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Crocs (NASDAQ:CROX)
Q3 2021 Earnings Call
Oct 21, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Ladies and gentlemen, thank you for standing by, and welcome to Crocs, Inc. third-quarter 2021 earnings conference call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

[Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to your speaker today, Corinne Lin.

Corinne Lin -- Vice President, Corporate Finance

Good morning, everyone, and thank you for joining us today for the Crocs third-quarter 2021 earnings call. Earlier this morning, we announced our latest quarterly results, and a copy of the press release may be found on our website at crocs.com. We would like to remind you that some of the information provided on this call is forward-looking and accordingly is subject to the safe harbor provisions of the federal securities laws. These statements include, but are not limited to, statements regarding potential impacts to our business related to the COVID-19 pandemic.

Crocs is not obligated to update these forward-looking statements to reflect the impact of future events. We caution you that all forward-looking statements are subject to risks and uncertainties described in the Risk Factors section of our annual report on Form 10-K. Accordingly, actual results could differ materially from those described on this call. Please refer to Crocs annual report on Form 10-K, as well as other documents filed with the SEC for more information relating to these risk factors.

Adjusted gross margin, income from operations, operating margin, and earnings per diluted common share are non-GAAP measures. A reconciliation of these amounts to their GAAP counterparts is contained in the press release we issued earlier this morning. Joining us on the call today are Andrew Rees, chief executive officer; and Anne Mehlman, executive vice president and chief financial officer. Following their prepared remarks, we will open the call for your questions.

At this time, I'll turn the call over to Andrew.

Andrew Rees -- Chief Executive Officer

Thank you, Cori, and good morning, everyone. As you saw from our release this morning, we achieved exceptional top-line growth and industry-leading profitability during Q3 of 2021. Our extraordinary performance in spite of the ongoing COVID-19 pandemic and widespread and supply chain disruptions demonstrate the strength of the Crocs brand and product offering globally and reinforces the confidence we have in achieving our short- and long-term goals. Our team's ability to navigate these disruptions for the last two-plus years has been and continues to be a key ingredient across the success.  Anne will review our financial results in more detail shortly, but here are a few highlights from the third quarter of 2021.

We experienced broad-based growth with total revenues up 73% versus prior year to $626 million and doubling from 2019. DTC grew 60% versus prior year and 90% versus 2019 to represent 51% of revenues. Digital sales grew 69%, achieving double-digit growth in all regions, and representing 37% of total revenues. Adjusted operating income more than doubled in the quarter to $205 million versus $75 million in 2020, with adjusted operating margins expanding to an impressive 33%.

Finally, we committed to becoming a net-zero company by 2030 and began production of bio-based products that go on sale in 2022. Let's now turn our attention to a topic that I know is top of mind for many of you. The recent factory closures in Vietnam due to COVID-19 and broader global supply chain challenges facing all industries. We first want to recognize our factory partners for their extraordinary efforts in a difficult time and for protecting the health of their employees.

We appreciate their ongoing partnership. Regarding the impact of the Crocs business, during the third quarter, some of our factories in Vietnam were close to several weeks, and they began reopening earlier this month. As of today, most of our factories in Vietnam are operational, although they are in various stages of restarting. We expect the situation to remain fluid as the vaccination rates increase in the country.

We are pursuing all of the actions you might expect to mitigate the impact of this temporary disruption. First, we are shifting production capacity to other countries, including China, Indonesia, and Bosnia, where possible. We also have a unique advantage in that we can ramp factory production quickly due to the limited inputs and simple configuration of our products. Secondly, by prioritizing top-selling products and narrowing SKU count, while still preserving newness, we're able to improve factory throughput.

Thirdly, we're aggressively leveraging airfreight to bring in units for 2022 spring/summer selling season. In the United States, we're planning to reduce our dependency on West Coast ports by adding East Coast transshipment capabilities to reach our major U.S. customers. In addition to maximizing supply, we're strategically allocating units.

We will prioritize our most important channels: e-commerce, e-tail, and our major wholesale customers. As we all know, this situation is very fluid, but our full confidence in the supply chain team and our factory partners to manage through this temporary disruption. Also, I want to emphasize that these disruptions will not distract from our long-term strategy that we believe will propel the Crocs brand to $5 billion-plus over the next five years. Now let's turn back to the third-quarter operating highlights.

From a channel perspective, global DTC revenues, which include revenues from e-commerce and company-owned retail stores, grew by 60%. Wholesale, which includes brick-and-mortar, e-tail, and distributors grew revenues 88% and 111% compared to 2019. Digital sales grew 69% and an impressive 129% versus 2019. All channels benefited from strong traffic, higher pricing, and fewer promotions.

