Thanks for the write up. Just want to note that your bear, base, and bull cases do not account for buybacks. Continuing their current rate of buybacks ($1.3 billion authorized, 600k shares last quarter) over the decade has a dramatic effect on the share price.
Their COGs base vs other shoes is lower. Tariffs impact is lower than competitors since it's a % of COGs base ( $1 x 1.25 = 1.25 resulting in net change 0.25. vs $2 x 1.25 is 2.5 so 0.5 net change. If crox can increase 0.5 with the rest of shoes then $crox actually can get higher margin per clog.
Yes, their COGS vs. the competitors is lower. But, at the same time, if the cost goes up due to tariffs, it is likely that many consumers will defer their purchase, reducing the quantities of products sold.
Nice summary. I think the bull case should include more growth coming from international expansion and turn around of HeyDude.
By the way, here is my deep dive on the stock:
https://www.moatmind.com/p/crocs-inc-stepping-boldly-into-the
Thanks for the write up. Just want to note that your bear, base, and bull cases do not account for buybacks. Continuing their current rate of buybacks ($1.3 billion authorized, 600k shares last quarter) over the decade has a dramatic effect on the share price.
I don't do that for two reasons:
1. Not only are buybacks uncertain, but the price at which they happen is also not known.
2. When that happens, the cash balance decreases. So the impact of not taking buybacks into account isn't that significant.
Bull case is actually higher margins, MSD growth, and a 15-20x FCF EV multiple IMO
The FCF multiple isn't that far from what you've mentioned.
However, I struggle to find a scenario where margins are much higher. What would drive that?
Their COGs base vs other shoes is lower. Tariffs impact is lower than competitors since it's a % of COGs base ( $1 x 1.25 = 1.25 resulting in net change 0.25. vs $2 x 1.25 is 2.5 so 0.5 net change. If crox can increase 0.5 with the rest of shoes then $crox actually can get higher margin per clog.
Yes, their COGS vs. the competitors is lower. But, at the same time, if the cost goes up due to tariffs, it is likely that many consumers will defer their purchase, reducing the quantities of products sold.