Can Crocs Navigate Tariff Risks and Protect Margins in 2026?

Crocs, Inc. CROX continues to face meaningful tariff-related pressures, as reflected in its latest quarterly performance. However, the company has also demonstrated multiple levers to help offset margin headwinds. In the third quarter of fiscal 2025, Crocs reported an adjusted gross margin of 58.5%, representing a 110-basis point (bps) decline year over year. This contraction was mainly due to a higher-than-anticipated tariff impact, which alone weighed on margins by 230 bps.

Despite these challenges, Crocs has already realized tangible benefits from cost-saving initiatives. The company implemented $50 million in gross cost savings in fiscal 2025, providing partial relief against external cost pressures. Building on this momentum, management has identified an additional $100 million in incremental gross cost savings expected to benefit fiscal 2026. These initiatives are focused on simplifying the organizational structure, deliberately reducing spending in non-critical areas, and further optimizing the supply chain.

Crocs is maintaining a disciplined approach to managing its adjusted SG&A base to drive operating leverage in fiscal 2026 while enhancing flexibility across the profit and loss statement. Management emphasized that several strategic and tactical actions have already been executed to support brand momentum, alongside efforts to create a more adaptable and resilient cost structure. Together, these actions underscore a clear focus on sustaining consistent and profitable long-term growth.

In addition, Crocs is benefiting from supply chain efficiencies stemming from years of investment and the deeper integration of the HEYDUDE and Crocs supply chains. These efforts have delivered meaningful operational improvements and cost advantages. While the company has not yet provided formal guidance for fiscal 2026, its proactive cost management and supply chain initiatives position Crocs to better navigate tariff pressures and protect profitability.

The Zacks Rundown for CROX

Crocs’ shares have lost 20.3% in the past six months compared with the industry’s decline of 9.9%. CROX presently carries a Zacks Rank #3 (Hold). 

From a valuation standpoint, CROX trades at a forward price-to-earnings ratio of 7.05X, lower than the industry’s average 17.76X.

The Zacks Consensus Estimate for CROX’s current year earnings estimates implies a year-over-year decline of 7.9%, and the next year earnings estimates indicate year-over-year growth of 3.9%. CROX delivered a trailing four-quarter earnings surprise of 14.3% on average.

Stocks to Consider

Some better-ranked stocks have been discussed below:

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The Zacks Consensus Estimate for VNCE’s current fiscal-year sales and earnings implies growth of 2% and 26.3%, respectively, from the year-ago figures. VNCE has delivered a trailing four-quarter earnings surprise of 229.6%, on average.

Kontoor Brands, Inc. KTB, a lifestyle apparel company, designs, produces, procures, markets, distributes, and licenses denim, apparel, footwear, and accessories, primarily under the Wrangler and Lee brands. At present, Kontoor Brands holds a Zacks Rank of 2 (Buy).

The consensus estimate for Kontoor Brands’ current fiscal-year sales and earnings implies growth of 19.4% and 12.5%, respectively, from the year-ago figures. KTB has delivered a trailing four-quarter earnings surprise of 14 %, on average.

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The Zacks Consensus Estimate for GES’s current fiscal-year sales implies growth of 8%, and the same for current fiscal-year earnings implies a decline of 13.8% from the year-ago figures. GES has delivered a trailing four-quarter earnings surprise of 45%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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