Execution against our product growth strategy is going well. Plug sales were outstanding, increasing 91% from a strong 2020 to represent 82% of footwear revenues versus 72% last year. We continue to innovate and are excited about our first-line product, which is on-trend for holiday. Recent cloud collaborations with Balenciaga, Hidden Valley Ranch, and Sanquin in China, among others, continue to excite fans and elevate the Crocs brand.

We continue to raise awareness for sandals, including them in collaborations, such as the one with Benefit Cosmetics, that featured both the clog and a two-strap sandal. Sandals grew by 15% in the quarter and 31% year to date as we conclude the sandal season in many parts of the world. Sandals represented 13% of footwear sales for the quarter versus 19% last year due to the strength of clog growth. Jibbitz sales once again more than doubled for the quarter versus 2020.

We continue to create excitement through a fresh assortment, including recent Jibbitz partnerships with social media personality, Bretman Rock, and legendary rock band, Grateful Dead. Consumer demand for our products is high, and we remain confident in our growth trajectory. We're raising the low end of our full-year revenue guidance, and now expect 2021 revenues to increase by between 62% and 65%. We're also raising our 2021 adjusted operating margin guidance from approximately 25% to approximately 28%, and as we benefit from favorable gross margins, SG&A leverage, and the underlying strength of our brand.

I'm pleased to share that our brand is extraordinarily healthy. And this is a testament to our product and marketing teams around the world who continue to innovate and raise the bar. In our 2021 brand strength survey, which measures participants' views about the Crocs brand globally, results were up double digits for each of our key metrics: brand desirability, brand relevance, and brand consideration. We have now averaged double-digit growth across these metrics for five consecutive years.

Another indicator of brand strength is the Piper Sandler's Fall 2021, "Taking Stock with Teens" survey, where the Crocs brand advanced in the all teen-preferred footwear rankings to the No. 6 spot, up from No. 9 last year and No. 34 just five years ago.

Supported by the health of our brand, wholesale bookings for the first half of 2022 have been exceptionally strong. However, given the supply constraints we've just discussed, we have limitations around how much demand we can fulfill for the first half of the year. Despite this temporary supply chain disruption, we're confident that we will be able to exceed 20% revenue growth for 2022. Before I turn the call over to Anne, I want to thank the entire Crocs organization.

We're incredibly proud of the health of the Crocs brand and business. Our results and the confidence we have in our long-term vision are due to our dedicated and talented colleagues who bring the Crocs brand to life every day. I want to thank them for everything that they do. With that, Anne will now review our financial results in more detail.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Thank you, Andrew, and good morning, everyone. I'll begin with a short recap of our third-quarter results. For a reconciliation of the non-GAAP amounts mentioned to their equivalent GAAP amounts, please refer to our press release. As you've already seen, we had an outstanding third quarter, we delivered broad-based revenue growth across all regions, channels, and product pillars.

Gross margin expansion and SG&A leverage led to another quarter of best-in-class profitability and increased earnings per share. Third-quarter revenues increased to $625.9 million, up 72.2% on a constant-currency basis compared to the third quarter of 2020, and up 100.1% compared to the third quarter of 2019. During the third quarter, we sold 25.4 million pairs of shoes, which represents an increase of 50.6% over last year and 60% versus the third quarter of 2019. The average selling price during Q3 was $24.42, a year-over-year increase of approximately 14.9% driven by price increases, promotional strategy, and product mix.

Now let's shift our view to results by region, beginning with the America's, where Q3 revenues of $455.9 million increased 94.8% against the prior year. DTC revenue growth in the region was up 78.3% driven by higher traffic conversion and average transaction value. Third-quarter digital penetration increased to 32.8% from 30.8% last year and rose significantly from 26.9% in 2019. Wholesale growth was 117.6% versus prior year and almost tripled versus 2019 as we continue to see strong sell-through with our best partners.

In Asia, Q3 revenues were $83.6 million, representing an increase of 21.2% on a constant-currency basis from last year. India posted triple-digit revenue growth versus last year, while China and South Korea both grew revenue double digits, offset by distributor sales in Southeast Asia and a conservative Japanese consumer. Digital revenues grew 11.3% versus prior year and 30.5% versus 2019. Digital penetration was 38.1% in the third quarter, compared to 42.3% last year and 32.9% in 2019.

