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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.07pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.07pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.08pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adverse+3
costly+3
fail+2
litigation+2
disruption+2
Positive rising
stabilize+3
greater+2
success+1
effective+1
favorable+1
Risk Factors (Item 1A)
17,795 words
ITEM 1A. Risk Factors
You should carefully consider the following risk factors and all other information presented within this Annual Report on Form 10-K. The risks set forth below are those that our management believes are applicable to our business and the industry in which we operate. These risks have the potential to have a material adverse effect on our business, results of operations, cash flows, financial condition, liquidity, access to sources of financing, or stock price. The risks included here are not exhaustive and there may be additional risks that are not presently material or known. Because we operate in a very competitive and rapidly changing environment, new risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all such risk factors on our business. Please also refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K.
Risks Related to Our Products
Our success depends substantially on the value of our brands; failure to strengthen and preserve this value, either through our actions or those of our business partners, could have a impact on our financial results.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
impairments+9
loss+4
impairment+3
unfavorable+3
critical+1
Positive rising
effective+3
gains+2
benefit+1
achieved+1
progress+1
MD&A (Item 7)
10,310 words
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Business Overview
Crocs, Inc. and its consolidated subsidiaries (collectively, the “Company,” “we,” “us,” or “our”) are engaged in the design, development, worldwide marketing, distribution, and sale of casual lifestyle footwear and accessories for all. We strive to be the world leader in innovative casual footwear for all, combining comfort and style with a value that consumers want. The vast majority of shoes within the Crocs Brand’s collection contain Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step. The HEYDUDE Brand provides an innovative loafer concept that is differentiated through easy on and off, quality, and comfort. The broad appeal of our footwear has allowed us to market our products through a wide range of distribution channels. We currently sell our products in more than 85 countries, through two distribution channels: wholesale and direct-to-consumer. Our wholesale channel includes domestic and international multi-brand retailers, mono-branded partner stores, e-tailers, and distributors; our direct-to-consumer channel includes company-operated retail stores, company-operated e-commerce sites, and third-party marketplaces.
Known or Anticipated Trends
Based on our recent operating results and our assessment of the current operating environment, we anticipate certain trends will continue to impact our future operating results:
We believe much of our success has been attributable to the strength of the Crocs and HEYDUDE brands. To be successful in the future, particularly outside of the U.S., where our brands may be relatively less well-known or perceived differently, we believe we must timely and appropriately respond to changing consumer demand and leverage the value of our brands across all sales channels. We may have difficulty managing the image of our brands across markets and international borders as certain consumers may perceive the image of either or both of our brands to be out of style, outdated, or otherwise undesirable. Maintaining, promoting, and growing our brands will depend on our design and marketing efforts, including product innovation and quality, advertising and consumer campaigns, as well as our ability to adapt to a rapidly changing media environment, including our continued reliance on social media and digital dissemination of advertising campaigns.
In the past, several footwear companies, including ours, have experienced periods of rapid growth in revenues and earnings followed by periods of declining revenues and losses, and our business may be similarly affected in the future. For example, during the second quarter of the fiscal year ended 2025, there was a triggering event for the HEYDUDE Brand indefinite-lived intangible assets (which consists solely of the HEYDUDE trademark) (the “trademark”) and the HEYDUDE Brand reporting unit (the ‘reporting unit”) goodwill. The triggering event was due to downward revisions during the second quarter of the fiscal year ended 2025 to our internal HEYDUDE Brand forecast as a result of the extended time we believed it would take us to stabilize the HEYDUDE Brand and return it to growth. This was partly due to the current and projected impact of a weak U.S. consumer and the disproportionate impact of tariffs on HEYDUDE Brand products, which became evident in the second quarter of the fiscal year ended 2025. See also the risk factor under “Financial and Accounting Risks — We may incur impairments of the carrying value of our goodwill and other intangible assets, which could have a material adverse effect on our business and financial results.” Consumer demand for our products and the equity of our brands could also diminish significantly if we, among other things, fail to preserve the quality of our products, are perceived to act in an unethical or socially irresponsible manner, fail to comply with laws and regulations, or fail to deliver a consistently positive consumer experience in each of our markets.
Adverse publicity about regulatory or legal action against us, or by us, could also damage our reputation and the image of our brands, undermine consumer confidence in us, and reduce long-term demand for our products, even if the regulatory or legal action is unfounded or not material to our operations. Negativeclaims or publicity involving us, our products, or any of our key employees, endorsers, or business partners could materially damage our reputation and the image of our brands, regardless of whether such claims are accurate. Social media, which accelerates and potentially amplifies the scope of negative publicity, can accelerate, and increase the impact of, negativeclaims. Further, business incidents that erode consumer trust, such as perceived product safety issues, whether isolated or recurring, in particular incidents that receive considerable publicity or result in litigation, can significantly reduce brand value and have a negative impact on our business and financial results. Additionally, counterfeit reproductions of our products or other infringement of our intellectual property rights, including unauthorized uses of our trademarks by third parties, could harm our brands and adversely impact our business. See also the risk factor under “Risks Related to our Products — Failure to adequately protect our trademarks and other intellectual property rights and counterfeiting of our brands could divert sales, damage our brands’ image, and adversely affect our business.”
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We face significant competition.
The footwear industry is highly competitive. Our competitors include most major athletic and non-athletic footwear companies and retailers with their own private label footwear products. A number of our competitors have significantly greater financial resources, more comprehensive product lines, a broader market presence, longer standing relationships with wholesalers, a longer operating history, greater distribution capabilities, stronger brand recognition, less reliance on a small number of brands or product lines, and spend substantially more on product marketing than we do. Our competitors’ greater financial resources and capabilities in these areas may enable them to better withstand periodic downturns in the footwear industry and general economic conditions, compete more effectively on the basis of price and production, price their products more aggressively in the face of inflationary or other competitive pressures, launch more extensive or diverse product lines, and more quickly develop new and popular products. Continued demand in the market for casual footwear and readily available offshore manufacturing capacity has also encouraged the entry of new competitors into the marketplace and has increased competition from established companies. Some of our competitors are offering products that are substantially similar, in design and materials, to our products. If we are unable to compete successfully in the future, our sales and profits may decline, we may lose market share, our business and financial results may deteriorate, and the market price of our common stock would likely fall.
Additionally, our industry is subject to significant pricing pressure caused by many factors, including, but not limited to, continued inflationary pressure, intense competition and a highly promotional retail environment, consolidation in the retail industry, pressure from retailers to reduce the costs of our products, excess inventory levels in the marketplace, and changes in consumer spending habits and patterns. Although we plan to limit our promotional activity, these foregoing factors may require us to reduce our sales prices to retailers and consumers, which could cause our gross margin to decline. If our sales prices decline and we fail to sufficiently reduce our product costs or operating expenses, our profitability will, in turn decline. In addition, changes in our customer, channel, and geographic sales mix could have a negative impact on our profitability. Any of these outcomes could have a material adverse effect on our business, financial condition, and results of operations.
Introducing new products may be difficult and expensive. If we are unable to do so successfully, our brands may be adversely affected, and we may not be able to maintain or grow our current revenue and profit levels.
To successfully continue to evolve our footwear product line to appeal to our consumers, we must anticipate, understand, and react to the rapidly changing tastes of consumers and provide appealing merchandise in a timely manner. New footwear models, collaborations, and licenses that we introduce may not be successful with consumers or our brands may fall out of favor with consumers. If we are unable to anticipate, identify, or react appropriately to changes in consumer preferences, our revenues may decrease, the image of our brands may suffer, our operating performance may decline, and we may not be able to execute our growth plans.
In producing new footwear models, collaborations, and licenses, we may encounter difficulties that we did not anticipate during the product development stage. If we are not able to efficiently manufacture new products in quantities sufficient to support wholesale, retail, and e-commerce distribution, we may not be able to recover our investment in the development of new styles, product lines, collaborations, and licenses, and we would continue to be subject to the risks inherent to having a limited product line. Even if we develop and manufacture new footwear products that consumers find appealing, the ultimate success of a new style, collaboration, or license may depend on our pricing. We may introduce products that are not popular, set the prices of new styles too high for the market to bear, or we may not provide the appropriate level of marketing in order to educate the market and potential consumers about our new products. Achieving market acceptance will require us to exert substantial product development and marketing efforts, which could result in a material increase in our selling, general and administrative expenses. There can be no assurance that we will have the resources necessary to undertake such efforts effectively or that such efforts will be successful or that we will dedicate our limited marketing resources to the right product lines. Failure to gain market acceptance for new products could impede our ability to maintain or grow current revenue levels, reduce profits, adversely affect the image of our brands, erode our competitive position, and result in long-term harm to our business and financial results.
See also the risk factor under “Risks Specific to Our Company and Strategy — Our future growth may be dependent in part on HEYDUDE.”
Failure to adequately protect our trademarks and other intellectual property rights and counterfeiting of our brands could divert sales, damage our brands’ image, and adversely affect our business.
We utilize trademarks, trade names, copyrights, trade secrets, issued and pending patents and trade dress, and design rights on nearly all of our products. We believe that having distinctive marks that are readily identifiable trademarks and intellectual property is important to our brands, our success, and our competitive position. The laws of some countries, for example, China,
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do not protect intellectual property rights to the same extent as do U.S. laws. We frequently discover products that are counterfeit reproductions of our products or that otherwise infringe on our intellectual property rights. If we are unsuccessful in challenging another party’s products on the basis of trademark or design or utility patent infringement or other infringement, particularly in some foreign countries, or if we are required to change our name or use a different logo, or it is otherwise found that we infringe on others’ intellectual property rights, continued sales of such competing products by third parties could harm our brands or we may be forced to cease selling certain products, which could adversely impact our business, financial condition, revenues, and results of operations by resulting in the shift of consumer preference away from our products. If our brands are associated with inferiorcounterfeit reproductions, the integrity and reputation of our brands could be adversely affected. Furthermore, our efforts to enforce our intellectual property rights are typically met with defenses and counterclaims attacking the validity and enforceability of our intellectual property rights. We may face significant expenses and liability in connection with the protection of our intellectual property, and if we are unable to successfully protect our rights or resolve intellectual property conflicts with others, our business or financial condition could be adversely affected.
We also rely on trade secrets, confidential information, and other unpatented proprietary rights and information related to, among other things, the Croslite™ material formulations and product development, particularly where we do not believe patent protection is appropriate or obtainable. Using third-party manufacturers and compounding facilities may increase the risk of misappropriation of our trade secrets, confidential information, and other unpatented proprietary information. The agreements we use in an effort to protect our intellectual property, confidential information, and other unpatented proprietary information may be ineffective or insufficient to prevent unauthorized use or disclosure of such trade secrets and information. A party to one of these agreements may breach the agreement, and we may not have adequate remedies for such breach. As a result, our trade secrets, confidential information, and other unpatented proprietary rights and information may become known to others, including our competitors. Furthermore, our competitors or others may independently develop or discover such trade secrets and information, which would render them less valuable to us.
Failure to continue to obtain or maintain high-quality endorsers of our products and social media influencers could harm our business .
We establish relationships with both celebrity endorsers and design, celebrity, and brand collaborators to develop, evaluate, and promote our products, as well as strengthen our brands. In a competitive environment, the costs associated with establishment and retention of these relationships may increase. If we are unable to maintain current associations and/or to establish new associations in the future, this could adversely affect our brands’ visibility and strength and result in a negative impact to financial results. In addition, actions taken, allegations of wrongdoing, or statements made by celebrity endorsers and collaborators associated with our products that harm the public image and reputations of those endorsers and collaborators, or our decisions to ceasecollaborating with them in light of actions taken, allegations of wrongdoing, or statements made by them, could also seriouslyharm the image of our brands with consumers and, as a result, could have an adverse effect on our sales and financial condition.
Our marketing and advertising programs are critical to our ability to attract new consumers and retain existing consumers. We are increasingly using digital and social media platforms to drive further engagement with consumers, with a focus on social media influencers. However, we cannot assure that our marketing and advertising programs will be successful or appeal to our target consumers. Ineffective marketing and advertising programs could result in an inefficient use of funds and hinder our ability to maintain brand relevance, attract new consumers or retain existing consumers.
We rely on technical innovation to compete in the market for our products.
Our success relies on continued innovation in both materials and design of footwear, such as our branded Croslite™, LiteRide™, and Free Feel Technology™ materials. Research and development is a key part of our continued success and growth, and we rely on experts to develop and test our materials and products. Croslite™, our branded proprietary closed-cell resin, is the primary raw material used in the vast majority of our Crocs Brand footwear and some of our accessories. Croslite™ is carefully formulated to create soft, durable, extremely lightweight, and water-resistant footwear that conforms to the shape of the foot and increases comfort. We continue to invest in research and development in order to refine our materials to enhance these properties and to develop new properties for specific applications. We strive to produce footwear featuring fun, comfort, color, and functionality. If we fail to introduce technical innovation in our products, consumer demand for our products could decline, and if we experience problems with the quality of our products, we may incur substantial expense to remedy the problems.
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Risks Related to the Economy
Changes in global economic conditions, including, but not limited to, those driven by tariffs and/or inflation, may adversely affect consumer spending and the financial health of our customers and others with whom we do business, which may adversely affect our financial condition, results of operations, and cash resources.
Uncertainty about current and future global economic conditions may cause consumers, wholesalers, and retailers to defer purchases or cancel purchase orders for our products in response to tighter credit, decreased cash availability, and weakened consumer confidence. Our financial success is sensitive to changes in general economic conditions, both globally and in specific markets, that may adversely affect the demand for our products including recessionary economic cycles, higher interest rates, higher tariffs, higher fuel and other energy costs, increased labor costs, declines in asset values, inflation, increases in commodity prices, higher levels of unemployment, higher consumer debt levels, higher tax rates and other changes in tax laws, public health issues such as a pandemic, or other economic factors, certain of which effects, including cost inflation, we have experienced since 2023 and currently expect to continue to experience in 2026.
Global inflation, elevated interest rates, global industry-wide logistics challenges, and foreign currency fluctuations resulting in a stronger U.S. Dollar (“USD”), have impacted, and we expect will continue to impact, our business, contributing to, among other things, incremental freight costs, increased wages, particularly in our distribution centers, and increased raw material costs. A stronger USD also results in costs for foreign goods purchased in USD but recognized in foreign currencies (“purchasing power”) that are unfavorable.
If global economic and financial market conditions deteriorate, or remain weak, for an extended period of time, the following factors, among others, could have a material adverse effect on our business and financial results:
• Changes in foreign currency exchange rates relative to the USD could have a material impact on our reported financial results. See the risk factor under “Risks Related to International Operations — Changes in foreign exchange rates, most significantly but not limited to the Euro, South Korean Won, and Chinese Yuan or other global currencies could have a material adverse effect on our business and financial results” for more information.
• Slower consumer spending may result in our inability to maintain or increase our sales to new and existing customers and cause reduced product orders or product order delays or cancellations from wholesale accounts that are directly impacted by fluctuations in the broader economy, difficulties managing inventories, higher discounts, and lower product margins.
• If consumer demand for our products declines, we may not be able to profitably operate existing retail stores, due to the higher fixed costs associated with our retail business compared to e-commerce distribution.
• A decrease in credit available to our wholesale or distributor customers, product suppliers, and other service providers, or financial institutions that are counterparties to our Revolving Facility (as defined herein) or derivative instruments may result in credit pressures, other financial difficulties, or insolvency for these parties, with a potential adverse impact on our business, our financial results, or our ability to obtain future financing.
• If our wholesale customers experience diminished liquidity, we may experience a reduction in product orders, an increase in customer order cancellations, and/or the need to extend customer payment terms, which could lead to larger balances and delayed collection of our accounts receivable, reduced cash flows, greater expenses for collection efforts, and increased risk of nonpayment of our accounts receivable.
