question comes from Chris <unk> with Bank of America. Please go ahead.
Christopher Michael Nardone: Thank you, guys. Good morning.
Chris: Thank you guys good morning.
Chris: Do you mind, just clarifying if your <unk> guidance reflects the trend youre seeing quarter to date or if theres an improvement embedded in the guidance and then as a follow up longer term I recognize parents just took over the president's role west weak, but do you envision major strategic shifts in how you'll run the brand and if so can you elaborate.
Speaker Change: Maybe some of his early plans. Thank you.
Andrew Rees: Hey Dude, do you mind just clarifying if your 2Q guidance reflects the trend you're seeing quarter to date, or if there's an improvement embedded in the guidance? And then, longer term, I recognize Terrence just took over the president's role last week, but do you anticipate major strategic shifts in how you'll run the brand? And if so, can you elaborate on maybe some of his early plans?
Speaker Change: Yeah. So let me talk to you hate your guidance and then Andrew will factor out the other piece. So on he's got into it reflects the current trends that we're seeing so we're not anticipating an improvement for Q2 at this time.
Christopher Michael Nardone: Thank you.
Andrew Rees: Thank you Anne.
Andrew Rees: So Terence has obviously been on board, a essentially a week and a half at this point so I think it's not fair.
Anne Mehlman: Yes, let me talk through the HATED Guidance, and then Andrew will talk through the other piece. So, on HATED Guidance, it reflects the current trends that we are seeing. So, we are not anticipating an improvement for Q2 at this time.
Andrew Rees: <unk> articulated a new strategy, but I would say, we do not anticipate a dramatic strategy shifts I think as we've.
Andrew Rees: at this point, so I think it's not fair for him to have articulated a new strategy. But I would say we do not anticipate dramatic strategy shifts.
Andrew Rees: We've been working together on kind of the.
Andrew Rees: I think as we've been working together on kind of the key pillars within the strategy, we're very much aligned that it's going to be really about the Wally and the Wendy, our iconic franchise. We think that it is incredibly relevant to a broad base of consumers. And really, what we need to do is a better job of engaging the consumer and making the Haydeep brand and that franchise, those iconic franchises, more relevant for more consumers.
Andrew Rees: The key pillars within this strategy.
Andrew Rees: We're very much aligned that it's going to be really about the wallet and Wendy are iconic franchise. We think that franchise is incredibly relevant to a broad base of consumers and really what we need to do is about a gel around engaging the consumer making the <unk> brand.
Andrew Rees: The franchise those iconic franchises more relevant to more consumers and I think that's the same.
Andrew Rees: And I think that's the same strategy we put in place for Crocs a number of years ago where we wanted to make the classic relevant for more consumers around the world, which is what we have done. So, we don't see a major strategy shift from a product perspective, from a marketing perspective, or from a distribution channel perspective.
Andrew Rees: The same strategy, we put in place across a number of years ago, where we wanted to make the classic relevant to more consumers around the world, which is what we've done. So I, we don't see a major strategy shift from a product perspective from a marketing perspective or from a distribution channel perspective.
Unknown Executive: Okay, got it. And then just as a quick follow-up, can you just talk about your confidence in the gray market issues on Amazon abating by mid-year, which was your prior message? Any change to that? So what we've still seen ahead when
Speaker Change: Okay got it and then just as a quick follow up can you just talk about your confidence in the gray market issues on the Amazon of bathing by midyear, which was your prior message any change to that.
Anne Mehlman: So we've still seen a headwind from the gray market for Hey Dude on Amazon. We anticipate that will continue through the first half of the year, and that headwind is embedded in the guidance that we provided.
Speaker Change: So what are we still seeing the headwinds from gray market.
Speaker Change: For he did on Amazon.
Speaker Change: We anticipate that will continue through the first half of the year and that headwind is embedded in the guidance that we provided.
Speaker Change: Okay. Thank you.
Unknown Executive: The next question comes from Laura Champine with Loop Capital. Please go ahead.
Laura Allyson Champine: Okay. The next question comes from Laura Chimp pain with loop capital. Please go ahead.
Laura Allyson Champine: Hi, I'd like to drill down into what's happening with the Hey Dude Direct business. I mean, I think you mentioned a shift to more full-price selling. I'm wondering what happened with units in that business, and I'm also wondering how long you would expect that business to be pressured by a shift in your ASP goals.
Laura Allyson Champine: Hi, I'd like to drill down into what's happening with the he do direct business. I mean, I think you mentioned a shift to more full price selling I'm wondering what happened with units in that business and I'm also wondering how long you would expect that business to be pressured by a shift in.