EMEA revenues of $86.3 million increased 42.8% on a constant-currency basis, with growing brand heat offsetting global logistics disruptions. DTC revenues increased 22.1%, with strength driven by higher traffic. Wholesale revenues grew 56.9% fueled by strength in all subsegments, e-tail, distributors, and brick-and-mortar. Digital growth was a standout, growing 37% versus prior year and 85.9% compared to 2019.

Digital penetration represents 56.9% of EMEA revenue this quarter versus 59.8% last year and 49.6% in Q3 2019. Adjusted gross margins for the third quarter were 64.2%, an improvement of 680 basis points from last year's 57.4%. This improvement was driven primarily by price increases and fewer promotions and discounts, offsetting higher freight costs associated with global logistics disruptions. Currency favorably impacted margins by approximately 65 basis points.

During the third quarter, our adjusted SG&A improved 520 basis points to 31.4% of revenue versus 36.6% in last year's third quarter. The decrease in adjusted SG&A rate was achieved while investing approximately $60 million versus prior year, primarily in marketing and talent to support our strategic initiatives: digital, sandals, China, and innovation. We will continue to make investments to support the long-term trajectory of our business. Our third-quarter adjusted operating income more than doubled to $205.1 million versus $75.4 million last year, with robust operating profit growth in all regions.

Adjusted operating margin rose from 20.8% last year to 32.8% this year, benefiting from gross margin expansion and SG&A leverage on strong sales growth. Third-quarter non-GAAP diluted earnings per share increased to $2.47 from $0.94 in the same period last year. Our liquidity position and balance sheet continue to remain strong. We ended the third quarter with $436.6 million of cash and cash equivalents and $686 million in borrowings with an additional $500 million of borrowing capacity on our revolver.

In August, we once again opportunistically took advantage of historically low interest rates, issuing $350 million and 4.125% senior unsecured notes due 2031 with share repurchase as the primary use of proceeds. Throughout the quarter, we repurchased approximately 1.1 million shares of our common stock in the open market for $150 million at an average price of $142.17. As previously announced, we will repurchase an additional $500 million of shares by the end of 2021 via an accelerated share repurchase for a total of $1 billion of share repurchases in 2021. Our shares outstanding as of October 14, 2021, were 58.8 million, including the partial impact of the ASR.

Our inventory balance at September 30, 2021, was $212.5 million, up from $174.1 million in the third quarter last year. Inventory was lean throughout Q3, and we ended the quarter with higher in-transit inventory due to the global logistics challenges. Turning to the future. I would like to share our current outlook for the balance of 2021.

As Andrew outlined earlier, the global supply chain remains volatile. For 2021, we are raising the low end of our revenue guidance, expecting revenues to grow approximately 62% to 65%. This implies a two-year growth rate of approximately 82% to 86% and a two-year compound annual growth rate of approximately 35% to 36%. We anticipate strong growth for fiscal 2021 in all regions and channels.

However, fourth-quarter revenues in EMEA will be disproportionately impacted by the Vietnam supply disruption as much of the region's inventory is sourced there due to favorable duties. Today, our 2021 operating margins have benefited from our high gross margins and ability to leverage SG&A. As a result, we are raising our full-year 2021 adjusted operating margin guidance by 300 basis points to be approximately 28%, which represents significant expansion from 18.9% in 2020. This margin guidance is below our 2021 year-to-date margin due to higher global logistics costs and continued investment in SG&A in the fourth quarter to support our future growth.

Looking to 2022, as Andrew mentioned, we expect revenue growth in excess of 20% for the full year. We plan to invest approximately $75 million in airfreight ahead of our 2022 spring/summer selling season. Despite elevated supply chain costs and significant investment to fuel our growth, we expect operating margins in 2022 to be comparable to full-year 2021 guidance, excluding the incremental airfreight. We will resume our normal cadence of providing more detailed fiscal year guidance on our fourth-quarter earnings call.

In summary, we continue to deliver outstanding revenue growth and profitability while managing through supply disruptions, opportunistically strengthening our balance sheet, and investing in our future growth. At this time, I'll turn the call back over to Andrew for his final thoughts.

Andrew Rees -- Chief Executive Officer

Thank you, Anne. With three quarters of the year behind us, we've achieved tremendous success fueled by the strength of the Crocs brand and our superior execution. We are navigating the ongoing global supply chain disruption and have utmost confidence in our ability to deliver upon our short- and long-term goals. There is no better team to navigate through this temporary disruption and lead Crocs to the next stage of our growth.

Operator, please open the call for questions.

Questions & Answers:


Operator

[Operator instructions] Your first question comes from the line of Erinn Murphy with Piper Sandler.

