B Riley sees earnings revisions ahead for Crocs, downgrades to neutral

B Riley analysts downgraded shares of Crocs (NASDAQ:) to Neutral from Buy with a new price target of $101, down from $125, in a note Thursday.

They cited the company’s “over-inventoried” footwear channel and slowing consumer sales cadence, resulting in likely second-half and early 2024 earnings revisions, as reasons for the downgrade.

“Based on our analysis of public footwear distribution and content companies, we estimate roughly $2.4B or 16% too much footwear inventory in stores, warehouses, and DCs as we entered the BTS and fall selling seasons,” explained the analysts.

“Our analysis of U.S. Census retail sales data, as well as category CPI data, leads us to conclude the sales cadence of footwear/apparel/accessories likely slows/turns negative Y/Y on a nominal basis in September/through the remainder of 2023.”

While B Riley remains confident in CROX’s management team, the company’s brands, and the “substantial cash flow-generating nature of CROX in the longer term,” they feel that the current footwear/slowing consumer backdrop will likely prove “too challenging and clogged for CROX to avoid downward earnings revisions.”