Speaker Change: In your E S P coals.
Andrew Rees: Yeah, so you're essentially right, Laura. So as we've raised prices in our Hey Dude Direct business, which is mostly on Amazon, where we're a three-piece seller for Hey Dude, we have seen a drop in units. We expected that, and I think net-net, that's been productive for the brand and productive for our margins, but we have seen a drop in unit sales. I would say, as we're introducing new products and our marketing is kicking in for Hey Dude, there's some evidence that that will mitigate over time.
Speaker Change: Yeah, So youre essentially right Laura so as we've raised prices in our heyday direct business, which is mostly on Amazon.
Speaker Change: Three piece and I'll ask what they did.
Speaker Change: We have seen a drop in units.
Speaker Change: But did that.
Speaker Change: And I.
Speaker Change: I think net net that's been productive for the brand and productive for our margin gains, but we have seen a drop in unit sales.
Speaker Change: I would say as we're introducing new products and our marketing is kicking in for hey, good. There's some evidence that that will mitigate over time.
Laura Allyson Champine: Got it, and is overtime, I mean, an improvement in the direct business implied in your full year guidance for Hey Dude, or not? So, I would say.
Speaker Change: Got it and is over time I mean, it is an improvement in the direct business.
Speaker Change: Implied in your full year guidance for Hey, Dude or not.
Andrew Rees: So I would say what we have said is that our full-year guidance projects that our direct business, which includes our marketplace business, our own.com, as well as our retail business, will outperform our wholesale business this year. And so that's included in our full-year guidance.
Speaker Change: So I would say what we have said is that our full year guidance that our direct business, which includes.
Speaker Change: Our marketplace fitness, our own dot com as well as our retail business.
Speaker Change: We'll outperform our wholesale business this year and so that's included in our full year guidance.
Speaker Change: Got it thank you.
Speaker Change: Thank you Laura.
Unknown Executive: The next question comes from Rick Patel with Raymond James. Please go ahead.
Speaker Change: The next question comes from Rick Patel with Raymond James. Please go ahead.
Rakesh Babarbhai Patel: Thank you, good morning everyone. Guidance for operating margins was maintained at 25% for the year despite plans for the first half to shake out a little bit ahead of that. Can you just provide color on what you think could weigh on margins as we think about the back half in terms of perhaps the timing of investments or SG&AB leverage just given your updated sales guidance for the next few quarters?
Rakesh Babarbhai Patel: Thank you and good morning, everyone guidance for operating margins was maintained at 25% for the year. Despite plants for the first half the shake out a little bit ahead of that can you just provide color on what you think could weigh on margins as we think about the back half in terms of perhaps the timing of investments or SG&A deleverage just given your updated.
Speaker Change: The sales guidance for the next few quarters.
Anne Mehlman: Yeah, I think I'm really pleased with our operating margins. Obviously, they well outperformed in Q1. So we're maintaining approximately 25. But obviously, that implies a little bit higher. Approximately 25 If you look at our EPS guidance, I feel very good about the factors there, which are really supported by hard gross margins that allow us to invest in our business. We're anticipating quite a bit of investment. So I feel very confident in that approximately 25% operating margin.
Speaker Change: Yeah, I think I'm really pleased with our operating margins, obviously, they've well outperformed in Q1, so we're maintaining that approximately 25, but obviously that implies a little bit higher or approximately 25.
Speaker Change: If you look at our EPS guidance I feel very good about the factors there, which are really supported by higher gross margin allows us to invest in our business, we're anticipating quite a bit of investment so I feel very confident and that approximately 25% operating margin.
Rakesh Babarbhai Patel: And can you also talk about what's implied in guidance for the Crocs brand as we think about ASPs versus units going forward? I'm just curious how we should extrapolate the very strong performance in one category. Yeah, thank you.
Speaker Change: And can you also talk about what's implied in guidance for the cross brand as we think about asps versus units going forward I'm just curious how we should extrapolate the very strong performance in <unk>.
Speaker Change: Yeah, I think you I think from a craft brand perspective, obviously, you don't guide based on that we saw nice unit and ASP growth in Q1.
Speaker Change: We don't have any more planned price increases currently for this year, we had a little bit of international price increases flowing through in Q1, which will flow through to Q2 that should actually abate a little bit in Q3 and Q4 so.
Speaker Change: I think.
Speaker Change: I am confident in the guidance that we provided but that's kind of all the color we're willing to give at this point.