Erinn Murphy -- Piper Sandler -- Analyst

Great. Thank you. Good morning. Good to hear about the progress, Andrew, in Vietnam and just some of the mitigating factors you're taking on the supply chain.

I guess, first, could you just remind us how big is Vietnam for you today? And where do you see your manufacturing mix evolving over the next 12 months? And then secondly, maybe kind of hone in a little bit more on the fourth quarter. How easy is it to get your product to market now? It sounds like Europe is going to be a little bit more challenged. And then, is there a product that you're seeing stuck out on the West Coast ports right now? Are you needing to accelerate airfreight specifically for holiday? Thanks. 

Andrew Rees -- Chief Executive Officer

OK, Erinn, thank you very much. A lot of questions there, so perfect. So, Vietnam, yes, Vietnam is a significant portion of our manufacturing base, it was actually about -- it was initially planned to be out 70% of our manufacturing base for '21. It will be a little less than that as we do the diversification we've talked about.

We have nine factories that are spread between southern, mid, and northern Vietnam, as we articulated in the prepared remarks, the factories are now largely open and in various states of reopening. One thing that we learned from COVID, I think it's really important for people to understand. Our shoes are really simple, and so ramping up factories can be very, very quick. Think about the Classic Clog it has three components, two of which are made on site.

So, you don't have a lot of external logistics to be able to get started. And so, we think we are confident in terms of ramping manufacturing. We will continue to diversify our manufacturing base. I think Indonesia is our most immediate target.

We have two factories in Indonesia that will be online by the end of the year, and they will ramp very quickly next year. We have a major facility planned in India in a year or so. So, we will continue diversification. And during the shuffling of supply, we'll obviously move some manufacturing back to China in the short term.

So, our team is really good at this. We have great relationships with our factory partners, so we feel really confident where we are. Obviously, the closure of the factories was disruptive, but I would also emphasize it's a temporary disruption. In terms of flow of goods for Q4, which I think was the second part of your question.

It's difficult, right? So yes, we definitely have product on ships outside of Long Beach. We have already diversified our inbound ports. So, we'd already pushed product to Northern ports on the West Coast to East Coast ports, etc. So, we've already done a good amount of that.

And we think we have kind of reasonable line of sight to everything that's going on. And I would say we've incorporated all of that into our guidance. You highlighted Europe. Europe is definitely more impacted because you may be aware that Vietnam is duty-free into Europe.

So, a lot of the production for Europe is coming out of Vietnam. So that's a little bit more impacted. We think that's a temporary impact. Our trajectory of bookings in EMEA have been extremely strong but will be impacted in Q4.

And I think the last part of your question was about airfreight. So, we don't anticipate using significant airfreight in Q4. Most of the product that will sell in Q4 is already here or inbound. So, there'll be a little bit but not significant.

Erinn Murphy -- Piper Sandler -- Analyst

That is so helpful. Thank you, Andrew. And if I can just add one for Anne. On your outlook for next year, could you just maybe help us with the shaping of first half versus second half just kind of marrying the comments of supply chain with the strong wholesale spring/summer '22 order book.

Thank you.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Sure, Erinn. So, our revenue for 2022, as we said, it's going to be over 20%. So, we're excited to be able to kind of provide that visibility a little bit earlier. I will say that there is a lot of variability right now in transit times per what Andrew just talked about with supply disruption, as well as the extended freight time.

So that makes quarter-to-quarter timing pretty difficult to anticipate this far out. Clearly, the front half is impacted by supply constraints. But I will say our current plan is not significantly back-half weighted, and we'll obviously give you more color on our full-year Q4 call.

Erinn Murphy -- Piper Sandler -- Analyst

Excellent. Congratulations. Thanks to you, guys.

Operator

Your next question comes from the line of Jonathan Komp with Baird.

Jonathan Komp -- Baird -- Analyst

Yeah. Hey, can you hear me? Sorry about that.

Andrew Rees -- Chief Executive Officer

Yeah. We got you, Jonathan. 

Jonathan Komp -- Baird -- Analyst

OK. Great. I wanted to ask about the ASP, the pricing component accelerated again in the fourth quarter. Could you maybe just touch on, from a product perspective, what's driving that? I noticed the line clogs maybe had a higher pricing increase and a lot of the new product looks at like a premium price point.

So, if you could maybe comment on the ASP drivers. And then as we think into '22, given the inflationary environment, how should we think about ASP given the unique input exposure you have?

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah. There's a couple of impacts on ASP. It's a really good question. So, the biggest impacts continue to be on ASP and kind of have been all year.