• If our manufacturers or other parties in our supply chain experience diminished liquidity, and, as a result, are unable to fulfill their obligations to us, we may be unable to provide our customers with our products in a timely manner, resulting in lost sales opportunities or a deterioration in our customer relationships, which could in turn negatively impact future sales.
• If we are unable to mitigate the impact of supply chain constraints, tariffs, and inflationary pressure through price increases or other measures, our results of operations and financial condition could be negatively impacted. Furthermore, even if we are able to raise the prices of our products, consumers might react negatively to such price increases, which could have a material adverse effect on, among other things, our brands, reputation, and sales.
In 2024, the Federal Reserve raised interest rates multiple times in response to concerns about inflation, though it subsequently lowered interest rates multiple times in 2025 and further interest rate changes remain uncertain. Higher interest rates, coupled with reduced government spending and volatility in financial markets may also increase economic uncertainty and negatively affect consumer spending. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner, on favorable terms, or more dilutive.
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Increased inflation rates have already, and may continue to, adversely affect us by increasing our costs, including labor and employee benefit costs. In addition, higher inflation, higher tariffs, and macro turmoil and uncertainty could also adversely affect our customers, which could reduce demand for our products. See the risk factor under “Risks Related to International Operations — Government actions and regulations, such as export restrictions, tariffs, and other trade protection measures could adversely affect our business.” for more information.
Ongoing wars could cause further disruptions in the global economy as well as a negative impact on our business, financial condition, and results of operations.
The ongoing war between Israel and Hamas as well as the ongoing war between Russia and Ukraine have adversely affected the global economy and have resulted in geopolitical instability. While we derived immaterial revenues from markets in and around these conflict zones in 2025, the instability resulting from these wars could cause an adverse effect on our business, financial condition, results of operations, supply chain, intellectual property, partners, customers, or employees should tensions escalate. Further escalation of geopolitical tensions could also result in, among other things, broader impacts that expand into other markets, cyberattacks, supply chain and logistics disruptions, lower consumer demand, and changes to foreign exchange rates and financial markets, any of which may adversely affect our business and supply chain.
A pandemic, epidemic, or other public health emergency has had an adverse impact, and may have a future material adverse impact, on our business, operations, liquidity, financial condition, and results of operations.
Pandemics, epidemics, and other public health emergencies have, among other things, caused global macroeconomic uncertainty, disrupted consumer spending and supply chains, contributed to various global shipping delays and port congestions, and created significant volatility and disruption of financial markets. For example, global supply chain disruptions during fiscal years 2021 and 2022 negatively impacted our gross margins and net income and any pandemics, epidemics, and other public health emergencies could do so again in the future, which could have a material adverse effect on our business, financial condition, and results of operations.
The effects of a pandemic, epidemic, or other public health emergency could affect our ability to successfully operate in many ways, including, but not limited to, the following factors:
• the impact on the economies and financial markets of the countries and regions in which we operate;
• the impact on our supply chain, including, but not limited to, staffing shortages, closed factories, cost inflation, scarcity of raw materials, scrutiny or embargoing of goods produced in the infected areas, and shipping delays;
• reduced foot traffic at our retail stores and those of our wholesale customers due to forcedclosures or other operational restrictions, such as reduced capacity limits and operating hours, declines in tourism, and/or potential changes in consumer behavior and shopping preferences; and
• operational risk, including, but not limited to, cybersecurity risks as a result of extended remote work arrangements and restrictions on employee travel.
Risks Related to Our Supply Chain
Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs.
We rely on third-party manufacturers outside of the U.S. to produce our products. See the risk factor under “We depend solely on third-party manufacturers located outside the U.S.” for more information.
We also rely on international shipping to transport our products to their various geographic markets. At times in the past, international shipping to the U.S. has been disrupted and delayed due to congestion in ports, and despite our actions to mitigate these impacts, we have been negatively impacted by global logistics challenges. Additional delays in shipping may cause us to have to use more expensive air freight or other more costly methods to ship our products. Furthermore, at times in the past,, our third-party manufacturers, distribution centers, where we manage our inventory, and our third-party partners experienced disruptions that impacted our supply chain and increased global lead-time for our products, including port congestion, temporary closures, and worker shortages. Additionally, as a consequence of the COVID-19 pandemic, reductions in the number of ocean carrier voyages and capacity delayed the arrival of imports and increased ocean transport costs globally. Additionally, supply chain labor costs have remained a significant pressure since 2023, as meaningful increases in pay rates were implemented to ensure a sufficient and stable workforce. As supply chain disruptions continue and we manage product availability, the timing of sales to our wholesale partners and consumers may continue to be impacted, and we face increased risk of order cancellations. In addition, global inflation has contributed to already higher incremental freight costs and such inflation may continue to result in higher freight costs. Failure to adequately produce and timely ship our products to customers
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could lead to lost potential revenue, failure to meet customer demand, strained relationships with customers, including wholesalers, and diminished brand loyalty.
We depend solely on third-party manufacturers located outside of the U.S.
All of our footwear products are manufactured by third-party manufacturers, the majority of which are located in Vietnam, China, Indonesia, India, and Mexico. We depend on the ability of these manufacturers to finance the production of goods ordered, maintain adequate manufacturing capacity, and meet our quality standards. We compete with other companies for the production capacity of our third-party manufacturers, and we do not exert direct control over the manufacturers’ operations. As such, from time to time we have experienced delays or inabilities to fulfill customer demand and orders, as discussed in more detail below. During the years ended December 31, 2025, 2024, and 2023, approximately 45%, 51%, and 56%, respectively, of our Crocs Brand production was in Vietnam. Our largest third-party manufacturer for the Crocs Brand, with the majority of operations in Vietnam, produced approximately 45%, 50%, and 47% of our production during the years ended December 31, 2025, 2024, and 2023, respectively, and our second largest third-party manufacturer for the Crocs Brand, primarily operating in both Vietnam and China, produced approximately 28%, 25%, and 26% of our production during the years ended December 31, 2025, 2024, and 2023, respectively. During the years ended December 31, 2025, 2024, and 2023, approximately 44%, 20%, and 5%, respectively, of our HEYDUDE Brand production was in Vietnam. Prior to 2025, the majority of our HEYDUDE Brand production was in China. We cannot guarantee that any third-party manufacturer will have sufficient production capacity, meet our production deadlines, or meet our quality standards. Furthermore, due to the relative concentration of our third-party manufacturers, we may be subject to an increased risk of supply chain disruption, particularly in the event of a natural disaster, pandemic, epidemic, geopolitical tension, or other event impacting the region outside of our control. In addition, disruption at the facilities of our third-party manufacturing partners as a result of a pandemic or otherwise, including through the effects of facility closures, reductions in operating hours and labor shortages has had an adverse effect on our supply chain in the past and may have a material adverse effect in the future. See the risk factor under “ Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs” and “Our operations are dependent on the global supply chain and impacts of supply chain constraints and inflationary pressure could adversely impact our operating results.”
Foreign manufacturing is subject to additional risks, including transportation delays and interruptions, including those caused by pandemics, work stoppages, political instability, including the ongoing war between Israel and Hamas, the ongoing war between Russia and Ukraine, expropriation, nationalization, foreign currency fluctuations, changing economic conditions, cost inflation, changes in governmental policies or laws, and the imposition of tariffs, import and export controls, and other barriers. Because we do not manufacture products internally, we cannot offset any interruption or decrease in supply of our products by increasing production in internal manufacturing facilities, and we may not be able to substitute suitable alternative third-party manufacturers in a timely manner or at acceptable prices. Any disruption in the supply of products from our third-party manufacturers may harm our business and could result in a loss of sales and an increase in production costs, which would adversely affect our results of operations. In addition, manufacturing delays or unexpected demand for our products have required us, and may require us again in the future, to use faster, more expensive transportation methods, such as aircraft, which could adversely affect our profit margins. Furthermore, the cost of fuel is a significant component in transportation costs. Increases in the price of petroleum products can increase our transportation costs and adversely affect our product margins.
In addition, because our footwear products are manufactured outside the U.S., the possibility of adverse changes in trade or political relations between the U.S. and other countries, political instability, changes in legislation and policies, increases in labor costs, changes in international trade agreements and tariffs, adverse weather conditions, or public health issues could significantly interfere with the production and shipment of our products, which would have a material adverse effect on our operations and financial results.
See also the risk factors under “Risks Related to International Operations — Government actions and regulations, such as export restrictions, tariffs, and other trade protection measures could adversely affect our business” and “Risks Related to International Operations — We conduct significant business activity outside the U.S., which exposes us to risks of international commerce.”
Our business could suffer if we need to replace either our third-party manufacturers or our distribution centers.
We do not own or operate any manufacturing facilities and depend exclusively on third-party manufacturers to manufacture our products, the majority of which are located in Vietnam, China, and Indonesia. Accordingly, our success depends, in part, on our ability to identify reputable third-party manufacturers who can fulfill our orders timely and to our requirements, as well as the timely importation, customs clearance, and shipment of products to and from our various distribution centers. We also compete with other companies for the production capacity of our third-party manufacturers. Some of these competitors may place larger orders than we do, and, as a result, may have an advantage or priority in securing production capacity. If we experience a
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significant increase in demand, or if an existing third-party manufacturer needs to be replaced, we may have to expand our third-party manufacturing capacity. We cannot guarantee that this potential additional capacity will be available when needed or on terms that are acceptable to us. We also enter into purchase order commitments specifying a time for delivery, method of payment, design and quality specifications, and other standard industry terms and conditions, but we do not have long-term contracts with any third-party manufacturer. Furthermore, none of the third-party manufacturers we use produce our products exclusively.
In addition, we rely on a number of company-operated and third-party operated distribution facilities around the world to warehouse and ship products to our customers and to our retail stores and perform other related logistics services. Our ability to meet our needs and the needs of our customers depends, in part, on the operation of these distribution centers. Our distribution centers generally utilize computer-controlled and automated equipment, which are subject to various risks, including software viruses, security breaches, power interruptions, or other system failures. If any of our distribution centers were to close or become inoperable or inaccessible for any reason, including, but not limited to, natural disasters, severe weather, labor shortages, fires, system failures, software viruses, security breaches, and/or pandemics, or if we fail to successfully consolidate existing facilities or transition to new facilities, we could experience a substantial loss of inventory, disruption of deliveries to our customers and our retail stores, increased costs, and longer lead times associated with the distribution of our products during the period that would be required to reopen or replace the facility. Any such disruptions could have a material adverse effect on our business, financial condition and results of operations.
We also rely upon third-party transportation providers for substantially all of our product shipments, including shipments to and from our distribution centers to our retail stores, and to our wholesale and DTC customers. Our utilization of these shipping services is subject to various risks, including, but not limited to, potential labor shortages (stemming from labor disputes, strikes, or otherwise), severe weather, and pandemics, which could delay the timing of shipments, and increases in wages and fuel prices, which could result in higher transportation costs. The continued increase in popularity of online shopping driven by changes in consumer shopping preferences has amplified certain of these risks, oftentimes resulting in capacity constraints. We have incurred, and may continue to incur, higher freight and other logistics costs as a result of certain of the foregoing factors. Any delays in the timing of our product shipments or increases in transportation costs could have a material adverse effect on our business, financial condition and results of operations.
Our operations are dependent on the global supply chain and impacts of supply chain constraints and inflationary pressure could adversely impact our operating results.
Our operations have been in the past, and may continue to be, impacted by supply chain constraints and raw material shortages, resulting in increased material costs, longer lead times, port congestion, and increased freight costs, the uncertain economic environment, tariffs, and macroeconomic trends. In addition, current or future governmental policies may increase the risk of inflation, which could further increase the costs of raw materials and components for our business. Similarly, if costs of goods continue to increase, our suppliers may seek price increases from us. If we are unable to mitigate the impact of supply chain constraints and inflationary pressure through price increases or other measures, our gross margins, results of operations and financial condition could be negatively impacted. Even if we are able to raise the prices of our products, consumers might react negatively to such price increases, which could have a material adverse effect on, among other things, our brands, reputation, and sales. If our competitors substantially lower their prices, we may lose customers and mark down prices. Our profitability may be impacted by lower prices, which may negatively impact gross margins. We are unable to predict the impact of these constraints on the timing of revenue and operating costs of our business in the near future. Raw material supply shortages and supply chain constraints, including cost inflation, have impacted, and could continue to negatively impact our ability to meet consumer demand, which in turn has impacted, and could in the future impact our net sales revenues and market share. See the risk factor under “Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs.”
If we do not accurately forecast consumer demand, we may have excess inventory to liquidate or have greaterdifficulty filling our customers’ orders, either of which could adversely affect our business.
The footwear industry is subject to cyclical variations, consolidation, contraction and closings, as well as fashion trends, rapid changes in consumer preferences, the effects of weather, general economic conditions, and other factors affecting consumer demand. In addition, purchase orders from our wholesale customers are generally subject to rights of cancellation and rescheduling by the wholesaler. These factors make it difficult to forecast consumer demand. If we overestimate demand for our products, we may be forced to liquidate excess inventories at discounted prices resulting in losses or lower gross margins. Conversely, if we underestimate consumer demand, we could have inventory shortages, which can result in lower sales, delays in shipments to customers, and expedited shipping costs, and adversely affect our relationships with our customers and diminish
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brand loyalty. Excess inventory, or any failure on our part to satisfy increased demand for our products, could adversely affect our business and financial results.
Our third-party manufacturing operations must comply with labor, trade, and other laws. Failure to do so may adversely affect us.
We require our third-party manufacturers to meet our quality control standards and footwear industry standards for working conditions and other matters, including compliance with applicable labor, environmental, and other laws; however, we do not control our third-party manufacturers or their respective labor practices. A failure by any of our third-party manufacturers to adhere to quality standards or labor, environmental, and other laws could cause us to incur additional costs for our products, generate negative publicity, damage our reputation and the value of our brands, and discourage customers from buying our products. We also require our third-party manufacturers to meet certain product safety standards. A failure by any of our third-party manufacturers to adhere to such product safety standards could lead to a product recall, which could result in critical media coverage; harm our business, brands, and reputation; and cause us to incur additional costs.
In addition, if we or our third-party manufacturers violate U.S. or foreign trade laws or regulations, we may be subject to extra duties, significant monetary penalties, the seizure and the forfeiture of the products we are attempting to import, or the loss of our import privileges. Possible violations of U.S. or foreign laws or regulations could include inadequate record keeping of our imported products, misstatements or errors as to the origin, quota category, classification, marketing or valuation of our imported products, and fraudulent visas or labor violations. The effects of these factors could render our conduct of business in a particular country undesirable or impractical and have a negative impact on our operating results. We cannot predict whether additional U.S. or foreign customs quotas, duties, taxes other charges, or restrictions will be imposed upon the importation of foreign produced products in the future or what effect such actions could have on our business or results of operations. See the risk factor under “We depend solely on third-party manufacturers located outside the U.S.” for more information.
For example, China’s Xinjiang Uyghur Autonomous Region (the “XUAR”) is the source of large amounts of cotton and textiles for the global apparel and footwear supply chain. The United States Treasury Department placed sanctions on China’s Xinjiang Production and Construction Corporation (“XPCC”) for serious human rights abusesagainst ethnic minorities in XUAR. Additionally, the Uyghur Forced Labor Prevention Act (“UFLPA”) empowers the U.S. Customs and Border Protection Agency (the “U.S. CBP”) to withhold release of items produced in whole or in part in the XUAR, or produced by companies included on a government-created UFLPA entity list, creating a presumption that such goods were produced using forced labor. XPCC controls many of the cotton farms and much of the textile industry in the region, and many large factories in XUAR produce fabrics and yarn for apparel and footwear.