Speaker Change: Thanks, very much Jack.
Speaker Change: Thank you.
Unknown Executive: And the next question comes from Jim Chartier with Manasseh, Carpsey, and Hart. Please go ahead.
Speaker Change: And the next question comes from Jim Chartier with an S Corp seat and Hardt. Please go ahead.
James Andrew Chartier: Hi, good morning. I was wondering if you could talk about Haiti performance on your own e-commerce site versus, you know, the marketplace business, if there's any meaningful difference between the two, and if so, which are the divergences.
James Andrew Chartier: Good morning.
James Andrew Chartier: I was wondering if you could talk about <unk> performance on your own E Commerce site versus the marketplace business. If there's any meaningful difference between the two and if so what drove the divergence.
Andrew Rees: Yeah, we obviously don't break that out, but just a little bit of color we're happy to provide. Because we're able to introduce a lot of new products more quickly on our own dot com, we do do some limited drops on our own dot com. I think we had Corona running last week, which was a collaboration that we did for Hey Dude. We did The Lebowski earlier, and we've also had some new product introductions and testing that we do with pull-forward styles that we think are going to be exciting to continue and can test them in that environment before releasing them more broadly. Yeah, our own dot com has been performing better than the marketplace, and we anticipate that trend will continue.
Speaker Change: Yes, yes, we don't obviously, Jim we obviously don't break that out, but just a little bit of color.
Speaker Change: Im happy to provide.
Speaker Change: Because we're able to introduce a lot of new product more quickly on our own dot com <unk>.
Speaker Change: Some limited drops on our Dot Com I think we had a corona running last week, which was a collaboration that we did for <unk>, which is a lebowski.
Speaker Change: And we've also had some new product introductions and testing that we do pull forward styles that we think is going to be exciting to the continuum contest them in that environment for releasing them more broadly.
Speaker Change: Our own dot com has been performing better than the marketplace and we anticipate that trend will continue.
James Andrew Chartier: Great, thanks. And then, Anne, I think you mentioned the fourth quarter could benefit Hey Dude from selling ahead of some international markets. Are those just the UK and Germany, or are there additional markets that you're planning for next year? Yeah, that's a great question. So we do.
Speaker Change: Right right.
Speaker Change: I think you mentioned for fourth quarter could benefit for who do from shell and ahead of some international markets.
Speaker Change: Our Lucius through the UK and Germany, or there are additional markets that you're planning for next year.
Anne Mehlman: Yeah, that's a great question. So we do have some select distributors that we sell to and that we will be selling to. So there is, you know, the UK and Germany are direct, more direct markets for us. So it's really, that's really a comment on distributor revenue for HeyDude.
Speaker Change: Yes, that's a great question. So we do have some select distributors that we sell to you that we will be selling to so.
Speaker Change: U K, Germany are direct more direct market for us. So it's really that's really a comment around the district distributor revenue for hate it.
Speaker Change: Alright, great. Thank you.
Speaker Change: Thank you.
Unknown Executive: And the next question comes from Mitch Koumets with Seedport Research. Please go ahead.
Speaker Change: And the next question comes from Mitch <unk> with Seaport Research. Please go ahead.
Mitchel John Kummetz: Yeah, thanks for taking my questions. On Hey Dude, the change in the outlook there, is it fair to say that you've taken expectations down for both DTC and wholesale, but more so on the wholesale side?
Mitch: Hi, guys. Thanks for taking my questions on Hey, do the change in the outlook. There is it fair to say that you've taken expectations down for both DTC and wholesale but more so on the wholesale side.
Anne Mehlman: Yeah, that's it. Yeah, I think wholesale definitely is kind of the biggest gap with where we've seen our expectations originally versus the performance in March and April. I will say for Q3, you know, overall revenue is planned to be down year over year, which is a big change driven largely by negative wholesale. We do expect it to be sequentially better than Q2. But we do expect that kind of negative wholesale demand in Q3. So I think that's a fair assumption.
Mitch: And yes, that's it yeah I think wholesale definitely we that's been kind of the biggest gap with where we've seen our expectations originally versus the performance in March and April.
Speaker Change: I will say for Q3, we also need you to overall revenue is planned to be.
Speaker Change: Year over year, which is a big change driven largely by negative wholesale we do expect it to be sequentially better than Q2.
Speaker Change: But we do expect that kind of negative wholesale in Q3 so.
Speaker Change: That's a fair assumption.