We did take price increases, as you mentioned -- took price increases on our line clog, as well as our Classic in the U.S. and other places. So that is an impact. So, the mix shift to clogs that we talked about in prepared remarks, as well as that pricing helps support it -- help support ASP.

And then also the pullback in promotions and discounts that we've seen broadly. Those are the biggest drivers from an ASP perspective, I would say, on the slightly negative side is a little bit of mix impact, which has been offset. Going into next year, from an inflationary perspective, we do anticipate some inflation flowing through, and we've seen that. We've been pretty proactive about taking price ahead of what we kind of anticipated from an inflationary environment.

We do have some price increases that we took this year that will flow through into next year, and we're proactively looking at other measures and things that we can do to kind of offset any inflationary pressures.

Jonathan Komp -- Baird -- Analyst

OK. That's really helpful. And maybe as a follow-up, just at a high level, thinking about gross margin next year, you highlighted the airfreight, I think you said mostly you are ahead of spring/summer. So maybe that's mostly in the first quarter, but if you could give any more color to the timing of the airfreight charges.

And then from an underlying gross margin perspective, should we expect a significant waiting when we think about the full-year '22 performance? Thanks.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah. So, from the airfreight perspective, I would see that's really front half. I don't really want to break it out by quarter, but I do think it's both Q1 and Q2. So again, we'll try to give you more visibility as we get a little closer.

And then from an overall kind of margin profile, we didn't guide that specifically. As we just mentioned, we are seeing some inflation. This year, it's been primarily around freight and wages. And what we see happening is that freight and wages in our distribution centers, that will continue through next year, as well as some of the resin impacts we expect to come on.

However, that's incorporated in our overall 28% operating margin guidance, excluding that airfreight. So, as I just mentioned, we also had some price increases flowing through, and we're looking at other things. So, we will try to give you again more color for next year on our normal cadence on our Q4 call. 

Jonathan Komp -- Baird -- Analyst

OK. That's very helpful.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Thanks again, Jonathan.

Operator

Your next question comes from the line of Laura Champine with Loop Capital.

Laura Champine -- Loop Capital Markets-- Analyst

Thanks for taking my question. It's sort of a follow- on the last one. Can you comment more specifically about cost increase of using the new, more sustainable resin in your product, and talk about whether you would have a concurrent price increase to the product? Or what your philosophy is around that? And then secondly, on the new formulation, does that change the wear profile of the product at all?

Andrew Rees -- Chief Executive Officer

OK. Thank you, Laura. So let me take those kind of in reverse order. So, the new formulation really uses a new ingredient, right? So, it's the same ingredient but the ingredients derived from a different source, a more sustainable source.

So, the wear profile, the look and feel, and the comfort of the product is completely unchanged, right? So, the consumer would not notice the two products side by side -- would not notice the difference between the two products side by side. So, I think that's one of the absolutely kind of fantastic parts about how we're approaching this. In terms of the cost increase, yes, I think we articulated when we made this announcement that the bio-based resin is more costly than the resin that we use today. But we're blending it in, right? So, there is a blend of the bio-based resin in essentially every product that we make.

And so, the cost increase for next year will be -- the cost impact for next year, frankly, is minimal. As we look forward into the future, it will have more impact but we're confident we can offset that through efficiency gains and/or potential price increases in the future. So -- but we do not intend to upcharge consumer for the bio-based product, and we will not be increasing prices to the consumer based on the increase in the bio-based resin purely. We'll be looking at sort of the overall health of the brand.

Does that make sense?

Laura Champine -- Loop Capital Markets-- Analyst

Yes. Thank you.

Operator

Your next question comes from the line of Sam Poser with Williams Trading.

Sam Poser -- Williams Trading -- Analyst

Good morning. Thank you for taking my questions. I've got a few. I'll just read them off.

One, what -- you talked about the additional $75 million in airfreight for next year. What is sort of the normal? Can you give us some idea of what the normal airfreight is and some -- just some more information there. Number two, what percent within Vietnam, how exposed of those nine factories? How many are in the South? And what kind of production comes out of the South? And then I noticed in your stores, what is the change in the regular full-price selling in your outlets this year versus past years? And how much -- it appeared to me that you're seeing a lot more full-price selling in the outlets than I anticipated, and wondered how that's impacting margins and how you see that going forward? And I probably have 10 more, but I'll just leave it at that. 

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Sure. So, I'll start, Sam, with answering your first one. So, our normal airfreight is certainly less than $10 million. We don't tend to spend a lot on airfreight.