Although we do not believe that our suppliers source materials from such area of China for the products they sell to us or use to manufacture our products, we have no known involvement with XPCC or its subsidiaries and affiliates, and we prohibit our suppliers from doing business with XPCC or using forced labor, we do not have the ability to completely map our supply chain, and we could be subject to penalties, fines or sanctions if any of the suppliers from which we purchase goods is found to have dealings, directly or indirectly, with XPCC or entities it controls. Additionally, our products or materials (including potentially non-cotton materials) could be held or delayed by the U.S. CBP, which would cause delays and unexpectedly and negatively affect our inventory levels. Even if we were not subject to penalties, fines or sanctions, if products we source are linked in any way to XPCC, the XUAR, or an entity on the UFLPA entity list, our reputation could be damaged. In addition, the UFLPA has induced greater supply chain compliance costs and delays to us and to our suppliers. Compliance with the UFLPA could continue to affect the global supply chain, the price and scarcity of traceable cotton in the marketplace and could lead to an increase in our cost of goods sold, which may have an adverse effect on our profitability.
See the risk factor under “ Risks Related to International Operations — We conduct significant business activity outside the U.S., which exposes us to risks of international commerce. ”
We depend on a number of suppliers for key production materials, and any disruption in the supply of such materials could interrupt product manufacturing and increase product costs.
We depend on a number of sources for the primary materials used to make our footwear. We source the elastomer resins that constitute the primary raw materials used in compounding our Croslite™, LiteRide™, and Free Feel Technology™ formulations, which we use to produce our various footwear products, from multiple suppliers. If the suppliers we rely on for elastomer resins were to cease production of these materials, we may not be able to obtain suitable substitute materials in time to avoid interruption of our production schedules. We are also subject to market conditions related to supply and demand for our raw materials and any resulting shortages in supply, as well as impacts of any global shipping or logistics delays. We may have to pay substantially higher prices in the future for the elastomer resins or any substitute materials we use, which would
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increase our production costs and could have an adverse impact on our product margins. If we are unable to obtain suitable elastomer resins, or if we are unable to procure sufficient quantities of the materials that go into the Croslite™, LiteRide™, and Free Feel Technology™ formulations, we may not be able to meet our production requirements in a timely manner or may need to modify our product characteristics, which could result in less favorable market acceptance, lost potential sales, delays in shipments to customers, strained relationships with customers, and diminished brand loyalty.
Risks Related to International Operations
Changes in foreign exchange rates, most significantly but not limited to the Euro, South Korean Won, and Chinese Yuan or other global currencies could have a material adverse effect on our business and financial results.
As a global company, we have significant revenues and costs denominated in currencies other than the USD. We are exposed to the risk of losses resulting from changes in exchange rates on monetary assets and liabilities within our international subsidiaries that are denominated in currencies other than the subsidiaries’ functional currencies. Likewise, our U.S. subsidiaries are also exposed to the risk of losses resulting from changes in exchange rates on monetary assets and liabilities that are denominated in a currency other than the USD. We have experienced, and will continue to experience, changes in exchange rates, impacting both our statements of operations and the value of our assets and liabilities denominated in foreign currencies.
In accordance with our operating practices, we hedge a significant portion of our foreign currency transaction exposures arising in the ordinary course of business to reduce risks in our cash flows and earnings. We use cash flow hedges to minimize the variability in cash flows caused by fluctuations in foreign currency exchange rates related to our external sales and external purchases of inventory. Currency forward agreements involve fixing the exchange rates for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically settled in USD for their fair value at or close to their settlement date. We may also use currency option contracts under which we will pay a premium for the right to sell a specified amount of a foreign currency prior to the maturity date of the option. Our hedging strategy may not be effective in reducing all risks, and no hedging strategy can completely insulate us from foreign exchange risk. Further, our use of derivative financial instruments may expose us to counterparty risks. Although we only enter into hedging contracts with counterparties having investment grade credit ratings, it is possible that the credit quality of a counterparty could be downgraded or a counterparty could default on its obligations, which could have a material adverse impact on our financial condition, results of operations, and cash flows.
Further, our ability to sell our products in foreign markets and the USD value of the sales made in foreign currencies can be significantly influenced by changes in exchange rates. A decrease in the value of foreign currencies relative to the USD could result in lower revenues, gross margin compression, and increased losses from currency exchange rates. Foreign exchange rate volatility could also disrupt the business of the third-party manufacturers that produce our products by making their purchases of raw materials more expensive and more difficult to finance. For the Crocs Brand, we pay the majority of our third-party manufacturers, located primarily in Vietnam and China, in USD. For the HEYDUDE Brand, we pay the majority of our third-party manufacturers, located primarily in Vietnam and China, in Chinese Yuan and USD. In 2025, we experienced increases in revenues of approximately $9.4 million, or 0.2%, primarily due to favorable fluctuations in the Euro, partially offset by unfavorable fluctuations in the South Korean Won, relative to the USD. Strengthening of the USD against Asian and European currencies, and various other global currencies, adversely impacts our USD reported results due to the impact on foreign currency translation. While we enter into foreign currency exchange forward contracts to reduce our exposure to changes in exchange rates on monetary assets and liabilities, the volatility of foreign currency exchange rates is dependent on many factors that cannot be forecasted with reliable accuracy and, as a result, our forward contracts may not prove effective in reducing our exposures.
Government actions and regulations, such as export restrictions, tariffs, and other trade protection measures, could adversely affect our business.
We, similar to many other companies with overseas operations, source, import, and sell products in other countries that have been impacted, and could continue to be impacted, by changes to the trade policies of the U.S. and foreign countries (including governmental action related to tariffs, international trade agreements, trade restrictions, or economic sanctions). Such changes, which are out of our control, have the potential to adversely impact our industry and the global demand for our products, and as a result, could have a material adverse effect on our business, financial condition, and results of operations.
For example, the United States (“U.S.”) has imposed tariffs on foreign imports from multiple countries, including an incremental tariff of 20%, 20%, 19%, 18%, and 19% on all imports from Vietnam, China, Indonesia, India, and Cambodia, respectively, the countries in which our products are primarily manufactured. These tariffs have increased, and may continue to
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increase, the cost of certain products and negatively impact our results of operations. Furthermore, these foregoing factors may require us to increase prices for a greater number of products to offset tariffs. If we increase prices further, this could negatively impact consumer demand. At this time, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of additional tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control, sanctions and investment restrictions, or other trade matters. Although the ultimate scope and timing of any such actions is currently indeterminable, if implemented, they could have a material impact on our financial condition and results of operations. The ultimate impact of these and any other tariffs will depend on various factors, including the extent and duration of the tariffs and how other countries respond to the U.S. tariffs.
Other effects of these changes, including impacts on the price of raw materials, responsive or retaliatory actions from governments, such as retaliatory tariffs on imports into these countries from the U.S. and the opportunity for competitors not subject to such changes to establish a presence in markets where we participate, could also have significant impacts on our results of operations, though whether any of the foregoing actions will be taken remains unclear. The resulting effect on general economic conditions and on our business as a result of increases in prices for goods we import or our suppliers and vendors purchase to produce these items that we acquire through our supply chain are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products. We cannot predict what further action may be taken with respect to export restrictions, tariffs or trade relations between the U.S. and other governments, and any further changes in U.S. or international trade policy could have an adverse impact on our business, financial condition and results of operations.
Furthermore, tariffs or other trade restrictions may lead to continuing uncertainty and volatility in U.S. and global financial and economic conditions and markets, declining consumer confidence, significant inflation and diminished expectations for the economy, and ultimately reduced demand for our products. Such conditions could have a material adverse impact on our business, results of operations, and cash flows. For instance, the fair values of our goodwill and indefinite-lived intangible assets are sensitive to the aforementioned potential unfavorable changes, which could result in the recognition of an impairment charge should the fair values of these assets fall below the carrying values. See also the risk factor under “Financial and Accounting Risks — We may incur impairments of the carrying value of our goodwill and other intangible assets, which could have a material adverse effect on our business and financial results. ”
Also, disruptions and volatility in the financial markets may lead to adverse changes in the availability, terms, and cost of capital. Such adverse changes could increase our costs of capital and limit our access to external financing sources to fund acquisitions, capital projects, or refinancing of debt maturities on similar terms, which could in turn reduce our cash flows and limit our ability to pursue growth opportunities. See also the risk factor under “We conduct significant business activity outside the U.S., which exposes us to risks of international commerce.”
We conduct significant business activity outside the U.S., which exposes us to risks of international commerce.
A significant portion of our revenues is generated from foreign sales. Our ability to maintain the current level of operations in our existing international markets is subject to risks associated with international sales operations. We operate retail stores and sell our products to retailers outside of the U.S. and utilize foreign-based third-party manufacturers. Foreign manufacturing and sales activities are subject to numerous risks, including:
• tariffs, anti-dumping fines, import and export controls, and other non-tariff barriers such as quotas and local content rules;
• delays associated with the manufacture, transportation, and delivery of products, including related to global port backlog or congestion;
• increased transportation costs due to distance, energy prices, inflation, or other factors;
• delays in the transportation and delivery of goods due to increased security concerns;
• restrictions on the transfer of funds;
• restrictions and potential penalties due to privacy laws on the handling and transfer of consumer and other personal information;
• changes in governmental policies and regulations;
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• political unrest, such as the ongoing war between Israel and Hamas as well as the ongoing war between Russia and Ukraine, changes in law, terrorism, natural disasters, or public health issues like a pandemic, any of which can interrupt commerce;
• potential violations of U.S. and foreign anti-corruption and anti-bribery laws by our employees, business partners or agents, despite our policies and procedures relating to compliance with these laws;
• expropriation and nationalization;
• difficulties in managing foreign operations effectively and efficiently from the U.S.;
• difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions;
• longer accounts receivable payment terms and difficulties in collecting foreign accounts receivables;
• difficulties in enforcing contractual and intellectual property rights;
• greater risk that our business partners do not comply with our policies and procedures relating to labor, health, and safety;
• UFLPA detentions by U.S. CBP resulting in revenue loss and adverse media exposure; and
• increased accounting and internal control costs.
In addition, we are subject to customs laws and regulations with respect to our export and import activity, which are complex and vary within legal jurisdictions in which we operate. We cannot ensure there will not be a control failure around customs enforcement despite the precautions we take. We are currently subject to audits by customs authorities. Any failure to comply with customs laws and regulations could be discovered during a U.S. or foreign government customs audit, or customs authorities may disagree with our tariff treatments, and such actions could result in substantial fines and penalties, which could have an adverse effect on our business and financial results. In addition, changes to U.S. trade laws may adversely impact our operations. These changes and any changes to the trade laws of other countries may add additional compliance costs and obligations and subject us to significant fines and penalties for non-compliance. Compliance with these and other foreign legal regimes may have a material adverse impact on our business and results of operations. For example, the UFPLA, which effectively prohibits imports of any goods made either wholly or in part in a certain area of China, generally prohibits importing goods made with forced labor into the U.S., subject to certain exceptions. While this law has not directly affected, nor do we currently expect that this law will directly affect, our supply chain, since we do not believe that our suppliers source materials from such area of China for the products they sell to us or use to manufacture our products, other companies’ attempts to shift suppliers in response to this law or other policy developments could result in, among other things, shortages, delays, and/or price increases that could disrupt our own supply chain or cause our suppliers to renegotiate existing arrangements with us or fail to perform on such obligations. In addition, the ongoing war between Israel and Hamas as well as the ongoing war between Russia and Ukraine has adversely affected the global economy. For more information, please see the risk factors under “Risks Related to the Economy — Ongoing wars could cause further disruptions in the global economy as well as a negative impact on our business, financial condition, and results of operations,” “Risks Related to Our Supply Chain — We depend solely on third-party manufacturers located outside the U.S.,” “ Risks Related to our Supply Chain — Our third-party manufacturing operations must comply with labor, trade, and other laws. Failure to do so may adversely affect us ,” and “Risks Specific to Our Company and Strategy — Our business relies significantly on the use of information technology. A significant disruption to our operational technology or those of our business partners, a privacy law violation, or a data security breach could harm our reputation and/or our ability to effectively operate our business, and our financial results.”
Furthermore, as a global company, we are subject to foreign and U.S. laws and regulations designed to combat governmental corruption, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. Violations of these laws and regulations could result in fines and penalties; criminal sanctions against us, our officers, or our employees; prohibitions on the conduct of our business and on our ability to offer our products and services in one or more countries; and a materially negative effect on our brands and our operating results. Although we have implemented policies and procedures designed to ensure compliance with these foreign and U.S. laws and regulations, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, there can be no assurance that our employees, business partners, or agents will not violate our policies.
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Risks Specific to Our Company and Strategy
We may be unable to successfully execute our long-term growth strategy, maintain or grow our current revenue and profit levels, or accurately forecast demand and supply for our products.
Our ability to maintain our revenue and profit levels or to grow in the future depends on, among other things, the continued success of our efforts to maintain our brands’ image, our ability to bring compelling and profit enhancing footwear offerings to market, our ability to effectively manage or reduce expenses and our ability to expand within our current distribution channels and increase sales of our products into new locations internationally.
Successfully executing our long-term growth and profitability strategy will depend on many factors, including our ability to
• strengthen and maintain our brands;
• focus on relevant geographies and markets, product innovation, and profitable growth, while maintaining demand for our current offerings;
• effectively manage our company-operated retail stores to meet operational and financial targets at the retail store level;
• accurately forecast the global demand for our products, consolidate our distribution and supply chain network to leverage resources, simplify our fulfillment process, and deliver product around the globe efficiently;
• use and protect the Crocs and HEYDUDE brands and our other intellectual property in new and existing markets and territories;
• achieve and maintain a strong competitive position in new and existing markets;
• attract and retain qualified wholesalers and distributors, including partner store operators;
• maintain and enhance our digital marketing capabilities and digital commerce capabilities; and
• execute multi-channel advertising, marketing, collaboration, and social media campaigns to effectively communicate our message directly to our consumers and employees.
While these strategies, along with other steps to be taken, are intended to improve and grow our business, there can be no assurance this will be the case or that additional steps or accrual of additional material expenses or accounting charges will not be required. If additional steps are required, there can be no assurance that they will be properly implemented or will be successful.
Our business relies significantly on the use of information technology. A significant disruption to our operational technology or those of our business partners, a privacy law violation, or a data security breach could harm our reputation and/or our ability to effectively operate our business, and our financial results.
We rely heavily on the use of information technology systems and networks across all business functions, as do our business partners. The future success and growth of our business depend on streamlined processes made available through information systems, global communications, internet activity, and other network processes. We also rely on third-party information services providers worldwide for many of our information technology functions including network, hardware, and software configuration. Additionally, we rely on internal networks and information systems and other technology, including the internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing, and collection of payments. In addition, we use information systems for certain human resource activities and to process our employee benefits, as well as to process financial information for internal and external reporting purposes and to comply with various reporting, legal, and tax requirements. We also have outsourced a significant portion of work associated with our finance and accounting, human resources, customer service, and other information technology functions to third-party service providers.
In addition, we continuously assess and implement upgrades to improve our information technology systems globally. The expansion of our systems and infrastructure has required, and will continue to require, us to commit substantial financial, operational and technical resources. The development and implementation of new systems and any other future upgrades to our systems and information technology may require significant costs and divert our management’s attention and other resources from our core business. There are also no assurances these new systems and upgrades will provide us with the anticipated benefits and efficiencies. Similarly, the time and resources that management will need to devote to operations and upgrades, any delays due to the installation of any upgrade (and customer issues therewith), any resulting service outages, or the impact on the reliability of our data from any upgrade or any legacy system, may have a material adverse effect on our business, financial
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condition, control environment or results of operations. During these implementation periods, we also face a heightened risk of system interruptions and deficiencies or failures in our internal controls involving our information systems and processes. As a result, we could be adversely affected by system or network disruptions if new or upgraded information technology systems are defective, not installed properly or not properly integrated into our operations. Accordingly, system modification or integration failures could have a material adverse effect on our business, financial position, and results of operations.
