Why Stores Are Central to Hey Dude’s Growth Rebound

Hey Dude just posted another disappointing quarter, but parent company Crocs Inc. has a plan to build the brand back to growth. And opening more stores is a key part of that.

In a Tuesday call with investors, Crocs brand president Anne Mehlman said that the company will open about 30 Hey Dude stores in 2024, six of which have already opened during the first quarter. This retail push is meant to help grow direct sales and build brand awareness.

“We expect that revenue contribution to build throughout the year,” Mehlman said with regard to the store openings. “And that’s supported by a strong pipeline of new products.”

Hey Dude revenues were down 17.2 percent to $195 million in Q1. The slowdown was present in both wholesale, which decreased 19.7 percent, and direct-to-consumer, which decreased 11 percent. Given the slowdown, Crocs Inc. now expects Hey Dude revenues to decline between 10 and 8 percent for the full year, down from its prior outlook of between flat and slightly up for the year. However, Crocs management reiterated its confidence in growing the brand in the long term.

The store push is one pillar of the retail strategy Crocs Inc. unveiled for Hey Dude in November. This plan, based off of the current one in place for the Crocs brand, in part involves strengthening strategic wholesale partnerships in the family channel, sporting goods sector, mall-based specialty channel and larger regional chains. It also means exiting accounts with smaller and less essential wholesale partners.

When it comes to launching its own stores, Hey Dude is going for a hybrid model that blends outlet and full-price. In this format, the front of the store is typically stocked with full-size runs of newer or slightly older products while the back features clearance product.

“It provides a vehicle to educate the consumer about the Hey Dude brand and allows them to find a product they can buy and take away and enjoy,” Rees said. “And the back of the store allows us to liquidate old product at much higher prices than we’d be able to liquidate elsewhere and give the consumer incredible value.”

Rees said the company is targeting new store openings in a combination of existing markets and newer regions for the brand.

“We’re using the stores to introduce new customers to the brand,” Rees said.

Given the store growth trajectory, Crocs Inc. expects Hey Dude’s DTC channel to outperform its wholesale growth for 2024 and projects the strongest revenue contributions from retail in the fourth quarter.

In addition to retail stores, Crocs is also doubling down on product innovation and marketing efforts for Hey Dude.

“We are optimistic about our pipeline of new product introductions for Hey Dude, but some of them are unproven at this stage,” said Rees. “[We’re] driving brand relevance and making the Hey Dude brand relevant to more consumers.”