Mitchel John Kummetz: That's helpful, Anne. And then, as far as the back half goes for Hey Dude, I think the revised guide does assume kind of flattish sales, which would be a pretty big step up from the first half. Does that reflect better sellout rates in wholesale? Or is that primarily just DTC kicking in with the outlet stores, maybe some sell-in in the fourth quarter for spring? You know, can you maybe just kind of walk through the assumptions around that?
Speaker Change: Okay. That's helpful and then as.
Speaker Change: As far as the back half goes for Hey, Dude I think the revised guide does assume kind of flattish sales would be which would be a pretty big step up from the first half.
Speaker Change: Does that reflect.
Speaker Change: Sellout rates in wholesale or is that primarily.
Speaker Change: DTC kicking in with the outlet stores, maybe some sell in in the fourth quarter for spring.
Speaker Change: Can you, maybe just kind of walk through that if the assumptions around that.
Anne Mehlman: Absolutely. I think there's kind of three things really driving that. We lack easier wholesale comparisons in the back half from a sell-in perspective, but the contribution from retail really builds. And then the third piece, as I just mentioned to Jim, you know, starting to realize sell-in ahead of select international market launches; those are international distributors that take place in Q4. So those are the three big pieces that really drive that change. But if you look at it, I hate to say this, but if you look at it on a two-year basis, just because we had a little bit of lumpiness the year before, you can see that it's a little bit smoother than what it looks like on a year-over-year basis.
Speaker Change: Clearly I think there's kind of three things really driving that we lap easier wholesale comparisons in the back half from a sell in perspective.
Speaker Change: The contribution from retail.
Speaker Change: Really build.
Speaker Change: And then the third piece as I, just mentioned to Jim starting to realize sell in ahead of select international market launches those are international distributors that take place in Q4. So those are the three big pieces that really drive that change. If you look at it I hate to say this but if you look at it on a two year basis, just because we had a little bit of <unk>.
Speaker Change: Be next year before you can see that it's a little bit smoother than what it looks like on a year over year basis.
Mitchel John Kummetz: Okay. Thanks, Kim, and good luck.
Jim: Okay, Thanks, Kevin and good luck.
Unknown Executive: The next question comes from Sam Poser with Williams Trading. Please go ahead.
Speaker Change: Thank you. Thank you.
Speaker Change: Next question comes from Sam.
Sam: Poser with Williams trading. Please go ahead.
Samuel Marc Poser: Good morning, everybody. Thank you guys for taking my questions. Andrew, I've got a question. You said in regard to the change in guidance on Hey Dude that you are concerned about the robustness of the consumer. Can you discuss that as it relates to both Hey Dude and Crocs?
Samuel Marc Poser: Everybody. Thank you guys for taking my questions.
Samuel Marc Poser: Andrew I've got a question you said.
Sam: In regard to.
Samuel Marc Poser: The change of the guidance on Hey, Dude that you were concerned about the robustness of the consumer.
Andrew Rees: Can you discuss that on how that relates to both hey Dude.
Sam: And to Crocs.
Andrew Rees: Yeah, yes. I mean, if we look at, so what I'm referring to there is, if you look at kind of industry data, so the market data for the footwear market, it is clearly down, you know, I would say mid to high double single digits in the first quarter of the year. And we see that continuing week on week, right? So there are some brands that are doing better than the market. Crocs is one of them.
Andrew Rees: Yes, yes, I mean, if we look at so what I'm, referring to there is if you look at kind of industry data. So the market data for the <unk>.
Andrew Rees: Footwear market it is clearly down.
Andrew Rees: I would say mid to high double single digits in the first quarter of the year.
Andrew Rees: There are others that are also well known that are doing substantially better than the market. At this point, Hey Dude is not doing better than the market, right? So there are definitely different trajectories relative to the underlying market. I think the underlying market is a reflection of the consumer spending less money on footwear.
Andrew Rees: And we see that continuing week on week right. So there are some brands that are doing better than the market. Crocs is one of them. There are others that are also well well known that is doing substantially better than the market at this point <unk> not doing better than the market right. So there are definitely different on different trajectories relative.
Andrew Rees: And to the underlying market I think the underlying market is a reflection of the consumer is spending less money on footwear.
Samuel Marc Poser: But they're spending more money on the stuff they really like. So wouldn't I mean, I guess the question is, what do you guys need to do to, I guess what was different than what you anticipated with the Hey Dude brand? And then what do you rather than have it be just the market, as you've done lots of good collabs and things like that that have performed well, both with Crocs and with Hey Dude? What do you guys have to do that can overcome that? Because you're overcoming that weak consumer with the Crocs brand, but you're not overcoming the weak consumer with the Hey Dude brand. So, so
Andrew Rees: But they are spending more money on the stuff they really like so wouldn't.