Furthermore, despite our current security and cybersecurity measures, our systems and those of our third-party service providers may be vulnerable to information security breaches, acts of vandalism, computer viruses, credit card fraud, phishing, ransomware attacks, and interruption or loss of valuable business data, and we have been subject to, and will continue to be subject to, various third-party attacks and phishing scams. Any disruption to these systems or networks could result in product fulfillment delays, key personnel being unable to perform duties or communicate throughout the organization, loss of sales, significant costs for data restoration, the inability to interpret data timely to enhance operations, and other adverse impacts on our business and reputation. Denial of service attacks could also materially adversely affect our business.
We routinely possess sensitive customer and employee information. Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks on a daily basis. Any breach of our network may result in the loss of valuable business data, misappropriation of our consumers’ or employees’ personal information, including credit card information, or a disruption of our business. Despite our existing cybersecurity procedures and controls, if our network is breached, it could give rise to unwanted media attention, materially damage our customer relationships, or harm our business, our reputation, and our financial results, which could result in fines or lawsuits. The costs we incur to protect against such information security breaches may materially increase, including increased investment in technology, the costs of compliance with consumer protection laws, and costs resulting from consumer fraud. Our business partners in our supply chain and customer base also rely significantly on information technology. Despite their existing cybersecurity procedures and controls, if their information systems become compromised, it could, among other things, cause delays in our product fulfillment or reduce our sales, which could harm our business. See Item 1C. Cybersecurity of this Annual Report on Form 10-K for more information on risks associated with cybersecurity procedures and controls.
In addition, the European Union’s General Data Protection Regulation, the California Consumer Privacy Act, and other similar evolving privacy laws impose additional obligations on companies regarding the handling of personal data and provide certain individual privacy rights to persons whose data is stored. These regulations may harm or alter the operations of our e-commerce business, add additional compliance costs and obligations, and subject us to significant fines and penalties for non-compliance. Compliance with these and other foreign legal regimes and the associated costs may have a material adverse impact on our business and results of operations. Increased scrutiny by federal regulators, such as the Federal Trade Commission, and state attorney generals focused on the retail industry may cause us to experience increased privacy and cybersecurity costs such as, but not limited to, organizational changes, deploying additional personnel, acquiring and implementing enhanced privacy and security technologies on our e-commerce sites, mandatory employee training for those employees handling customer and employee personal data, engaging third-party experts and consultants, and the impact of unauthorized use of proprietary information, each of which may materially and adversely affect our business, financial condition and results of operations.
Finally, the SEC has adopted rules that require us to provide greater disclosures around cybersecurity risk management, strategy and governance, as well as disclose the occurrence of material cybersecurity incidents. These rules and regulations may also require us to report a cybersecurity incident before we have been able to fully assess its impact or remediate the underlying issue. Efforts to comply with such reporting requirements could divert management’s attention from our incident response and could potentially reveal system vulnerabilities to threat actors. Failure to timely report incidents under these or other similar rules could also result in monetary fines, sanctions, or subject us to other forms of liability. This regulatory environment is increasingly challenging and may present material obligations and risks to our business, including significantly expanded compliance burdens, costs and enforcement risks.
Artificial intelligence presents risks and challenges that can impact our business including by posing security risks to our confidential information, proprietary information, and personal data.
Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business operations. As with many technological innovations, artificial intelligence presents risks and challenges that could impact our business. We have adopted and integrate generative artificial intelligence tools into our systems for specific use cases, such as marketing, product creation, planning, and general company operations, reviewed by legal and information security, and may continue to do so. Our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit our or our vendors’ ability to maintain an adequate level of service and experience. If we,
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our vendors, or our third-party partners experience an actual or perceived breach of privacy or security incident because of the use of generative artificial intelligence, we may losevaluable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed. Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information, and intellectual property. Any of these outcomes could damage our reputation, result in the loss of valuable property and information, and adversely impact our business.
If our online e-commerce sites, or those of our customers, or third-party digital marketplaces on which we operate, do not function effectively, our business and financial results could be materially adversely affected.
An increasing amount of our products are sold on our e-commerce sites and third-party e-commerce sites. Consumer expectations and the associated competitive pressures have increased and we expect that they will continue to increase relative to various aspects of our e-commerce channel, including speed of product delivery, the cost to ship our products, return policies and other evolving consumer expectations. Consumers are also increasingly using mobile-based applications and third-party digital marketplaces to engage with us and our competitors through digital experiences that are offered on mobile platforms, and we are increasingly using social media and other mobile applications to interact with our consumers as a means to market and sell our products to consumers and enhance their shopping experience. Any failure on our part or on the part of third parties to provide effective, reliable, user-friendly e-commerce platforms that offer a wide assortment of our products and that continually meet the evolving expectations of online shoppers or any failure to provide attractive digital experiences could place us at a competitive disadvantage, result in the loss of sales, and could have a material adverse impact on our business and financial results. Our e-commerce business may be particularly vulnerable to cyber threats including unauthorized access and denial of service attacks. Sales in our e-commerce channel may also divert sales from our retail and wholesale channels.
Furthermore, these third-party platforms may unilaterally and with little or no notice change, among other things, their algorithms, policies, fee structures, content moderation rules, data access, and programs in ways that could, among other things, increase our customer acquisition costs, or otherwise diminish the effectiveness and economics of our efforts. They may also modify order routing, payment processing, and fulfillment requirements or impose new seller standards that are costly or impracticable for us to meet. Any such changes could materially reduce traffic to our store fronts, negatively impact our conversion, impair our ability to target or retarget customers, or increase returns and chargebacks.
Our participation on these platforms also exposes us to certain operational and reputational risks. We have in the past, and may again in the future, encounter counterfeit, gray market, or unauthorized sellers offering similar or infringing products at lower prices, which could impact, among other things, our pricing and brand equity. In addition, because these platforms often control payment flows and dispute resolution processes, we may experience withheld funds, increased reserves, or unfavorable chargeback determinations that we are unable to contest effectively. In addition, platform‑mandated logistics or return policies may increase our shipping, warehousing, and reverse‑logistics costs, and fulfillment errors by platform partners may be attributed to us by consumers.
We are also exposed to evolving legal, regulatory, and geopolitical developments that may materially impact social commerce channels. Governmental actions, investigations, or restrictions targeting specific platforms or their parent companies, including potential bans, limitations on app store availability, forceddivestitures, or heightened data‑privacy and content‑moderation requirements, could impair or eliminate our access to certain platforms, reduce user engagement, or necessitate costly changes to our operations and technology. Increased scrutiny of youth marketing, endorsements and influencer advertising, data collection and cross‑border data transfers, and artificial intelligence–driven recommendations may also lead to new compliance obligations, enforcement actions, fines, or litigation, including class actions and claims under consumer protection, privacy, advertising, or intellectual property laws. If we or our influencers, affiliates, or vendors fail to comply with applicable platform terms or legal requirements, we could face account suspensions, content removals, monetization limits, or termination.
Furthermore, the economics of social commerce remain uncertain. Platforms may, among other things, raise fees, reduce incentives or subsidies, revise revenue‑share arrangements, or introduce paid placement requirements that increase our customer acquisition costs or compress margins. Shifts in platform algorithms and consumer behavior can rapidly change traffic patterns and demand, and our investments in content, creative, and influencer relationships may not yield the anticipated returns. We depend on access to accurate, timely, and sufficiently granular data from these platforms to optimize marketing and inventory and restrictions on data availability, quality, or portability, whether due to platform policy, privacy laws, or technical changes, could also have a negative impact on our ability to measure performance and manage our business.
Any significant disruption, degradation, or change affecting one or more key social commerce platforms, or our inability to adapt to platform dynamics, could materially and adversely affect our revenue growth, brand perception, customer acquisition
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and retention, operating expenses, and overall results of operations. Given the rapid pace of change in this channel and our growing reliance on it, these risks could be exacerbated over time.
Our financial success depends in part on the strength of our relationships with, and the success of, our wholesale and distributor customers.
Our financial success is related to the willingness of our current and prospective wholesale and distributor customers to carry our products. We do not have long-term contracts with most wholesale customers, and sales to these customers are generally on an order-by-order basis and subject to cancellation and rescheduling. Our contracts with distributors typically have terms of one to five years and can be terminated or renegotiated if minimum requirements or other terms are not met. If we cannot fill orders in a timely manner, the sales of our products and our relationships may suffer. Alternatively, if our wholesalers or distributors experience diminished liquidity or other financial issues, we may experience a reduction in product orders, an increase in order cancellations and/or the need to extend payment terms, which could lead to larger outstanding balances, delays in collections of accounts receivable, increased expenses associated with collection efforts, increases in bad debt expenses, and reduced cash flows if our collection efforts are unsuccessful. We have recorded material allowances for doubtful accounts in the past and could do so again in the future. Future problems with customers may have a material adverse effect on our product sales, financial condition, results of operations, and our ability to grow our product line.
Operating company-operated retail stores incurs substantial fixed costs. If we are unable to generate sales, operate our retail stores profitably, or otherwise fail to meet expectations, we may be unable to reduce such fixed costs and avoid losses or negative cash flows.
Opening and operating company-operated retail stores requires substantial financial commitments, including fixed costs, and are subject to numerous risks including consumer preferences, location, and other factors that we do not control. Declines in revenue and operating performance of our company-operated retail stores could cause us to record impairment charges and have a material adverse effect on our business and financial results. During 2025, we opened 88 and closed 16 retail stores, and we operated 514 retail stores at December 31, 2025.
Many of our company-operated retail stores are located in shopping malls and outlet malls, and our success depends in part on obtaining prominent locations and the overall ability of the malls to successfully generate and maintain customer traffic. We cannot control the success of individual malls or store closures by other retailers, which may lead to mall vacancies and reduced customer foot-traffic. In addition, consumer spending and shopping preferences have shifted, and may continue to further shift, away from brick-and-mortar retail to e-commerce channels, both prior to, and as a result of, the COVID-19 pandemic, which may contribute to declining foot-traffic in company-operated retail locations. Continued reduced customer foot-traffic could reduce sales at our company-operated retail stores, including kiosks and store-in-store locations, or hinder our ability to open retail stores in new markets, which could in turn negatively affect our business and financial results. In addition, some of our company-operated retail stores occupy street locations that are heavily dependent on customer traffic generated by tourism. Any substantial decrease in tourism, resulting from an economic slowdown, political, terrorism, social, or military events, natural disasters, public health issues like a pandemic, or otherwise, is likely to adversely affect sales in our stores.
Our financial results may be adversely affected if substantial investments in businesses and operations fail to produce expected returns.
From time to time, we may invest in business infrastructure, expansion of existing businesses or operations, and acquisitions of new businesses, such as HEYDUDE, which require substantial cash investment and management attention. We believe cost effective investments are essential to business growth and profitability; however, significant investments are subject to risks and uncertainties. The failure of any significant investment to provide the returns or profitability we expect, or implementation issues, or the failure to integrate newly acquired businesses could have a material adverse effect on our financial results and divert management attention from more profitable business operations.
Specifically, over the last several years, we have implemented numerous information systems designed to support various areas of our business, including a fully-integrated global accounting, operations, and finance enterprise resource planning system, and warehouse management, order management, and internet point-of-sale systems, as well as various interfaces between these systems and supporting back-office systems. As our business grows, we may also need to make further investments in business systems and distribution capabilities. Issues in implementing or integrating new business operations, such as HEYDUDE, and new systems with our current operations, failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, issues with transitioning to or operating our new distribution centers, cost overruns, or a
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breach in security of these systems could cause delays in product fulfillment and reduced efficiency of our operations, require significant additional capital investments to remediate, and may have an adverse effect on our business and financial results.
We depend on employees across the globe, the loss of whom would harm our business.
We rely on executives and senior management to drive the financial and operational performance of our business. Turnover of executives and senior management can adversely impact our stock price, our results of operations, and our client relationships and may make recruiting for future management positions more difficult or may require us to offer more generous compensation packages to attract top executives. Changes in other key management positions may temporarily affect our financial performance and results of operations as new management becomes familiar with our business. When we experience management turnover, we must successfully integrate any newly hired management personnel within our organization in a timely manner in order to achieve our operating objectives. The key initiatives directed by these executives may take time to implement and yield positive results, and there can be no guarantee they will be successful. If our new executives do not perform up to expectations, we may experience declines in our financial performance and/or delays or failures in achieving our long-term growth strategy.
Further, our business depends on our ability to source and distribute products in a timely, efficient, and cost-effective manner. Labor disputes impacting our suppliers, manufacturers, transportation carriers, or ports pose significant threats to our business, particularly if such disputes result in work slowdowns, lockouts, strikes or other disruptions during our peak importing, or manufacturing and selling seasons. Any such disruption could result in delayed or canceled orders by customers, unplanned inventory accumulation or shortages, and increased transportation and labor costs, negatively impacting our results of operations and financial position.
Our future growth may be dependent in part on HEYDUDE.
We acquired HEYDUDE in 2022. If we fail to execute our strategy, we may not accelerate the growth and success of HEYDUDE, and the brand may not perform as expected. If we are unsuccessful at, among other things, continuing to stabilize the U.S. marketplace by supporting and refining various marketing activities to drive higher brand awareness, enhancing digital capabilities, managing our wholesale relationships and refreshing the marketplace, investing in the brand’s infrastructure as well as sales and business operations, our sales and/or results of operations could be adversely affected, and our business could suffer. In addition, HEYDUDE’s product sales may not meet our expectations or those of third parties such as investors, analysts and/or other stakeholders.
Moreover, HEYDUDE depends on a limited number of third-party manufacturers that are concentrated in Vietnam and China to produce its products. Due to the relative concentration of HEYDUDE’s third-party manufacturers, disruption at the facilities of such third-party manufacturing partners, including through the effects of facility closures, reductions in operating hours and labor shortages may have a material adverse effect in the future. See the risk factors under “ Risks Related to Our Supply Chain — Supply chain disruptions could interrupt product manufacturing and global logistics and increase product costs ,” “ Risks Related to Our Supply Chain — Our operations are dependent on the global supply chain and impacts of supply chain constraints and inflationary pressure could adversely impact our operating results ,” and “ Risks Related to Our Supply Chain — We depend solely on third-party manufacturers located outside of the U.S. ”
We are subject to periodic litigation, which could result in unexpected expenditures of time and resources.
From time to time, we initiate litigation or are called upon to defend ourselves against lawsuits relating to our business. Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of any such proceedings. For a detailed discussion of our current material legal proceedings, see Note 17 — Legal Proceedings in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K. An unfavorable outcome in any of these proceedings, or any future legal proceedings, could have an adverse impact on our business and financial results. In addition, any significant litigation in the future, regardless of its merits, could divert management’s attention from our operations and result in substantial legal fees. We have also had securities class action litigation brought against us from time to time. If our stock price is volatile, we may become involved in this type of litigation again in the future. Any litigation could result in substantial costs and a diversion of management’s attention and resources that are needed to successfully run our business.
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Global climate change, including extreme weather conditions, natural disasters, public health issues, or other events outside of our control, as well as related regulations, could negatively impact our operating results and financial condition.
The effects of climate change, natural disasters such as earthquakes, hurricanes, tsunamis, or other adverse weather and climate conditions, and public health issues like a pandemic, whether occurring in the U.S. or abroad, may disrupt our operations or the operations of our vendors, other suppliers, or customers. Consequences of these events could include property damage, infrastructure damageleading to the inability of our employees and third parties to work, damage to our supply chain, unavailability of raw materials, increased manufacturing costs and disruptions to the productivity of our third-party manufacturers, disruptions to our distribution centers, disruptions to our retail stores, changes in consumer preferences or spending priorities, and energy shortages, which could result in negative impacts to our operating results and financial condition. Additionally, certain catastrophes are not covered by our general insurance policies, which could result in significant unrecoverablelosses. Many governmental and other regulatory bodies worldwide are enacting regulations to mitigate the impacts of climate change. If we, our suppliers, or our third-party manufacturers are required to comply with these laws and regulations, or if we choose to take additional voluntary steps to reduce or mitigate our impact on the climate, we may experience increased costs for energy, production, transportation, and raw materials, increased capital expenditures, or increased insurance premiums and deductibles, each of which could adversely impact our operations. In addition, inconsistent regulations among jurisdictions may also affect our cost to comply with such laws and regulations. Any assessment of the potential impact of future climate change legislation, regulations, or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we operate.
