Legal & Courts  February 24, 2025

Lawsuit claims Crocs leaders misled investors about Heydude performance

Crocs sandals
Crocs’ classic sandals on display. Dallas Heltzell/BizWest
By

BROOMFIELD — An investor in Crocs Inc. (Nasdaq: CROX) has sued the casual-footwear company’s board of directors and executives, accusing the leadership team of misleading investors about the financial performance of Heydude, a footwear brand Crocs bought for $2.5 billion in 2021.

The lawsuit, filed Friday in U.S. District Court of Colorado by Arizona resident James O’Connor, claims that the “strong revenue growth exhibited” by Heydude following Crocs’ acquisition “was largely driven by a conscious decision on the part of Crocs management to aggressively stock its third-party wholesaler pipeline with Heydude products, regardless of the level of retail demand being experienced by those wholesalers.”

Crocs’ leaders “pursued this overstocking strategy despite assurances to investors” by Crocs CEO Andrew Rees, who is a defendant in O’Connor’s lawsuit, “that Crocs would not ‘play the game of forcing inventory into [wholesalers] and getting them overstocked,’” the complaint said. “As a result, unbeknownst to investors, the Company reported Heydude revenue numbers in 2022 that were not indicative of actual retail demand for Heydude shoes and, over the longer term, were entirely unsustainable.”

SPONSORED CONTENT

The complaint continues: “Moreover, after the Company’s retail partners began to destock this excess inventory, the Individual Defendants further misled investors by concealing that waning product demand for Heydyde shoes would further impact the Company’s financial results.”

While Crocs did recently post record sales of $4.1 billion for fiscal 2024, it’s no secret that Heydude has been a persistent drag on the company’s overall performance. 

On a conference call with investors and analysts to announce the Heydude acquisition in late 2021, Crocs officials were bullish on Heydude’s ability to quickly add revenue to the company’s balance sheet, predicting $1 billion in sales from the Heydude business by 2024.

But Heydude’s revenue was down 13.2% year over year to $824 million in 2024. Crocs management had previously told investors that they expected the brand’s sales to be down between 8% and 10% for the year.

Moving forward into the new fiscal year, Crocs is taking “a prudent approach to how we shape 2025 guidance for Heydude as we focus on reigniting the brand,” Rees said in a statement this month when the company reported its 2024 earnings. 

Last April, Crocs hired Terence Reilly, then the president of trendy drinkwear maker Stanley Brand, to run Heydude. 

Crocs’ stock price, which is down more than 12% over the last 12 months, has taken several major hits in recent years that have corresponded with the release of disappointing Heydude sales figures. 

“The fall in stock price did not hurt several Company insiders, who since the acquisition of Crocs, and while well aware of management’s ‘conscious decision’ to overstock inventory channels, sold material amounts of their Crocs common stock for substantial profits,” alleges O’Connor’s lawsuit, which accuses Crocs leadership of breach of fiduciary duties, unjust enrichment and insider selling.

O’Connor’s complaint claims that Crocs executives and directors “reaped nearly $20 million due to their illicit sales” of company stock. 

Crocs did not immediately respond to a request for comment Monday.

In addition to unspecified damages, the lawsuit demands that the court direct “Crocs to take all necessary actions to reform and improve its corporate governance and internal procedures to comply with applicable law and to protect the Company and its shareholders from a repeat of the damaging events.”

The lawsuit is James O’Connor vs. Thomas Smach et al, case number 1:25-cv-00576-SBP, filed Feb. 21 in U.S. District Court of Colorado. 

An investor in Crocs Inc. has sued the casual-footwear company’s board of directors and executives, accusing the leadership team of misleading investors about the financial performance of Heydude, a footwear brand Crocs bought for $2.5 billion in 2021.

Related Posts

A Maryland native, Lucas has worked at news agencies from Wyoming to South Carolina before putting roots down in Colorado.
Categories: Broomfield Legal & Courts Manufacturing Sunday Weekly Today's News Crocs Inc. Heydude
Sign up for BizWest Daily Alerts
Closing in 8 seconds...

ONE FREE EMAIL CAN MAKE YOU BETTER IN BUSINESS. IT'S AN EASY YES!

×

Stay informed with critical information, news and insights throughout the Boulder Valley and Northern Colorado.