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Shares of foam clog maker Crocs (CROX -1.48% ) were down 3.8% today as of market close. There was no specific news from Crocs to cause the pullback. However, consumer confidence is falling as inflation rises. According to The Conference Board's Consumer Confidence Survey, households are feeling the most pessimistic about the outlook for income, business, and labor market conditions since early 2013.
Since Crocs is an apparel company, shopping for shoes could take a hit if a recession strikes and consumers tighten up their budgets.
A consumer sentiment index is backward-looking and isn't exactly a reliable tool for predicting whether tough economic times are ahead or not. The last time the Consumer Confidence Expectations Index was this low (March 2013), the stock market was gearing up for a massive run higher. From March to the end of December 2013, the S&P 500 notched a 22% gain.
Nevertheless, times are different from what they were nearly a decade ago, and inflation -- especially in energy prices -- does appear to be altering shopper behavior. Wardrobe spending can be particularly sensitive if consumers start looking for ways to save some coin by delaying new clothes purchases.
Crocs sales were up 18.5% year over year in the first quarter of 2022, or up nearly 44% when including the recent acquisition of casual footwear brand Hey Dude. Management has forecasted full-year 2022 sales to be about $3.5 billion, a prediction that indicates Crocs will maintain its double-digit sales growth rate this year (the Crocs brand growth of at least 20% compared to 2021).
But that was a couple of months ago, and economic conditions are changing rapidly as the U.S. Federal Reserve hikes interest rates to try and fight inflation. Crocs will get a chance to prove its forecast true, likely in late July or early August when it reports on Q2 2022. In the meantime, Crocs stock trades for just 4.1 times one year forward expected earnings, reflecting risks associated with a fragile economy. This is perhaps the best deal among shoe stocks right now if the company delivers on its growth ambitions.
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