We have a public, enterprise-wide commitment to be Net Zero by 2040. Although we intend to meet these commitments, we may be required to expend significant resources to do so, which could increase our operational costs. Further, there can be no assurance of the extent to which our commitment will be achieved, or that any future investments we make in furtherance of achieving such target and goal will meet investor expectations or legal standards, if any, regarding sustainability performance. As our business context continues to change, we will continue to evaluate pathways and feasibility of our carbon reduction journey. Moreover, we may determine that it is in the best interest of our Company and our stockholders to prioritize other business, social, governance or sustainable investments over the achievement of our current commitments based on economic, technological developments, regulatory and social factors, business strategy or pressure from investors, activist groups or other stakeholders. If we are unable to meet these commitments, then we could incur adverse publicity and reaction from investors, activist groups or other stakeholders, which could adversely impact the perception of us and our products and services by current and potential customers, as well as investors, which could in turn adversely impact our results of operations.
There could be a material disruption to our business as a result of the actions of activist stockholders or others.
We may be subject to various legal and business challenges due to actions or proposals instituted by activist stockholders or others. Responding to such efforts can be costly and time-consuming, disrupt our business, and divert the attention of our Board, management, and employees from the pursuit of our business strategies. Activist stockholders or others may also cause perceived uncertainties as to the future direction of our company or strategy which may be exploited by our competitors and may make it more difficult to attract and retain qualified personnel and potential consumers, and may affect our relationships with consumers, manufacturers, suppliers, investors, and other third parties. In addition, a proxy contest for the election of directors at our annual meeting could require us to incur significant legal and advisory fees and proxy solicitation expenses and require significant time and attention by management and our Board. The perceived uncertainties as to our future direction also could affect the market price and volatility of our securities.
Our restated certificate of incorporation, amended and restated bylaws, and Delaware law contain provisions that could discourage a third-party from acquiring us and consequently decrease the market value of an investment in our stock.
Our restated certificate of incorporation, amended and restated bylaws, and Delaware corporate law each contain provisions that could delay, defer, or prevent a change in control of us or changes in our management. These provisions could discourage proxy contests and make it more difficult for our stockholders to elect directors and take other corporate actions, which may prevent a change of control or changes in our management that a stockholder might consider favorable. In addition, Section 203 of the Delaware General Corporation Law may discourage, delay, or prevent a change in control of us. Any delay or prevention of a change of control or change in management that stockholders might otherwise consider to be favorable could cause the market price of our common stock to decline.
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Increasing scrutiny from investors, regulators, and other key stakeholders with respect to our environmental, social, and governance practices may impose additional costs on us or expose us to new or additional risks.
Investor advocacy groups, certain institutional investors, investment funds, proxy advisory firms, stockholders, customers, non-governmental organizations, consumers and regulators, such as the SEC, are increasingly focused on corporate responsibility, specifically on the CRS practices of companies. These parties have placed increased importance on the implications of the social cost of their investments. From time to time, we communicate certain CRS initiatives and goals to market participants and our customers and business partners. Any corporate responsibility disclosure we make may include our policies, practices, initiatives, and goals on a variety of social and ethical matters, corporate governance, environmental compliance, sustainability, employee health and safety practices, human capital management, product quality, supply chain management, and workforce inclusion and diversity. Although we have undertaken significant efforts to improve and implement our CRS initiatives, it is possible that the aforementioned parties may not be satisfied with such disclosures, our CRS practices, or the speed with which we adopt and/or implement our plans. The establishment of CRS criteria, as well as the collection of relevant CRS data, can be costly, challenging, and time consuming and is subject to evolving CRS reporting standards and regulations.
Furthermore, some stakeholders may disagree with our goals. There is also a risk that stakeholders may change their views on these topics over time. These parties and regulators may also hold divergent opinions on these issues as well as conflicting expectations regarding our culture, values, goals and business, which may affect how we are regulated or perceived. We are increasingly subject to scrutiny from institutional investors, advocacy organizations, and other stakeholders regarding our CRS policies, disclosures, and performance. Some stakeholders advocate for greatertransparency and more aggressive CRS-related commitments in areas such as human capital, labor practices, supply chain oversight, and diversity. Others, including advocacy organizations and litigation-focused groups, have criticized these types of initiatives and have challenged companies, through lawsuits, regulatory investigations, and public campaigns, for implementing these types of strategies that they deem inconsistent with fiduciary duties or legal obligations. Moreover, we may determine that it is in the best interest of our Company and our stockholders to prioritize other business investments over the achievement of our current goals based on economic, technological developments, regulatory and social factors, business strategy or pressure from investors, activists, or other stakeholders.
If our CRS practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, or if we are perceived or deemed to have not appropriately responded to the growing concern for CRS issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage from stakeholders and consumers and our business and financial condition could be materially and adversely affected. We may also incur additional costs or require additional resources to monitor such stakeholder expectations and standards and to meet our targets and commitments. Further, we could fail, or be perceived to fail, to achieve our CRS initiatives or goals, or we could fail to fully and accurately report our progress on such initiatives and goals, which could negatively impact our business.
Indebtedness Risks
The Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Indentures (each as defined below) each impose significant operating and financial restrictions on us and certain of our subsidiaries, which may prevent us from capitalizing on business opportunities. A breach of any of those restrictive covenants may cause us to be in default under the Revolving Credit Agreement, the Term Loan B Credit Agreement and/or the Indentures, and our lenders could foreclose on our assets.
Our Revolving Credit Agreement requires us to maintain certain financial covenants. A decline in our operating performance could negatively impact our ability to meet these financial covenants. If we breach any of these restrictive covenants, the lenders could either refuse to lend funds to us or accelerate the repayment of any outstanding borrowings under the Revolving Credit Agreement. We may not have sufficient funds to repay such indebtedness upon a default or be unable to receive a waiver of the default from the lenders. If we are unable to repay the indebtedness, the lenders could initiate a bankruptcy proceeding or collection proceedings with respect to our assets, all of which secure our indebtedness under the Revolving Credit Agreement. The foregoing risks also apply to our agreement (as amended to date, the “Term Loan B Credit Agreement”) with respect to our senior secured term loan B facility (as amended to date, the “Term Loan B Facility”).
The Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Indentures also contain certain restrictive covenants that limit, and in some circumstances prohibit, our ability to, among other things: incur additional debt or issue preferred stock; sell, lease or transfer our assets; pay dividends on, and make other distributions on, or redeem or repurchase, our common stock; make certain capital expenditures and investments; guarantee debt or obligations; create certain liens; repurchase our common stock; enter into transactions with our affiliates; and enter into certain merger, consolidation, or other reorganizations transactions. These restrictions could limit our ability to obtain future financing, incur or guarantee additional
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debt, incur certain liens, enter into transactions with affiliates, transfer or sell certain assets, make acquisitions or needed capital expenditures, withstand the current or future downturns in our business, or the economy in general, conduct operations or otherwise take advantage of business opportunities that may arise, any of which could place us at a competitive disadvantage relative to our competitors.
The terms of any future indebtedness we may incur could include more restrictive covenants. We cannot assure you that we will be able to maintain compliance with these covenants in the future and, if we fail to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants. In addition, our ability to comply with these negative covenants can be affected by events beyond our control. Our failure to comply with the restrictive covenants described above as well as other terms of our indebtedness could result in an event of default, which, if not cured or waived, could result in our being required to repay these borrowings before their due date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our results of operations and financial condition could be adversely affected.
Our substantial indebtedness could adversely affect our business, financial condition, and results of operations, as well as the ability to meet payment obligations under our Revolving Credit Agreement, the Term Loan B Credit Agreement, and the Notes (as defined below).
Our indebtedness has, among other things, reduced our liquidity and has caused, and could continue to cause, us to place more reliance on cash generated from operations to pay principal and interest on our debt, thereby reducing the availability of our cash flow for working capital and capital expenditure needs or to pursue other potential strategic plans. As of December 31, 2025, we had $1,230.9 million in total indebtedness outstanding (net of $31.1 million of unamortized issuance costs related to the Term Loan B Facility and issuance of the Notes).
Subject to the limits contained in the Revolving Credit Agreement, the Indentures, the Term Loan B Credit Agreement and the applicable agreements governing our other existing indebtedness, we may be able to incur substantial additional debt from time to time. If we do so, the risks related to our level of debt could increase. Specifically, our level of debt could have important consequences, including the following:
• making it more difficult for us to meet our obligations with respect to our debt;
• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate purposes;
• requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions or other general corporate purposes;
• increasing our vulnerability to general adverse economic and industry conditions;
• exposing us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest;
• placing us at a disadvantage compared to other, less leveraged competitors;
• increasing our cost of borrowing; and
• limiting our flexibility in planning for changes in our business and reacting to changes in the industry in which we compete.
Furthermore, if we are unable to meet our debt service obligations or should we fail to comply with our financial and other negative covenants contained in the agreements governing our indebtedness, we may be required to refinance all or part of our debt, sell important strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities. We may not be able to, at any given time, refinance our debt, sell assets, incur additional indebtedness or issue equity securities on terms acceptable to us, in amounts sufficient to meet our needs. If we are able to raise additional funds through the issuance of equity securities, such issuance would also result in dilution to our stockholders. Our inability to service our obligations or refinance our debt could have a material and adverse effect on our business, financial condition or operating results. In addition, our debt obligations may limit our ability to make required investments in capacity, technology, or other areas of our business, which could have a material adverse effect on our business, financial condition, or operating results.
Any of these factors could have an adverse effect on our business, financial condition, and results of operations and our ability to meet our debt payment obligations.
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Despite our current level of indebtedness, we may be able to incur substantially more debt, which could increase the risks to our financial condition described above.
We may be able to incur substantial additional indebtedness in the future. Although certain of the agreements governing our existing indebtedness contain restrictions on the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to a number of qualifications and exceptions, including compliance with various financial conditions. Additional indebtedness incurred in compliance with our existing debt instruments could be substantial. To the extent new debt is added to our current debt levels, the substantial leverage risks described in the immediately preceding risk factor would increase.
As of December 31, 2025, we had $1,230.9 million in total indebtedness outstanding (net of $31.1 million of unamortized issuance costs related to the Term Loan B Facility and issuance of the Notes), including $500.0 million outstanding on the Term Loan B Facility. We had borrowings outstanding of $62.0 million under the Revolving Facility, with total borrowing capacity of approximately $937.4 million thereunder (including $0.6 million of letters of credit outstanding as of such date).
Financial and Accounting Risks
We may be required to record impairments of long-lived assets or incur other charges relating to our company-operated retail operations.
Impairment testing of our retail stores’ long-lived assets requires us to make estimates about our future performance and cash flows that are inherently uncertain. These estimates can be affected by numerous factors, including changes in economic conditions, our results of operations, and competitive conditions in the industry. Due to the fixed-cost structure associated with our retail operations, negative cash flows, or the closure of a store could result in impairment of leasehold improvements, impairment of right-of-use assets, impairment of other long-lived assets, write-downs of inventory, severance costs, significant lease termination costs or the loss of working capital, which could adversely impact our business and financial results. Impairment charges may increase as we continue to evaluate our retail operations. The recording of additional impairments in the future may have a material adverse impact on our business and financial results.
We may incur impairments of the carrying value of our goodwill and other intangible assets, which could have a material adverse effect on our business and financial results.
In connection with the HEYDUDE acquisition, we allocated approximately $710.0 million and $1,780.0 million to goodwill and definite- and indefinite-lived intangible assets, respectively. We evaluate the carrying value of our indefinite-lived intangible assets and goodwill at least annually or when an interim triggering event has occurred indicating potential impairment. During the second quarter of the fiscal year ended 2025, there was a triggering event for the trademark and the reporting unit goodwill, which resulted in non-cash impairment charges of $430.0 million for the trademark and $307.0 million for the reporting unit goodwill. The triggering event was due to downward revisions during the second quarter of the fiscal year ended 2025 to our internal HEYDUDE Brand forecast as a result of the extended time we believed it would take us to stabilize the HEYDUDE Brand and return it to growth. This was partly due to the current and projected impact of a weak U.S. consumer and the disproportionate impact of tariffs on HEYDUDE Brand products, which became evident in the second quarter of the fiscal year ended 2025. Our impairment evaluations represent a critical accounting policy as they require significant judgments and assumptions that we believe to be reasonable but that are inherently uncertain and unpredictable. Changes in the assumptions used to estimate the fair value of our goodwill and indefinite-lived intangible assets could result in impairment charges in future periods as the key assumptions are inherently uncertain, require significant judgment and are subject to change based on, among others, industry and geopolitical conditions, our ability to navigate changing macroeconomic conditions and trends as well as the timing and success of strategic initiatives. In addition, certain factors, such as failure to achieve forecasted revenue growth rates, earnings before interest, taxes, depreciation, and amortization, or increases in the discount rates, have the potential to create variances in the estimated fair values of our goodwill and indefinite-lived intangible assets that could result in additional impairment charges in future periods. See Part II - Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 4 — Goodwill and Intangible Assets, Net in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.
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Our quarterly revenues and operating results are subject to fluctuation as a result of a variety of factors, which could increase the volatility of the price of our common stock.
Quarterly results may also fluctuate as a result of several factors, including new style introductions, general economic conditions, or changes in consumer preferences. Results for any one quarter or year are not necessarily indicative of results to be expected for any other quarter or for any other year. This could lead to results outside of analyst and investor expectations, which could increase volatility of our stock price.
The risks of maintaining significant cash abroad could adversely affect our cash flows in the U.S., our business, and financial results.
We have substantial cash requirements in the U.S., but a significant portion of our cash is generated and held abroad. We generally consider unremitted earnings of subsidiaries operating outside the U.S. to be indefinitely reinvested, and it is not our current intent to change this position. Cash held outside of the U.S. is primarily used for the ongoing operations of the business in the locations in which the cash is held. Most of the cash held outside of the U.S. could be repatriated to the U.S., and under the U.S. Tax Cuts and Jobs Act, could be repatriated without incurring additional U.S. federal income taxes, although some states will continue to subject cash repatriations to income tax. In some countries, repatriation of certain foreign balances is restricted by local laws and could have adverse tax consequences if we were to move the cash to another country. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and may adversely affect our liquidity.
Changes in tax laws and unanticipated tax liabilities and adverse outcomes from tax audits or tax litigation could adversely affect our effective income tax rate and profitability.
We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Our effective income tax rate in the future could be adversely affected by a number of factors, including changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, and the outcome of income tax audits or tax litigation in various jurisdictions around the world. We are regularly subject to, and are currently undergoing, audits by tax authorities in the U.S. and foreign jurisdictions for prior tax years. Please refer to Note 13 — Income Taxes and Note 15 — Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for additional details regarding current tax audits. The final outcome of tax audits and related litigation is inherently uncertain and could be materially different than that reflected in our historical income tax provisions and accruals. Moreover, we could be subject to assessments of substantial additional taxes and/or fines or penalties relating to ongoing or future audits, which could have an adverse effect on our financial position and results of operations.