Speaker Change: I guess the question is what what do you guys need to do to I guess, what was different than what you anticipated with the Hey Dude brand.
Andrew Rees: And then what the rather than have it be just the market as you've done lots of good co labs and things like that that have performed well both with cross sell with Hey Dude.
Andrew Rees: Hum.
Andrew Rees: What do you guys have to do that could overcome that because you're overcoming that we consumer with the crocs brand, but youre not overcoming the weak consumer with the Hadrian Brown.
Andrew Rees: Exactly. So product and marketing, right? So we are optimistic about our pipeline of new product introductions for Hey Jude, but some of them are unproven at this stage. And most of the new products are really Wally and Wendy, but a new derivative is off. But I think at the crux of it will be improved marketing. And so driving brand relevance, like making the Haitian brand relevant to more.
Andrew Rees: Exactly so so product marketing right. So.
Andrew Rees: We are optimistic about our pipeline of new product introductions also hey, dude, but some of them are unproven at this stage.
Andrew Rees: Most of the new products is really volume, Wendy, but need derivatives off but I think the crux of it will be improved marketing.
Andrew Rees: So driving brand relevance.
Andrew Rees: The <unk> brand relevant to more consumers.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Unknown Executive: And the next question comes from Tom Nikic with Wedbush. Please go ahead.
Speaker Change: And the next question comes from Tom <unk> with Wedbush. Please go ahead.
Tom Nikic: Hey everyone, thanks for taking my question. I wanted to ask about the outlet stores that you're opening. How are those stores being sorted? Like, are they mostly clearance or liquidation products? Is it specially made for the channel? Is, you know, the product being sold there any different than what you're selling on the hotel channels? I'd kind of love to hear, you know, what you're thinking about merchandising the album. Yeah.
Tom: Hey, everyone. Thanks for taking my question I wanted to ask about the outlet.
Tom: How are those stores being sorted.
Tom: Is it mostly.
Tom: Clearance liquidation Sato.
Tom: Especially made for the channel as it is.
Tom: The product being sold there are any different than what you're selling in the wholesale channel.
Speaker Change: You know what.
Speaker Change: <unk>.
Speaker Change: How are you thinking about merchandising.
Tom: Yeah.
Andrew Rees: Yeah, great. A good question, Tom.
Tom: Yeah, Greg Good question, Tom So.
Greg: As we've talked about we've got 11 outlet stores open at this point through the end of March six that we opened in the first quarter to five that we opened last year.
Andrew Rees: So, as we talked about, we've got 11 outlet stores open at this point, or through the end of March 6th, that we opened, and the first quarter 5 that we opened last year. The stores, the format is pretty consistent with a lot of other footwear brands, I would say. The front of the store is essentially full-size runs, so we can drive consumer satisfaction. They can definitely find a product that they want and in their size.
Greg: Our stores the formats.
Greg: But pretty consistent with kind of a lot of other footwear brands I would say the front of the store is essentially full sized loans. So the consumer so we can drive consumer satisfaction. They can definitely find a product that they want in their size.
Greg: Size those full cycle and there will be a combination of newer products, sometimes even current product and also some slightly older products that we happen to have in <unk>.
Andrew Rees: Those full-size runs will be a combination of newer products, sometimes even current products, and also some slightly older products that we happen to have a quality assortment of. And then in the back of the store, we have essentially a clearance section. And so it provides two vehicles for us. It provides one vehicle to educate the consumer about the Haygee brand, allow them to find a product that they can buy and take away and enjoy, and hopefully become a Haygee brand fan.
Greg: Quality assortment all.
Greg: And then in the back of the store is essentially clearance product.
Greg: And so it provides two vehicles for us it provides one vehicle to.
Greg: Educate the consumer about the heyday brand allow them to find the product that they combined takeaway and enjoy it and hopefully become a hey dude brand fans.
Andrew Rees: And then at the back of the store, it allows us to liquidate old products at much higher prices that we'll be able to liquidate elsewhere and give the consumer incredible value at the back of the store. So I would say we're really happy with the way the store is working, and we opened in a combination of markets. We've opened in markets that I would describe as sort of the Haygee heartland, and we've also opened in markets that are a little bit more nascent for Haygee. So we're using the stores to introduce new customers to the brand, and we're kind of happy that both are working.
