shoemaker’s shares crocs (CROX -3.29%) Were having blasts today, falling 3.8% as of 1:25 p.m. ET. They were doing much worse than the market overall. for comparison, S&P 500 was down 1.1%.
There wasn’t any specific financial news from Crocs that caused the stock to fall. But the Bureau of Labor Statistics CPI (Consumer Price Index) report yesterday is the likely cause. Inflation in the month of June rose 9.1% year over year, the biggest increase since 1980.
And what does this have to do with Crocs? With basic things like food and gas rising the cost of living rapidly, consumers are adjusting their spending habits. While retail sales were showing resilience in May (as measured by the US Census Bureau), the economic picture is rapidly changing. More discretionary spending on things like clothing and apparel could be in for a pullback, which would be bad news for shoe companies like Crocs.
There was some good news for Crocs though. A recent announcement by the company said it has received judgments against USA Dogs and Double Diamond Distribution, two companies making knockoff versions of Crocs’ foam clogs. The monetary consideration is minimal, but helps protect Crocs’ patents on its shoe design.
Legal proceedings aside, Crocs is likely to remain in growth mode this year, even as it experiences some turbulence in consumer spending. Not only is the Crocs brand expanding, but the company recently completed the acquisition of the casual footwear brand Hey Dude, which is rapidly expanding amongst young buyers. It will take time to unlock the Hey Dude’s full potential by plugging it into Crocs’ existing distribution channels, but could give the stock a big boost in the years to come.
For now, inflation is tarnishing the market’s ability to see long-term potential for Crocs. The shares trade for just 4.4 times expected one-year forward earnings. If Crocs can execute on its plans, the stock could be a great buy right now for investors looking to stay tight for at least a few years.