Future changes in domestic or international tax laws and regulations could also adversely affect our effective tax rate or result in higher income tax liabilities. In August 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which included among other provisions, a 15% minimum tax on “adjusted financial statement income” and became effective for us beginning January 1, 2023. In July 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law in the U.S. The OBBBA includes various provisions which permanently extend certain expiring provisions from the Tax Cuts and Jobs Act of 2017, many of which have different effective dates. Changes in the OBBBA include the accelerated tax recovery for certain capital investments and research and development expenditures, and changes to the business interest expense limitation. Recently, intergovernmental organizations such as the Organization for Economic Co-operation and Development (“OECD”) and European Union (“EU”) have proposed changes to the existing tax laws of member countries. For example, the OECD has introduced model rules for a new 15% global minimum tax framework, as well as a proposal on the allocation of profit among tax jurisdictions in which companies operate. In December 2022, the EU member states agreed to incorporate the 15% global minimum tax into their respective domestic laws effective for fiscal years beginning on or after December 31, 2023. Additionally, several non-EU countries, including the United Kingdom, have recently proposed and/or adopted legislation consistent with the OECD global minimum tax framework. These tax laws and regulations could adversely impact our financial position and results of operations beyond 2026. Continued economic and political pressures to increase tax revenues in jurisdictions in which we operate, or the adoption of new or reformed tax legislation or regulation, may make resolving tax disputes more difficult, and prior decisions by tax authorities regarding treatments and positions of corporate income taxes could be subject to enforcement activities, as well as legislative investigation and inquiry, which could also result in changes in tax policies or prior tax rulings. The final resolution of such tax audits and any related litigation can differ from our historical provisions and accruals, resulting in an adverse effect on our financial performance. These and any other additional changes could adversely affect our effective tax rate or result in higher cash tax liabilities.
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We may fail to meet analyst and investor expectations, which could cause the price of our stock to decline.
Our common stock is traded publicly, and various securities analysts follow our financial results and frequently issue reports on us which include information about our historical financial results as well as their estimates of our future performance. These estimates are based on their own opinions and are often different from management’s estimates or expectations of our business. If our operating results are below the estimates or expectations of public market analysts and expectations of our investors, our stock price could decline.
• We continue to operate in an environment where consumers are feeling the effects of elevated interest rates, inflation, and future expected price increases, among other things, and as a result, there is more pressure on discretionary spending. Given this, our wholesale partners are also acting cautiously. In addition, geopolitical tensions have increased across the globe. The United States (“U.S.”) has imposed tariffs on foreign imports from multiple countries, including, most relevant to us, an incremental tariff of 20%, 20%, 19%, 18%, and 19% on all imports from Vietnam, China, Indonesia, India, and Cambodia, respectively. We are continuing to monitor developments with respect to these policy changes and proposals. We are continuing to mitigate the potential impacts of tariffs and the resulting effect on the consumer, including diversifying our sourcing mix, refining our cost structure, and implementing select price increases. Refer to the risk factor under “Risks Related to International Operations — Government actions and regulations, such as export restrictions, tariffs, and other trade protection measures could adversely affect our business ” included in Item 1A. Risk Factors of this Annual Report on Form 10-K for additional information.
• We have taken cost saving actions across the business that are designed to simplify the organization and reduce our cost base. These cost reduction initiatives include approximately $50 million of gross cost savings achieved for the year ended December 31, 2025, and approximately $100 million of gross cost savings identified for 2026. In connection with these initiatives, we incurred charges of just over $14 million during the year ended December 31, 2025, primarily related to operational workforce reductions. The estimates of the duration of these initiatives, the charges and expenditures that we expect to incur in connection therewith, and the timing thereof, are subject to a number of assumptions and actual amounts may differ materially from estimates. In addition, we may incur other charges or cash expenditures not currently contemplated due to unanticipated events that may occur, including in connection with the implementation of these initiatives.
• We are prioritizing returning to growth in North America for both brands, while making progress on our long-term strategic initiatives. Specifically for the Crocs Brand, we believe this will be driven by product innovation, diversification within key product categories, growth within our sandals business, and ultimately prioritizing stricter segmentation and pricing discipline across the marketplace. For the HEYDUDE Brand, we are focused on refining our marketing toward our target consumers, focusing on our core product offering, and refreshing the marketplace. For both brands, scaling digital capabilities continues to be a priority.
• Our liquidity position remains strong with approximately $130.4 million in cash and cash equivalents and $952 million in available borrowing capacity as of December 31, 2025. Our total borrowings were $1.2 billion as of December 31, 2025. We repurchased $577.2 million of our common stock during the year.
Use of Non-GAAP Financial Measures
In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”), we present certain information related to our results of operations through “constant currency,” which is a non-GAAP financial measure and should be viewed as a supplement to our results of operations and presentation of reportable segments under U.S. GAAP. Constant currency represents current period results that have been retranslated using
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prior year average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rates on reported amounts.
Management uses constant currency to assist in comparing business trends from period to period on a consistent basis in communications with the Board, stockholders, analysts, and investors concerning our financial performance. We believe constant currency is useful to investors and other users of our consolidated financial statements as an additional tool to evaluate operating performance and trends. Investors should not consider constant currency in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP.
Key Performance Indicators
Management utilizes the key performance metrics of gross margin, operating margin, footwear unit sales, and average footwear selling price to gauge the Company’s operational efficiency and market competitiveness, identify trends, formulate financial projections, and make strategic decisions. Management continuously monitors and analyzes these metrics in an effort to ensure we remain agile, competitive, and aligned with our long-term growth objectives. The titles and/or definitions of certain of these metrics may vary from company to company. As a result, our calculation of certain of these metrics may not be comparable to similarly titled metrics used by other companies.
Gross Margin
Gross margin is defined as gross profit divided by revenues. Management uses this metric and believes it is useful for investors because it provides insights into profitability, cost management, and pricing strategy.
Operating Margin
Operating margin is defined as income from operations divided by revenues. Management uses this metric and believes it is useful for investors because it provides a comprehensive view of profitability from its core business operations, excluding the effects of financing and tax considerations.
Footwear Unit Sales
Footwear unit sales is defined as wholesale and DTC footwear only sales. Management uses this metric and believes it is useful for investors because it provides a direct measure of our sales volume and can offer valuable insights into its market performance and growth potential.
Average Footwear Selling Price
Average footwear selling price is defined as footwear and footwear accessories revenues divided by footwear units. Management uses this metric and believes it is useful for investors because it provides insights into our pricing strategy, market positioning, and revenue generation capabilities.
2025 Financial and Operational Highlights
Revenues were $4,040.6 million for the year ended December 31, 2025, a 1.5% decrease compared to the year ended December 31, 2024. The decrease was due to the net effects of: (i) lower unit sales volume in the HEYDUDE Brand, which decreased revenues by $87.4 million, or 2.1%; (ii) higher average selling price on a constant currency basis (“ASP”) driven by the HEYDUDE Brand, which increased revenues by $16.5 million, or 0.4%; and (iii) net favorable changes in exchange rates, which increased revenues by $9.4 million, or 0.2%.
The following were significant developments affecting our businesses during the year ended December 31, 2025:
• We grew Crocs Brand revenues 1.5% compared to the same period in 2024. HEYDUDE Brand revenues decreased 13.3%.
• Gross margin was 58.3% compared to 58.8% in 2024, a decrease of 50 basis points, primarily due to unfavorable duties for both brands as a result of the aforementioned incremental tariffs.
• Selling, general & administrative expenses (“SG&A”) were $1,469.4 million compared to $1,364.3 million 2024, primarily as a result of increased investment in talent and higher costs in the DTC channel. As a percent of revenues, SG&A increased to 36.4% of revenues compared to 33.3% in 2024.
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• Asset impairments were $738.1 million, primarily driven by the partial impairment of the HEYDUDE indefinite-lived trademark and HEYDUDE Brand reporting unit goodwill. Refer to Note 4 — Goodwill and Intangible Assets, Net in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements of this Annual Report on Form 10-K.
• Income from operations was $149.5 million for the year ended December 31, 2025, compared to income from operations of $1,021.9 million for the year ended December 31, 2024. Net loss was $81.2 million, or $1.50 per diluted share, compared to net income of $950.1 million, or $15.88 per diluted share, in 2024.
Results of Operations
Comparison of the Years Ended December 31, 2025, and 2024
A discussion of our comparison between 2025 and 2024 is presented below. A discussion of the changes in our results of operations between the years ended December 31, 2024, and December 31, 2023, has been omitted from this Annual Report on Form 10-K but may be found in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 13, 2025, which is available free of charge on the SEC’s website at www.sec.gov and our corporate website (www.crocs.com).
Year Ended December 31,
$ Change
% Change
Favorable (Unfavorable)
(in thousands, except per share data, margin, and average selling price data)
Revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Goodwill impairment
Asset impairments
Income from operations
Foreign currency gains (losses), net
Interest income
Interest expense
Other income, net
Income before income taxes
Income tax expense (benefit)
Net income (loss)
Net income (loss) per common share:
Basic
Diluted
Gross margin (1)
Operating margin (1)
Footwear unit sales:
Crocs Brand
HEYDUDE Brand
Average footwear selling price - nominal basis (2) :
Crocs Brand
HEYDUDE Brand
(1) Changes for gross margin and operating margin are shown in basis points (“bp”).
(2) Average footwear selling price is calculated as footwear and footwear accessories revenues divided by footwear units.
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Revenues by Channel
Year Ended December 31,
% Change
Constant
Currency % Change (1)
Favorable (Unfavorable)
(in thousands)
Crocs Brand:
Wholesale
Direct-to-consumer
Total Crocs Brand
HEYDUDE Brand:
Wholesale
Direct-to-consumer
Total HEYDUDE Brand
Total consolidated revenues
(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.
Revenues. In the year ended December 31, 2025, revenues decreased $61.5 million, or 1.5%, compared to 2024. The decrease in revenue was driven by lower volume of $87.4 million, or 2.1%, primarily due to lower volume in the HEYDUDE Brand, partially offset by higher volume in the Crocs Brand. Higher average selling price on a constant currency basis (“ASP”) for the HEYDUDE Brand increased revenues by $26.7 million, or 0.7%, driven mostly by favorable channel mix, partially offset by unfavorable product mix. This increase was partially offset by lower ASP for the Crocs Brand, which decreased revenues by $10.2 million, or 0.2%, driven mostly by increased discounting, partially offset by favorable channel mix. Net favorable foreign currency fluctuations also increased revenues by $9.4 million, or 0.2%, primarily due to favorable fluctuations in the Euro, partially offset by unfavorable fluctuations in the South Korean Won.
Gross margin. Gross margin was 58.3% compared to 58.8% in 2024. This was primarily due to incremental duties of 130 basis points and higher freight and fulfillment costs of 40 basis points, for both brands. The overall decrease in gross margin was offset in part by lower product costs in the Crocs Brand of 70 basis points, and favorable brand mix of 30 basis points.
In the years ended December 31, 2025, and 2024, cost of sales included $488.4 million and $487.1 million, respectively, of distribution expenses primarily related to receiving, inspecting, warehousing, and packaging product in owned and third-party warehouses, combined with transportation costs associated with delivering products from distribution centers to wholesale partners, retail stores, and end customers.
Selling, general and administrative expenses. SG&A increased $105.2 million, or 7.7%, during the year ended December 31, 2025, compared to the same period in 2024, primarily driven by increased investment in talent of $45.1 million, costs associated with an operational workforce reduction of $13.4 million, increased marketing of $16.1 million, higher DTC costs, as a result of investment in the channel and variable costs associated with increased channel revenues, of $39.1 million, and net decreases in other costs of $8.5 million.
Goodwill and Asset impairments. Goodwill and Asset impairments increased $714.0 million during the year ended December 31, 2025, compared to the same period in 2024, primarily due to non-cash impairment charges in the current year of $430.0 million related to the indefinite-lived HEYDUDE trademark and $307.0 million for HEYDUDE Brand reporting unit goodwill. The increase in Goodwill and Asset impairments was partially offset by prior year non-cash impairment charges of $18.2 million for information technology systems related to the HEYDUDE integration, $5.5 million for our former HEYDUDE Brand warehouses in Las Vegas, Nevada, and $0.4 million for our former Crocs Brand warehouse in Oudenbosch, the Netherlands, none of which recurred in the current year. For additional information, refer to Note 4 — Goodwill and Intangible Assets, Net in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements of this Annual Report on Form 10-K.
Foreign currency gains (losses), net. Foreign currency gains (losses), net, consists of unrealized and realized foreign currency gains and losses from the remeasurement and settlement of monetary assets and liabilities denominated in non-functional currencies as well as realized and unrealized gains and losses on certain foreign currency derivative instruments. During the
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year ended December 31, 2025, we recognized realized and unrealized net foreign currency gains of $9.8 million compared to losses of $6.8 million during the year ended December 31, 2024.
Interest expense. Interest expense during the year ended December 31, 2025, decreased $21.0 million, or 19.2%, primarily due to lower outstanding borrowings and lower weighted average interest rates on each of the Term Loan B Facility (as defined herein) and the Revolving Facility (as defined herein) in the current year.
Income tax expense (benefit). During the year ended December 31, 2025, we recognized an income tax expense of $154.2 million on pre-tax book income of $73.0 million, representing an effective tax rate of 211.3%, compared to an income tax benefit of $39.5 million on pre-tax book income of $910.6 million in 2024, which represented an effective tax rate of (4.3)%. The current year effective tax rate is higher primarily due to the impairments of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill in 2025, which are not deductible for tax purposes. Our effective tax rate has varied dramatically in recent years due to intra-entity intellectual property rights transactions, differences in our profitability levels and relative operating earnings across multiple jurisdictions, and by changes in the valuation allowance.
In 2025, in one relevant jurisdiction, we settled a portion of the uncertain tax positions associated with the 2023 IP transactions that resulted in the release of uncertain tax positions of $34.1 million . The other relevant uncertain tax positions associated with the 2023 IP transactions remain unchanged. The impairments of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill also impact the net deferred tax assets since the GAAP carrying value decreased. As of December 31, 2025, the related net deferred tax asset, net of applicable valuation allowance and uncertain tax positions, was $114.2 million.
In 2024, we completed an intra-entity transaction related to certain intellectual property rights primarily to align with current and future international operations. The transaction resulted in a step-up in tax basis of intellectual property rights and a correlated increase in foreign deferred tax assets based on the fair value of the intellectual property rights. Foreign deferred tax assets increased by $268.8 million and this benefit was offset by an increase in uncertain tax positions of $145.6 million. As such, a net change in deferred tax asset of $123.2 million was recognized along with a corresponding foreign income tax benefit in 2024. In 2024, we received new information and remeasured the reserve for uncertain tax positions related to the 2020 and 2021 intellectual property rights transactions which resulted in the release of uncertain tax positions of $141.2 million along with a corresponding foreign income tax benefit. As of December 31, 2025, the related net deferred tax asset, net of applicable valuation allowance and uncertain tax positions, was $289.8 million.
Our valuation allowances are primarily the result of uncertainties regarding the future realization of tax attributes recorded in various jurisdictions. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not that the deferred tax assets will not be realized. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results and the availability of prudent and feasible tax planning strategies. In assessing our valuation allowance as of December 31, 2025, we considered all available evidence, including the magnitude of recent and current operating results, the duration of statutory carryforward periods, our historical experience utilizing tax attributes prior to their expiration dates, the historical volatility of operating results of these jurisdictions and our assessment regarding the sustainability of their profitability. The weight we give to any particular item is, in part, dependent upon the degree to which it can be objectively verified. Valuation allowances recorded against deferred tax assets increased by a net $58.8 million.
The 2025 impact of changes in valuation allowances to the effective tax rate was an unfavorable impact of $58.2 million , equating to a 79.7% unfavorable impact. We maintain valuation allowances of approximately $300.4 million as of December 31, 2025, which may be reduced in the future depending upon the achievedprofitability of certain jurisdictions as well as the magnitude of the profitability.
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Reportable Operating Segments
The following table sets forth information related to our reportable operating segments for the years ended December 31, 2025 and 2024.
Year Ended December 31,
% Change
Constant
Currency % Change (1)
Favorable (Unfavorable)
(in thousands)
Revenues:
Crocs Brand revenues
HEYDUDE Brand revenues
Total consolidated revenues
Income from operations:
Crocs Brand income from operations
HEYDUDE Brand income from operations
Enterprise corporate
Total consolidated income from operations
Foreign currency gains (losses), net
Interest income
Interest expense
Other income (expense), net
Income before income taxes
(1) Reflects year over year change as if the current period results were in constant currency, which is a non-GAAP financial measure. See “Use of Non-GAAP Financial Measures” for more information.
