Crocs Snaps Up Footwear Brand Hey Dude For $2.5 Billion

Footwear giant Crocs CROX is set to buy privately-owned casual shoes brand Hey Dude for $2.5 billion as the U.S. clog maker diversifies its global footprint. The deal, subject to customary closing conditions and regulatory approvals, is expected to close in the first quarter of next year, and by 2024 Crocs expects to make its new asset a $1 billion dollar brand.

With Hey Dude on board, Crocs could move from fourth position behind Sketchers, Deckers and Wolverine to second (based on 2022 pro forma revenue) in the $305 billion casual footwear market. Hey Dude’s sales in calendar 2021 are forecast to be around $570 million.

Crocs CEO Andrew Rees has described the Italian-origin acquisition as “another high-growth, highly profitable” business to add to the company’s portfolio. “We believe Hey Dude’s comfortable and lightweight products are aligned to long-term consumer trends and are a perfect fit. We intend to leverage our marketing and infrastructure to build upon Hey Dude’s strong foundation,” he said in a statement.

Hey Dude was founded Italy in 2008 by CEO Alessandro Rosano who wanted to create comfortable and accessible footwear. However, today, 95% of revenue comes from the American market—and the brand also has almost one million followers across social media channels. Rosano said: “We are proud of the brand we built. Crocs is perfectly positioned to take Hey Dude to the next level.”

Rosano added that he has “long admired” Crocs whose sales rocketed by 13% to $1.4 billion in 2020, helped by stay-home Covid restrictions. Crocs achieved (at the time) its highest ever quarterly revenue in the company’s history in Q4 last year, which it has since beaten thanks to continued strength in 2021.

Hey Dude hasn’t done badly itself. Crocs executive vice president and CFO, Anne Mehlman commented: “Hey Dude has experienced incredible growth in revenue and profits over the past few years and the company is expected to be immediately accretive to our growth, operating margins and earnings.”

The purchase is being funded by $2.05 billion in cash and $450 million in Crocs shares issued to Rosano based on the average of the daily volume-weighted average price of Crocs stock during the 20 days immediately prior to the signing date. The $2.05 billion will come from a $2 billion term loan and $50 million borrowing through an existing credit facility.

New leadership at Hey Dude

When the deal closes, Hey Dude will operate as a standalone division, with founder Rosano, handling product development as strategic advisor and creative director. Rick Blackshaw—the former CEO at CCM Hockey—will take over as executive vice president and brand president.

Blackshaw is a seasoned veteran of the footwear and fashion market with over 25 years under his belt. He has previously served as president of boat shoe brand Sperry where he diversified the non-boat category from 36% to 50% of the business; president of Keds where collabs included Taylor Swift; and vice president/general manager of the Chuck Taylor division of Converse. Blackshaw will become a member of the Crocs executive leadership team and report to CEO Rees.

In a presentation to investors, Crocs said that the addition of Hey Dude would also help to balance the company’s category portfolio which is 71% skewed to clogs. The new arrival will take that share down to 57% with Hey Dude’s casual offering making up 20% of sales.

Investors did not react positively to the deal. Crocs stock fell by 12% today, though year-to-date it is 97% up—peaking in November—helped by a strong sales performance last year and this year to date.