We actually spent a little bit more this year than we did last. And that will be between $8 million and $10 million. So that's kind of a normal run rate for this year.

Andrew Rees -- Chief Executive Officer

Great. So, Vietnam, I said, look, the majority of the factories are in the south, Sam, as you'd expect, with the concentration of production facilities down there. We're obviously not going to kind of break out the size of each facility, but I would say the majority have been in the south. The north and the mid factories have continued to operate through this whole period, although you did see some disruption based on COVID cases and labor availability.

I think the only other piece of color I would say is as the factories in the South are reopening, we are seeing the labor coming back pretty effectively. So, we're pretty confident about getting those facilities back online quickly. And then you asked about full-price selling in our stores. Absolutely, as you kind of looked at the selling season, especially through the summer, which obviously is a peak period for us, particularly in the outlets with all of the tourist traffic.

Yes, we were essentially a lot more full price than we were last year. So, we did see a nice margin uptick in the stores. You can see that reflected in -- our overall margins have been extremely strong. And I think I am articulating very clearly that that was due to reduced promotional activity or one of the key components was reduced promotional activity.

And in-store has been an important component of that.

Sam Poser -- Williams Trading -- Analyst

And you anticipate that the outlet stores will continue to run at a more regular price rate, which should be really, really good on your -- leveraging your rents and everything else compared to your full-price stores? 

Andrew Rees -- Chief Executive Officer

I would say yes. look, I think we're heading into Q4, which is a more promotional period. There are some key periods in Q4, Black Friday, Cyber Monday, etc., when we feel like some promotional activity is required by the consumer, and it would be probably foolhardy not to participate in that to some degree. But I think depth and breadth will be less for sure.

And we're not planning to return to a higher promotional cadence anytime soon. We see demand for the brand far ahead of our ability to supply at this stage.

Sam Poser -- Williams Trading -- Analyst

And then one last thing. When will your factories in south Vietnam, do you think, be at full capacity and relative and where are they today? If you could give us some kind of color there.

Andrew Rees -- Chief Executive Officer

Yeah. That's too hard to say, Sam. I mean, I think we're certainly going to see -- we're anticipating that we see some on-again, off-again type of situation. We're not anticipating that the ramp-up -- our baseline projections do not anticipate they ramp up to full production in a number of weeks and then stay there for the rest of the eternity.

We think this is going to be volatile. We've incorporated that into our expectations and into our guidance.

Sam Poser -- Williams Trading -- Analyst

Thanks very much.

Operator

Your next question comes from the line of Susan Anderson with B. Riley.

Susan Anderson -- B. Riley FBR Inc. -- Analyst

I guess I wanted to ask about the boots for the fall, if there's any early reads on the boot offering that you have out there, particularly the personalized ones.

Andrew Rees -- Chief Executive Officer

Yeah. I would say boots is a very, very minor part of our strategy and product offering. As we look at the fall, we're actually primarily focused on Line Classic or Line product. That's where we really can deliver, I think, very strongly on kind of consumer expectations.

That's where the volume of our business is. I would say Line's been performing extremely well. We're very satisfied with the performance of our boots, but it's really a very minor part of what we do.

Susan Anderson -- B. Riley FBR Inc. -- Analyst

Great. And then I'm curious about just the Jibbitz growth in the quarter. I'm not sure if you mentioned that. And then also, how much more space did you gain for Jibbitz if at all at wholesale for the quarter?

Andrew Rees -- Chief Executive Officer

Yeah. Well, I think what we said is the Jibbitz doubled again in the quarter. I think if you remember back at our Investor Day presentation, we said it was 6% of our overall business. In terms of wholesale presentation, we continue to gain wholesale presentation for Jibbitz, I would say, across the globe in this country, in Western Europe, and also in Asia.

So that is an important part of our growth in Jibbitz. I would also say that our online sales of Jibbitz have shifted more from kind of singles to packs, which has also allowed us to accelerate growth in terms of digital sales, for Jibbitz, too.

Susan Anderson -- B. Riley FBR Inc. -- Analyst

Great. And then lastly, maybe if you could just talk about what you're expecting in terms of mix of wholesale to DTC. It seems like wholesale is reaccelerating now. I guess DTC is still growing, but do you expect that to shift back a little bit more to wholesale next year? 

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah. Thank you for the question. I think when we think about next year, as I mentioned, there's still a lot of unknown with just kind of the variability of transit times and all the things that we're laying out. As we talked about in prepared remarks, we're seeing really strong wholesale bookings, as well as we're really confident in the consumer demand for our product.