Crocs Brand
Revenues. The Crocs Brand segment grew revenues for the year ended December 31, 2025, compared to 2024, primarily due to higher volume. Net favorable currency fluctuations also increased revenues. The overall increase in Crocs Brand revenues was offset in part by lower ASP, mainly due to increased discounting, partially offset by favorable channel mix.
Income from Operations. During the year ended December 31, 2025, income from operations for our Crocs Brand segment was $1,111.7 million, a decrease of $70.3 million, or 6.0% from 2024. Gross margin was 61.3% for the year ended December 31, 2025, a decrease of 30 basis points compared to 2024. The decrease in gross margin was primarily due to unfavorable duties and higher freight and fulfillment costs, partially offset by lower product costs.
During the year ended December 31, 2025, SG&A for our Crocs Brand segment increased by $89.5 million, or 10.7%, compared to 2024, primarily due to increased investments in talent and marketing and higher costs in the DTC channel, as a result of investment in the channel and variable costs.
HEYDUDE Brand
Revenues. During the year ended December 31, 2025, HEYDUDE revenues decreased compared to 2024, primarily due to lower volume. The overall decrease in revenues was partially offset by higher ASP, primarily due to favorable channel mix, partially offset by unfavorable product mix.
Income from Operations. For the HEYDUDE Brand, loss from operations during the year ended December 31, 2025, was $668.9 million, a decrease of $806.3 million, or 586.8%, compared to 2024. Gross margin was 44.8% for the year ended December 31, 2025, a decrease of 290 basis points, primarily due to unfavorable duties, higher freight and fulfillment costs, and higher product costs, partially offset by favorable channel mix.
During the year ended December 31, 2025, SG&A, including asset impairments, for the HEYDUDE Brand segment increased by $733.0 million, or 286.5%, primarily due to the partial impairment of the indefinite-lived HEYDUDE trademark and
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HEYDUDE Brand reporting unit goodwill, as discussed above, which was partially offset by prior year impairments costs of the right-of-use assets for our former HEYDUDE Brand warehouses in Las Vegas, Nevada, that did not recur in the current year. SG&A also increased overall for the HEYDUDE Brand due to increased investments in talent and higher costs in the DTC channel, as a result of investment in the channel and variable costs, mostly offset by decreased investments in variable marketing.
Enterprise Corporate
During the year ended December 31, 2025, total net costs within ‘Enterprise corporate’ increased $4.2 million, or 1.4%, compared to the same period in 2024, primarily due to an increased investment in talent, costs associated with an operational workforce reduction, and higher information technology costs, mostly offset by a prior year non-cash impairment charge for information technology systems related to the HEYDUDE integration that did not recur in the current year.
Store Locations and Digital Sales Percentage
As of December 31, 2025, we had 439 company-operated retail locations for the Crocs Brand, inclusive of 200 retail locations in North America and 239 retail locations internationally. As of December 31, 2025, we had 75 company-operated retail locations for the HEYDUDE Brand. As of December 31, 2024, we had 390 company-operated retail locations for the Crocs Brand, inclusive of 184 retail locations in North America and 206 retail locations internationally. As of December 31, 2024, we had 52 company-operated retail locations for the HEYDUDE Brand.
Digital sales, which includes sales through our company-owned website, third-party marketplaces, and e-tailers (which are reported in our wholesale channel), as a percent of total revenues, by reportable operating segment were:
Year Ended December 31,
Digital sales as a percent of total revenues:
Crocs Brand
HEYDUDE Brand
Total
Liquidity and Capital Resources
Our liquidity position as of December 31, 2025, was:
December 31, 2025
(in thousands)
Cash and cash equivalents
Available borrowings
As of December 31, 2025, we had $130.4 million in cash and cash equivalents and up to $952.4 million of available borrowings, including $937.4 million remaining borrowing availability under the Revolving Facility (as defined below) and $15.0 million of remaining borrowing availability under the Citibank Facility (as defined below). As of December 31, 2025, the Term Loan B Facility (as defined below) was fully drawn, and there was no available borrowing capacity. We believe that our cash flows from operations, our cash and cash equivalents on hand, and available borrowings under our Revolving Facility and Citibank Facility will be sufficient to meet our ongoing liquidity needs and capital expenditure requirements for at least the next twelve months.
Additional future financing may be necessary to fund our operations and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all. Although we believe we have adequate sources of liquidity over the long term, the success of our operations, the global economic outlook, and the pace of sustainable growth in our markets could each impact our business and liquidity.
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Repatriation of Cash and Cash Equivalents
As a global business, we have cash balances in various countries and amounts are denominated in various currencies. Fluctuations in foreign currency exchange rates impact our results of operations and cash positions. Future fluctuations in foreign currencies may have a material impact on our cash flows and capital resources. Cash balances held in foreign countries may have additional restrictions and covenants associated with them which could adversely impact our liquidity and our ability to timely access and transfer cash balances between entities.
All of the cash held outside of the U.S. could be repatriated to the U.S. as of December 31, 2025, without incurring additional U.S. federal income taxes. In some countries, repatriation of certain foreign balances is restricted by local laws. These limitations may affect our ability to fully utilize our cash resources for needs in the U.S. or other countries and could adversely affect our liquidity. As of December 31, 2025, w e held $118.2 million of o ur total $130.4 million in cash and cash equivalents in internationa l locations. This cash is primarily used for the ongoing operations of the business in the locations in which the cash is held. Of the $118.2 million, an insignificant amount is currently restricted by local laws or otherwise.
Senior Revolving Credit Facility
In July 2019, the Company and certain of its subsidiaries (the “Borrowers”) entered into a Second Amended and Restated Credit Agreement (as amended, the “Credit Agreement”), with the lenders named therein and PNC Bank, National Association, as a lender and administrative agent for the lenders. Since that time, we have amended the Credit Agreement, which, as amended to date, provides for a revolving credit facility of $1.0 billion, which can be increased by an additional $400.0 million, subject to certain conditions (the “Revolving Facility”). Borrowings under the Credit Agreement bear interest at a variable interest rate based on (A) a Base Rate (defined as the highest of (i) the Overnight Bank Funding Rate (as defined in the Credit Agreement), plus 0.25%, (ii) the Prime Rate (as defined in the Credit Agreement), and (iii) the Daily Simple SOFR (as defined in the Credit Agreement), plus 1.00%), plus an applicable margin ranging from 0.25% to 0.875% based on our leverage ratio or 1.35% to 1.975% for the Daily Simple SOFR based on the leverage ratio, inclusive of a 0.10% SOFR adjustment, or (B) the Term SOFR Rate (as defined in the Credit Agreement), plus an applicable margin ranging from 1.35% to 1.975% based on our leverage ratio for one-month interest periods and three-month interest periods, inclusive of a 0.10% SOFR adjustment. Borrowings under the Credit Agreement are secured by all of the assets of the Borrowers and guaranteed by certain other subsidiaries of the Borrowers.
The Credit Agreement requires us to maintain a minimum interest coverage ratio of 3.00 to 1.00, and a maximum leverage ratio of 3.25 to 1.00 (subject to adjustment in certain circumstances). The Credit Agreement permits, among other things, (i) stock repurchases subject to certain restrictions, including after giving effect to such stock repurchases, the maximum leverage ratio does not exceed certain levels; and (ii) certain acquisitions so long as there is borrowing availability under the Credit Agreement of at least $40.0 million. As of December 31, 2025, we were in compliance with all financial covenants under the Credit Agreement.
As of December 31, 2025, the total commitments available from the lenders under the Revolving Facility were $1.0 billion. At December 31, 2025, we had $62.0 million in outstanding borrowings and $0.6 million in outstanding letters of credit under the Revolving Facility, which reduces amounts available for borrowing under the Revolving Facility. As of December 31, 2025, and 2024, we had $937.4 million and $809.4 million, respectively, of available borrowing capacity under the Revolving Facility, which matures in November 2027.
Term Loan B Facility
On February 17, 2022, the Company entered into a credit agreement (the “Original Term Loan B Credit Agreement”) with Citibank, N.A., as administrative agent and lender, which was amended on August 8, 2023, (the “August 2023 Amendment”) and on February 13, 2024 (the “February 2024 Amendment”). The Original Term Loan B Credit Agreement, as amended by the August 2023 Amendment and the February 2024 Amendment is referred to herein as the “Term Loan B Credit Agreement.”
The Original Term Loan B Credit Agreement provided for an aggregate term loan B facility in the principal amount of $2.0 billion. Prior to the February 2024 Amendment, the outstanding balance was $820.0 million. Among other things, the February 2024 Amendment provided for a new $820.0 million tranche of term loans (the “2024 Refinancing Term Loans” and, such facility, the “Term Loan B Facility”), to refinance the then-outstanding principal balance. The 2024 Refinancing Term Loans are secured by substantially all of the Company’s and each subsidiary guarantor’s assets on a pari passu basis with their obligations arising from the Term Loan B Credit Agreement and is scheduled to mature on February 17, 2029, though we have the ability to request extensions as set forth in the Term Loan B Credit Agreement. Additionally, subject to certain conditions, including, without limitation, satisfying certain leverage ratios, the Company may, at any time, on one or more occasions, add
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one or more new classes of term facilities and/or increase the principal amount of the loans of any existing class by requesting one or more incremental term facilities.
Pursuant to the reduced interest rate margins applicable to the 2024 Refinancing Term Loans, each term loan borrowing which is an alternate base rate borrowing bears interest at a rate per annum equal to the Alternate Base Rate (as defined in the Term Loan B Credit Agreement), plus 1.25%. Each term loan borrowing which is a term SOFR borrowing bears interest at a rate per annum equal to the Adjusted Term SOFR Rate (as defined in the Term Loan B Credit Agreement) plus 2.25%.
As of December 31, 2025, the Term Loan B Facility was fully drawn with no remaining borrowing capacity, and we had $500.0 million in outstanding principal on the Term Loan B Facility.
The Term Loan B Credit Agreement also contains customary affirmative and negative covenants, incurrence financial covenants, representations and warranties, events of default and other provisions. As of December 31, 2025, we were in compliance with all financial covenants under the Term Loan B Credit Agreement.
Asia Revolving Credit Facility
During the year ended December 31, 2025, we had one revolving credit facility in Asia with Citibank (China) Company Limited, Shanghai Branch (the “Citibank Facility”), which, as amended, provides up to an equivalent of $15.0 million.
As of December 31, 2025, and 2024, we had no borrowings outstanding on the Citibank Facility.
Senior Notes Issuances
In March 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.250% Senior Notes due March 15, 2029 (the “2029 Notes”), pursuant to the indenture related thereto (as amended and/or supplemented to date, the “2029 Notes Indenture”). Additionally, in August 2021, the Company completed the issuance and sale of $350.0 million aggregate principal amount of 4.125% Senior Notes due August 15, 2031 (the “2031 Notes”), pursuant to the indenture related thereto (as amended and/or supplemented to date, “the 2031 Notes Indenture” and, together with the 2029 Notes Indenture, the “Indentures” and, each, an “Indenture”). Interest on each of the 2029 Notes and the 2031 Notes (collectively, the “Notes”) is payable semi-annually.
The Company has the option to redeem all or any portion of the 2029 Notes, at once or over time, at any time on or after March 15, 2024, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company also had the option to redeem some or all of the 2029 Notes at any time before March 15, 2024 at a redemption price of 100% of the principal amount to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. In addition, at any time before March 15, 2024, the Company could have redeemed up to 40% of the aggregate principal amount of the 2029 Notes at a redemption price of 104.250% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The Company will have the option to redeem all or any portion of the 2031 Notes, at once or over time, at any time on or after August 15, 2026, at a redemption price equal to 100% of the principal amount thereof, plus a premium declining ratably on an annual basis to par and accrued and unpaid interest, if any, to, but excluding, the date of redemption. The Company will also have the option to redeem some or all of the 2031 Notes at any time before August 15, 2026, at a redemption price of 100% of the principal amount to be redeemed, plus a “make-whole” premium and accrued and unpaid interest, if any, to, but excluding, the date of redemption. In addition, at any time before August 15, 2024, the Company could have redeemed up to 40% of the aggregate principal amount of the 2031 Notes at a redemption price of 104.125% of the principal amount with the proceeds from certain equity issuances, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption.
The Notes rank pari passu in right of payment with all of the Company’s existing and future senior debt, including the Credit Agreement, and are senior in right of payment to any of the Company’s future debt that is, by its term, expressly subordinated in right of payment to the Notes. The Notes are unconditionally guaranteed by each of the Company’s restricted subsidiaries that is a borrower or guarantor under the Credit Agreement and by each of the Company’s wholly-owned restricted subsidiaries that guarantees any debt of the Company or any guarantor under any syndicated credit facility or capital markets debt in an aggregate principal amount in excess of $25.0 million.
The Indentures contain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to incur additional debt or issue certain preferred stock; pay dividends or repurchase or redeem capital stock or make other
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restricted payments; declare or pay dividends or other payments; incur liens; enter into certain types of transactions with the Company’s affiliates; and consolidate or merge with or into other companies. As of December 31, 2025, we were in compliance with all financial covenants under the Notes.
Consolidated Statements of Cash Flows
Our consolidated statements of cash flows are summarized as follows:
Year Ended December 31,
$ Change
% Change
Favorable (Unfavorable)
(in thousands)
Cash provided by operating activities
Cash used in investing activities
Cash used in financing activities
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
Net change in cash, cash equivalents, and restricted cash
Operating Activities. Our primary source of liquidity is cash provided by operating activities, consisting of net income adjusted for non-cash items and changes in working capital. Cash provided by operating activities decreased $282.1 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, driven by decreases in operating assets and liabilities of $288.9 million, primarily due to the decrease in income taxes payable, accounts receivable, and inventories, partially offset by an increase in net income, adjusted for non-cash items, of $6.8 million.
Investing Activities. There was a $18.1 million decrease in cash used in investing activities for the year ended December 31, 2025, compared to the year ended December 31, 2024. This was due to a decrease in purchases of property, equipment, and software.
Financing Activities. Cash used in financing activities decreased by $171.5 million in the year ended December 31, 2025, compared to the year ended December 31, 2024. The decrease in cash used in financing activities was primarily due to a decrease in repayments, net of borrowings, of $195.2 million. There were other decreases in cash used of $6.2 million. The overall decrease in cash used in financing activities was partially offset by an increase of $29.9 million in repurchases of common stock, including excise tax.
Stock Repurchases
On February 10, 2025, the Board approved a $1.0 billion increase to our then-existing common stock repurchase authorization. The number, price, structure, and timing of the repurchases are at our sole discretion and may be made depending on market conditions, liquidity needs, restrictions under the agreements governing our indebtedness, and other factors. The Board of Directors may suspend, modify, or terminate the program at any time without prior notice. Share repurchases may be made in the open market or in privately negotiated transactions. The repurchase authorization does not have an expiration date and does not obligate us to acquire any amount of our common stock. Under Delaware state law, these shares are not retired, and we have the right to resell any of the shares repurchased.
During the year ended December 31, 2025, we repurchased 6.5 million shares of our common stock at a cost of $577.2 million, including commissions. During the year ended December 31, 2024, we repurchased 4.3 million shares of our common stock at a cost of $551.2 million, including commissions.
As of December 31, 2025, we had remaining authorization to repurchase approximately $746.8 million of our common stock, subject to restrictions under our Indentures, Credit Agreement, and Term Loan B Credit Agreement.
See Note 10 — Equity in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information on our repurchases and repurchase authorizations.
