Crocs Shares Fall After Wall Street Learns About Company’s Latest Acquisition

Crocs CEO Andrew Rees has taken to defending the $2.5 billion Hey Dude acquisition this week as Crocs shares tumbled.

The company recently announced a multibillion-dollar deal on Thursday to buy the privately held casual shoemaker Hey Dude in a cash-and-stock deal.

Founded in Italy in 2008, Hey Dude does more than 40% of its business online and is expected to bring in roughly $570 million in revenue this year, Crocs said.
Sales are projected to be between $700 and $750 million in 2022, according to Rees.

Analyst Piper Sandler called Hey Dude “one of fastest-rising brands” it has been tracking as part of its biannual “Taking Stock With Teens” survey. It ranked No. 8 in its fall survey.

Rees argues the acquisition could lead to robust sales growth, especially in the U.S. Northeast and coastal urban regions.

The transaction is expected to close in the first quarter of next year and immediately add to revenue and earnings growth, Crocs said.

The CEO added that Crocs is also hoping to expand its portfolio of shoes beyond the rubber clogs that it’s best known for while still tapping into comfort trends.

While Rees is optimistic about the deal, shares of the company dropped 12% on the news. It was the worst collapse for shares since April of 2020.

“We think a great way to diversify and provide a little bit more security to our investors is to not diversify away from the iconic clog within Crocs, but to add another brand, which has its own icon,” Rees assured, in an interview on CNBC’s “Power Lunch.” “And that provides, we think, a tremendous diversification and a really compelling reason for us to acquire this brand.”

“We think [Hey Dude] has far more potential, both here in the U.S. and also globally,” he added.
Croc shares have gained over 90% YTD.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.