Greg: On the back of the store that allows us to liquidate all product at much higher prices that will be able to liquidate elsewhere and gives the consumer incredible value in your back of the store so.
Greg: I would say, we're really happy with the way the stores working.
Greg: And we've opened in a combination of market, we've opened new markets that I would describe as sort of hazy to heartland and we've also opened in markets that are a little bit more nascent so he did so.
Greg: We're using the stores too.
Greg: To introduce new customers to the brand and we're kind of happy that both are working.
Tom Nikic: Thanks very much and welcome everyone. And the next question comes from Jay Sole with UBS. Please go ahead. Great, thank you so much. Andrew, can you elaborate a little bit on that?
Speaker Change: Understood, Thanks, very much and before I commit to you.
Speaker Change: Thank you.
Unknown Executive: And the next question comes from Jay Sole with UBS. Please go ahead. Great, thank you so much.
Speaker Change: And the next question comes from Jay sole with UBS. Please go ahead.
Jay Daniel Sole: Great. Thank you so much Andrew I'm, hoping can you elaborate a little bit on the performance of crocs in China, because 100 peer triple digit growth is really strong if I'm correct I believe it's kind of like a low seasonality quarter.
Jay Daniel Sole: In China so.
Jay Daniel Sole: There anything maybe related to timing or something that could have boosted that number and then how are you thinking about spring do you think you can maintain really strong growth through the peak spring and summer seasons.
Speaker Change: If you can tell us about that that would be super helpful. Thank you.
Jay Daniel Sole: Yeah, that's a great question. Yes, the first quarter is not our strongest quarter in China. You're exactly right. It's a sort of counter-seasonal quarter. It does build through the quarter.
Speaker Change: Yeah. That's great question, yes, the first quarter was not as strong this quarter and trying to you're exactly right. It's a sort of counter seasonal quarter. It does build through the quarter I think the one thing that is different this year that we did call out in our prepared remarks is we did win a super brand day on Tmall for those of you not familiar that's a process you go through it a bit on that.
Jay Daniel Sole: You get selected who was selected because of our brand heat we're able to.
Jay Daniel Sole: <unk> the brand and really so that was a non comp event and the substantial non comparable in Q1, which is very productive.
Andrew Rees: I think the one thing that is different this year that we did call out in our prepared remarks is that we did win a super brand day on Tmall. For those of you not familiar, that's a process you go through to bid on that and get selected. We were selected because of our brand heat; we were able to, you know, showcase the brand, and really, that was a non-competition event and the substantial non-competition event in Q1, which is very productive.
Jay Daniel Sole: We do believe we will be able to maintain a very very strong growth rate in China through Q2, and the remainder of the year.
Jay Daniel Sole: That is driven by a growing digital presence.
Jay Daniel Sole: Consumer following but also incremental store openings, we will plan to open a significant number of our franchise partner stores with our partners. This year. So we'll have incremental wholesale distribution.
Andrew Rees: We do believe we'll be able to maintain a very, very strong growth rate in China through Q2 and the remainder of the year. That is driven by a growing digital presence and a growing consumer following, but also incremental store openings. We plan to open, you know, a significant number of franchise partner stores with our partners this year. So we'll have incremental wholesale distribution in the Chinese market, which will drive, I think, a very strong business.
Jay Daniel Sole: China market, which could drive I think a very strong business for us.
Speaker Change: Great. Thank you so much.
Unknown Executive: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Andrew Rees for any closing remarks.
Speaker Change: Thank you.
Jay Daniel Sole: That concludes our question and answer session I would like to turn the conference back over to Andrew <unk> for any closing remarks.
Andrew Rees: Thank you very much, everybody, for joining us and your interest in our brand. I just want to highlight that this is Anne's last earnings call. She may be happy about that, may not be happy about that, but Anne will, with the announcement and the joining of Susan Healey, who will join us on June 3rd, be moving over to her full-time role as Crocs brand president. So I want to thank Anne for all her incredible contributions over the last six years. So, thank you, Anne.
Andrew Rees: Thank you very much everybody for joining us and your interest in our Bryan I would just want to highlight that this is <unk> last earnings call. You may be happy about that may not be happy about that but any more with the announcement and the joining of the Susan Healy who will join US on June 3rd will be moving over to a full time role as crocs brand presence I want to thank.
Jay Daniel Sole: And for all our credible contributions over the last six years. So thank you Ron.
Unknown Executive: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Jay Daniel Sole: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.