But I don't think we're ready to kind of give that breakout yet as it's still pretty early. So, we're happy to provide more color, commentary as we get a little closer to the year next year.

Susan Anderson -- B. Riley FBR Inc. -- Analyst

Great. OK. Thanks so much. Good luck at this holiday.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Steven Marotta with C.L. King.

Steven Marotta -- C.L. King & Associates -- Analyst

Good morning, Andrew, Anne, and Cori. Anne, two questions for you. Could you please just assemble what the in-transit inventory is in the third quarter of this year versus last year? And the follow-up is, can you talk about price increases in the first half of 2022 on a like-for-like basis versus pricing in the first half of '21. Thank you.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Sure. So, yes, in the quarter, we grew revenue 73%, Inventory grew 22%, and almost all of the growth was in transit. And that's really just a reflection of the extended transit times that we've experienced. I think we've managed it really well, trying to keep our inventory really in stock, especially in our strategic channels, including our own e-commerce channel.

And then switching over from a price increase first half '22 versus first half '21. So, we did take the biggest kind of flow-through that we've talked about, is the price increase we took for wholesale that hasn't flowed through to the first half of '22, yet that will be flowing through. And then we also have some price increases we took internationally that will flow through in the first half of '22. 

Steven Marotta -- C.L. King & Associates -- Analyst

OK. I'll take the balance offline. Thank you again.

Operator

Your next question comes from the line of James Chartier with Monness, Crespi.

James Chartier -- Monness, Crespi, Hardt & Co., Inc. -- Analyst

Thanks for taking my question. For next year, how should we think about growth by product category and region? Should we still expect clogs in America's to grow faster than the overall? Or should we start to see the shift toward sandals and Asia star next year?

Andrew Rees -- Chief Executive Officer

Yes. Thanks, Jim. As we look at next year, we still expect clog growth to be very strong. So, we're still seeing tremendous growth in bookings, in our clog business.

I would say we are anticipating that the America's will be strong, but we also think the international business will accelerate. And then we think sandal growth will improve, hopefully. But that's kind of a smaller piece of the business. So, if we think about our five-year plan in terms of growing our sandal business, we definitely think we're on track for our long-term trajectory, and confident about the growth of that category.

James Chartier -- Monness, Crespi, Hardt & Co., Inc. -- Analyst

Great. And then just on the store openings this year in Asia, where have those stores been opened? Have you started to open up any new stores in China?

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah, that's a great question. The vast majority of the store openings in Asia have actually been in China. So split between some outlets that we took back in Beijing, and then some full-price stores and some key cities in China.

James Chartier -- Monness, Crespi, Hardt & Co., Inc. -- Analyst

Great. Thank you.

Operator

Your next question comes from the line of Jim Duffy with Stifel.

Jim Duffy -- Stifel Financial Corp. -- Analyst

Good morning. I have a couple of questions. I wanted to start just on customer activity in the DTC data file. Can you shape the composition of sales to existing customers versus customers that are new to the data file and maybe speak about growth of that data file?

Andrew Rees -- Chief Executive Officer

Yeah. I mean, we don't break that out in a lot of detail, Jim. It's just not how we go to market. But what I can tell you -- obviously, we do analyze that information.

What I can tell you is that the growth we're seeing in DTC is frankly from both is from new customers and also increased and repeat purchasing from existing customers. As we look at the -- and obviously, with the acquisition of those new customers, our underlying data file is growing extremely well. I would also add that some of our colab activity and some of the marketing activity we do allows us to capture consumers very effectively in terms of when they are in a queue looking for a colab while they enter an auction, as you might have seen -- we've moved some of our colabs to an auction type of process. That also is very effective in terms of increasing our consumer data files.

So we feel very confident and optimistic about the consumer activity that we see both online and in-store.

Jim Duffy -- Stifel Financial Corp. -- Analyst

Thanks for that. And, Andrew, I wanted to ask about wholesale orders. Clearly, retailers very anxious to get more product for spring. I'm curious, the measures you have in place that will help you guard against the risk of over inventory in the channel.

Will those be stage deliveries? Are you monitoring inventories in the channel? I recognize the orders are strong, but just talk about your thought process for managing through that as the year unfolds. 

Andrew Rees -- Chief Executive Officer

Yeah. I mean, I think we've talked about this a few times. I think we've really stepped up our brand health and inventory management activities. We work very closely with all of our major wholesale partners around what they're ordering, how much they're ordering, when they're ordering it.