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Contractual Obligations
We believe we have sufficient liquidity to fund our operations and meet our short-term and long-term obligations. Our material future cash obligations as of December 31, 2025, include the following:
Less than 1 Year
Thereafter
Total
(approximately, in thousands)
Debt-related:
Debt obligations (1)
Interest on debt obligations (1)
Purchase commitments (2)
Lease-related (3) :
Lease obligations
Total
(1) Represents future interest payment obligations, which are estimated by assuming the amounts outstanding under our Term Loan B Facility, Notes, Revolving Facility, and Citibank Facility and the interest rates in effect as of December 31, 2025, will remain constant into the future. This is only an estimate, as actual amounts borrowed and rates may vary over time for certain borrowing instruments, as described in Note 9 — Borrowings.
(2) Represents purchase commitments to our third-party manufacturers, primarily for materials and supplies used in the manufacture of our products. We expect to fulfill our commitments under these agreements in the next twelve months in the normal course of business and are only liable for the portion of the purchase obligations that have been purchased by the third-party manufacturer or manufactured by the vendor, with the remainder cancellable without penalty. Refer to Note 15 — Commitments and Contingencies in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.
(3) Our operating lease obligations consist of leases for real estate, which includes retail, warehouse, distribution center, and office spaces and represent the minimum cash commitment under contract to various third parties for operating lease obligations. For more information on our lease obligations and obligations for leases not yet commenced, refer to Note 6 — Leases in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for more information.
We had no material off-balance sheet arrangements as of December 31, 2025, other than certain purchase commitments, as described in the footnote (2) above.
Critical Accounting Policies and Estimates
General
Our discussion and analysis of financial condition and results of operations, outside of discussions regarding constant currency, is based on the consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates on an on-going basis.
An accounting policy is considered to be critical if it is important to our results of operations, financial condition, and cash flows, and requires significant judgment and estimates on the part of management in its application. Our estimates are often based on historical experience, complex judgments, assessments of probability, and assumptions that management believes to be reasonable, but that are inherently uncertain and unpredictable. We believe that the following discussion represents those accounting policies that are the most critical to the reporting of our financial condition and results of operations. For a discussion of our significant accounting policies, see Note 1 — Basis of Presentation and Summary of Significant Accounting Policies in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.
Impairment of Goodwill and Indefinite-Lived Intangible Assets
Our goodwill and indefinite-lived intangible assets, which primarily consist of the HEYDUDE trademark, are not amortized. We evaluate the carrying value of our goodwill and indefinite-lived intangible assets at least annually or when an interim triggering event has occurred indicating potential impairment. Our annual test is performed as of the first day of the fourth
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quarter. Our impairment evaluations represent a critical accounting policy as they require significant judgments and assumptions that we believe to be reasonable but that are inherently uncertain and unpredictable.
We perform our goodwill impairment testing for each reporting unit that has goodwill. During the years ended December 31, 2025, 2024, and 2023, we had two reporting units, comprised of a reporting unit within the HEYDUDE Brand segment and a reporting unit within the Crocs Brand segment. We perform our indefinite-lived intangible impairment testing at the asset level.
When performing our annual test for impairment, we may assess goodwill and indefinite-lived intangible assets for potential impairment using either a qualitative or quantitative assessment. The qualitative assessment may evaluate factors such as macroeconomic conditions, industry and market considerations, and overall financial performance, among other factors. If we determine that it is more likely than not that the fair value of a reporting unit or an indefinite-lived intangible asset is less than its carrying value, a quantitative assessment is performed. For the quantitative assessment, we compare the estimated fair value of the trademark and reporting unit with their respective carrying value, including the goodwill assigned to the reporting unit. If carrying value of the reporting unit exceeds its estimated fair value, an impairment charge is recorded. In the second quarter of the fiscal year ended 2025, we recorded an impairment charge related a triggering event for the HEYDUDE Brand indefinite-lived intangible assets (which consists solely of the HEYDUDE trademark) (the “trademark”) and the HEYDUDE Brand reporting unit (the “reporting unit”) goodwill.
Our impairment evaluations represent a critical accounting policy as they require significant judgments and assumptions that we believe to be reasonable but that are inherently uncertain and unpredictable. The primary assumptions developed by management and used in the quantitative assessments included annual revenue growth rates, averaging approximately 8% for both the trademark and reporting unit goodwill, projected earnings before interest, taxes, depreciation, and amortization (“EBITDA”) margins, averaging approximately 20% for both the trademark and reporting unit goodwill, and a market-based discount rate of 15% for both the trademark and reporting unit goodwill, which was based on, most significantly, a risk-free rate of return, an equity market risk premium, and a company-specific risk premium. Changes in the assumptions used to estimate the fair value of our goodwill and indefinite-lived intangible assets could result in additional impairment charges in future periods as the key assumptions are inherently uncertain, require significant judgment and are subject to change based on, among others, industry and geopolitical conditions, our ability to navigate changing macroeconomic conditions and trends as well as the timing and success of strategic initiatives.
Certain factors, such as failure to achieve forecasted revenue growth rates, EBITDA, or increases in the discount rates, have the potential to create variances in the estimated fair values of our goodwill and indefinite-lived intangible assets that could result in impairment charges in future periods. Refer to the risk factor under “Financial and Accounting Risks — We may incur impairments of the carrying value of our goodwill and other intangible assets, which could have a material adverse effect on our business and financial results” included in Item 1A. Risk Factors of this Annual Report on Form 10-K for additional information.
We did not record any impairment charges in the years ended December 31, 2024, or 2023, based on the results of our goodwill and indefinite-lived intangible assets impairment testing, and we did not record any additional impairment charge based on the results of the annual 2025 goodwill and indefinite-lived intangible assets impairment testing. As of December 31, 2025, our HEYDUDE Brand reporting unit had $403.0 million in recorded goodwill and the estimated fair value of the reporting unit exceeded the assigned carrying value by more than 10%. As of December 31, 2025, the recorded amount of our HEYDUDE Brand indefinite-lived intangible asset was $1.1 billion and the estimated fair value exceeded the assigned carrying value by less than 10%. Refer to Note 1 — Basis of Presentation and Summary of Significant Accounting Policies and Note 4 — Goodwill and Intangible Assets, Net in the accompanying notes to the consolidated financial statements included in Part II - Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information related to our goodwill and indefinite-lived intangible assets.
Impairment of Long-Lived Assets
Property and equipment, right-of-use assets, and definite-lived intangible assets, such as customer relationships and capitalized software, are evaluated for impairment whenever events or changes in circumstances indicate that their carrying values may not be fully recoverable. This represents a critical accounting policy as our impairment evaluations include significant judgments and assumptions that we believe to be reasonable but that are inherently uncertain and unpredictable. Testing of long-lived assets for impairment is at the level of an asset group, which is the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. In our retail business, the asset group for impairment testing is each individual retail store. For customer relationships, impairment testing is performed at the HEYDUDE Brand asset group level. In evaluating long-lived assets for recoverability, we use our best estimate of future cash flows expected to result from the use of the asset and its eventual disposition, where applicable. To the extent that estimated future undiscounted net cash flows
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attributable to the asset are less than its carrying value, an impairmentloss is recognized equal to the difference between the carrying value of such asset and its fair value. Assets to be disposed of and for which there is a committed plan of disposal are reported at the lower of carrying value or fair value, less costs to sell.
In determining future cash flows, we take various factors into account, including the remaining useful life of each asset group, forecasted growth rates, EBITDA, pricing, working capital, capital expenditures, and other cash needs specific to the asset group. Additional considerations when assessing impairment include changes in our strategic operational and financial decisions, global and regional economic conditions, demand for our product, and other corporate initiatives which may eliminate or significantly decrease the realization of future benefits from our long-lived assets. Since the determination of future cash flows is an estimate of future performance, future impairments may arise in the event that future cash flows do not meet expectations.
In 2025, we recorded non-cash impairments of $1.1 million related to the discontinuation of an information technology project. In 2024, we recorded non-cash impairments of $18.2 million for information technology systems related to the HEYDUDE integration and $5.9 million related to our former HEYDUDE Brand warehouse in Las Vegas, Nevada, and our former Crocs Brand warehouse in Oudenbosch, the Netherlands. In 2023, we recorded non-cash impairments of $9.3 million related to our former corporate headquarters. See Note 7 — Fair Value Measurements in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information related to long-lived asset impairments.
Revenues and Reserves for Sales Returns and Allowances
While our revenue recognition does not involve significant judgment, it does represent a key accounting policy as it is important to our results of operations. Revenues are recognized in the amount expected to be received when control of the product transfers to customers. Revenues are reported net of various promotions, which range from contractually-fixed percentage price reductions to sales returns, discounts, rebates, and other incentives that may vary in amount, must be estimated, and are reported as a reduction in revenues. An area of judgment affecting our reported revenues and net income involves estimating reserves for sales returns and allowances, which represent a portion of revenues not expected to be realized. Revenues in our direct-to-consumer channels are reduced by an estimate of returns. We may also accept returns from our wholesale customers, on an exception basis, to ensure that our products are merchandised in the proper assortments and may provide markdown allowances at our sole discretion to key wholesalers and distributors to facilitate sales of slower moving products. Wholesale revenues are reduced by estimates of returns and allowances.
Our estimated sales returns and allowances are based on customer return history and actual outstanding returns yet to be received. Changes to our estimates for customer returns and allowances may be caused by many factors, including, but not limited to, whether customers accept our new styles, customer inventory levels, shipping delays or errors, known or suspected product defects, the seasonal nature of our products, and macroeconomic factors affecting our customers. Historically, actual amounts of customer returns and allowances have not differed significantly from our estimates. A hypothetical 10% increase in our reserves for returns and allowances as of December 31, 2025, would have decreased our revenues during the year ended December 31, 2025, by $0.7 million.
Income Taxes
Income Tax Accounting
We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities. We provide for income taxes at the current and future enacted tax rates and laws applicable in each taxing jurisdiction. We account for the tax effects of global intangible low tax income (“GILTI”) as a component of income tax expense in the period the tax arises, to the extent applicable. We use a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. The impact of an uncertain tax position that is more likely than not to be sustained upon examination by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained. Interest expense is recognized on the full amount of deferred benefits for uncertain tax positions. While the validity of any tax position is a matter of tax law, the body of statutory, regulatory and interpretive guidance on the application of the law is complex and often ambiguous. Our analysis of unrecognized tax benefits contains uncertainties based on judgment used to apply the more likely than not recognition and measurement thresholds. Due to the complexity of some of these judgments and uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the tax liabilities. To the extent we prevail in matters
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for which unrecognized tax benefit liabilities have been established, or are required to pay amounts in excess of our recorded unrecognized tax benefit liabilities, our effective tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement would require use of our cash and generally result in an increase in our effective tax rate in the period of resolution. A favorable tax settlement would generally be recognized as a reduction in our effective tax rate in the period of resolution. We recognize interest and penalties related to unrecognized tax benefits within the ‘Income tax expense (benefit)’ line in the accompanying consolidated statements of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheets.
We evaluate our ability to realize the tax benefits associated with deferred tax assets by analyzing our forecasted taxable income using both historical and projected future operating results, the reversal of existing temporary differences, taxable income in prior carry back years (if permitted) and the availability of tax planning strategies. A valuation allowance is required unless management determines that it is more likely than not that we will ultimately realize the tax benefit associated with a deferred tax asset. We determine on a regular basis the amount of undistributed earnings that will be indefinitely reinvested in our non-U.S. operations. This assessment is based on the cash flow projections and operational and fiscal objectives of each of our U.S. and foreign subsidiaries. Foreign withholding taxes have not been provided on cumulative undistributed foreign earnings of the non-U.S. subsidiaries as of December 31, 2025, which are considered to be indefinitely reinvested outside of the U.S.
See Note 13 — Income Taxes in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for further information related to income taxes.
Intellectual Property Income Tax Implications
In 2025, in one relevant jurisdiction, we settled a portion of the uncertain tax positions associated with the 2023 intellectual property (“IP”) transactions that resulted in the release of uncertain tax positions of $34.1 million . The other relevant uncertain tax positions associated with the 2023 IP transactions remain unchanged. The impairments of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill also impact the net deferred tax assets since the GAAP carrying value decreased. As of December 31, 2025, the related net deferred tax asset, net of applicable valuation allowance and uncertain tax positions was $114.2 million.
In 2024, we completed an intra-entity transaction related to certain IP rights primarily to align with current and future international operations. The transaction was executed using transfer pricing guidelines issued by the relevant taxing authorities. Significant estimates and assumptions were required to compute the valuation of this transaction. These estimates and assumptions include, but are not limited to, estimated future revenue growth, which is inherently uncertain and, therefore, may ultimately differ materially from our actual results. Foreign deferred tax assets increased by $268.8 million and this benefit was offset by an increase in uncertain tax positions of $145.6 million. As such, a net change in deferred tax asset of $123.2 million was recognized along with a corresponding foreign income tax benefit in 2024. In 2024, we received new information and remeasured the reserve for uncertain tax positions related to the 2020 and 2021 intellectual property rights transactions which resulted in the release of uncertain tax positions of $141.2 million along with a corresponding foreign income tax benefit. As of December 31, 2025, the related net deferred tax asset, net of applicable valuation allowance and uncertain tax positions, was $289.8 million.
In 2023, we completed transactions that created an amortizable step-up in tax basis of the intangible asset and a corresponding increase in foreign deferred tax assets based on the fair value of that IP. These transactions were also executed using transfer pricing guidelines issued by the relevant taxing authorities. Significant estimates and assumptions were required to compute the valuation of these transactions. These estimates and assumptions include, but are not limited to, estimated future revenue growth and discount rates, which by their nature are inherently uncertain and, therefore, may ultimately differ materially from our actual results. As of December 31, 2024, the related net deferred tax asset, net of applicable valuation allowance and uncertain tax positions was $271.7 million.
In 2020 and in 2021, we completed transactions that created an amortizable step-up in tax basis of the intangible asset and a corresponding increase in foreign deferred tax assets based on the fair value of that IP. These transactions were also executed using transfer pricing guidelines issued by the relevant taxing authorities. Significant estimates and assumptions were required to compute the valuation of these transactions. These estimates and assumptions include, but are not limited to, estimated future revenue growth and discount rates, which by their nature are inherently uncertain and, therefore, may ultimately differ materially from our actual results. As of December 31, 2024, the related net deferred tax asset, net of applicable valuation allowance and uncertain tax positions was $377.1 million. In 2024, we received new information and remeasured the reserve for uncertain tax positions related to the 2020 and 2021 intellectual property rights transactions which resulted in the release of uncertain tax positions of $141.2 million along with a corresponding foreign income tax benefit. As of December 31, 2025, the related net deferred tax asset, net of applicable valuation allowance and uncertain tax positions was $401.6 million.
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In order to support and sustain the amortizable tax basis for these transactions (and associated deferred tax asset, net of uncertain tax position), we must demonstrate economic ownership, including the appropriate authority and expertise to manage the IP owned and serviced in the Netherlands and Singapore. The determination of economic substance is a judgment that has to be evaluated by management on a continual basis requiring understanding and expertise of local laws of each associated tax jurisdiction. The Netherlands and Singapore subsidiaries serve as the primary corporate headquarters outside of the U.S. and already perform significant functions in support of the economic ownership of the IP. In 2025, we undertook activities to align business operations that support the economic substance of the IP.
We have also recorded certain tax reserves to address potential differences involving our income tax positions. These potential tax liabilities result from the varying application of statutes, rules, regulations and interpretations by different taxing jurisdictions. While our tax position is not uncertain, because of the significant estimates used in the value of certain intellectual property rights, our tax reserves contain assumptions based on past experiences and judgments about the interpretation of statutes, rules and regulations by taxing jurisdictions. It is possible that the costs of the ultimate tax liability or benefit from these matters may be materially more or less than the amount that we estimated.
Recent Accounting Pronouncements
See Note 2 — Recent Accounting Pronouncements in the accompanying notes to the consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K for a description of recently adopted accounting pronouncements and issued accounting pronouncements that we believe may have an impact on our consolidated financial statements when adopted.