We wanted to sell-throughs extremely closely, as you'd expect us to do. And some of our key products, frankly, are really on allocation across those partners. So, we make sure we have the right product in the right place. So, I'd say we're very much on top of that and do all of the things that you kind of, frankly, expect us to do to make sure that I think the biggest problem or the biggest thing that any brand has to be aware of is making sure that their inventory is fresh, inventory is turning in all the channels.

And if you just look at our overall inventory efficiency and our turn rates, I think there the best-in-class.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah. And, Jim, just one thing to add there. As we talked about in prepared remarks, we do see a really strong wholesale order book for next year. We are not going to be able to fulfill all the demand that's in our wholesale order book just given Vietnam production in the first half of the impact.

So even though we're airfreighting, and we are projecting really strong growth for next year. We will still be constrained from a wholesale demand perspective. 

Jim Duffy -- Stifel Financial Corp. -- Analyst

Helpful. Thanks again. And then I wanted to ask if you could provide a little more color on the components of gross margin improvement. You got 65 basis points from currency.

How would you split the rest of the contributors to that gross margin improvement? And I'm particularly curious about the benefit to gross margin from Jibbitz mix. Any color you could provide there would be helpful. Thanks.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah. The biggest overall benefit to gross margins really have to deal with the pullback in promotions, as well as price increases. So that's kind of the largest share. I would combine those two into buckets.

Jibbitz mix is also a piece of it, but price increases in promotional strategy are the largest followed by product mix and Jibbitz share.

Jim Duffy -- Stifel Financial Corp. -- Analyst

Great. Thank you. I'll leave it at that.

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah. Thanks.

Operator

Your next question comes from the line of Jay Sole with UBS.

Jay Sole -- UBS -- Analyst

Great. Thank you so much, and thanks for taking my question. Andrew, I just want to maybe take a step back because your question has been about pricing and channels. And just if you think about 20% -- exceeding 20% growth next year on top of this year where growth is going to be in the mid-60s, at least.

How do you think about -- what gives you confidence to give an outlook for next year at this point here in October versus normally in February when you do it? Obviously, the wholesale order book sounds really robust. But can you maybe just talk about what strategies you're using continue to drive growth on top of big growth? And maybe which consumer groups are really -- you're targeting to increase the sales, and then just can you continue to increase brand relevance? Thank you.

Andrew Rees -- Chief Executive Officer

Yeah. Excellent question. So, if we step way back, I think what we're seeing is very strong brand trajectory, right? We talked about that a little bit in prepared remarks. We wanted brand relevance, consideration, etc.

and we've seen double-digit increases in that sort of five years in a row, right? So, as we look at our brand relevance and our brand trajectory -- and that's frankly not just in the U.S., we're looking at that in all of our key countries. We're looking at it in Europe. We're looking at it, China, Korea, Japan, etc. So, we've seen continued acceleration of brand relevance which allows us, I think, a great deal of confidence that we can continue to scale the brand in many parts of the world, right? If you look at our recent success and our recent trajectory, it's been heavily driven by the United States.

We've seen extraordinary growth here in the United States, really for three years in a row now despite the pandemic. As we look to the future and as we talked about in our Investor Day, we really see that growth accelerating outside of the United States. So, in our EMEA business, we've seen strong traction this year. We anticipate that continuing with a temporary disruption in Q4 of this year.

And then we also see Asia as our biggest long-term potential with giant markets available to us, firstly, in China but also in Japan and Southeast Asia, which has essentially been closed down during this time period. So, it's brand trajectory. It's a growth opportunity around the world, is kind of the two key factors. And that's what really underpins our $5 billion in the next five years in terms of our overall growth.

Then I layer on top of that, bookings. If we look at wholesale bookings as we book into the first half of next year, we're clearly seeing demand way beyond what we're able to supply, given some of the supply disruptions and just over the overall scaling of our supply chain. So, we think we can solve that over time, but we can't solve that in the short term. So, I think that's what gives us the confidence to be able to give you the kind of 20%-plus revenue growth into next year.

The rate-limiting factor for next year, frankly, is really supply. And then I think to one of the earlier questions, we do remain very vigilant, and monitor closely the sell-through of that product. The last thing that we want to do is create a negative momentum for the brand by over-inventorying any of our particular channels.

Jay Sole -- UBS -- Analyst

Got it. That's very helpful.

Andrew Rees -- Chief Executive Officer

Thank you, Jay.

Operator

Your next question comes from the line of Jonathan Komp with Baird.

Jonathan Komp -- Baird -- Analyst

Thanks. Two quick follow-ups if there's time. One, taking out of the prior question and thinking back to the Investor Day and hitting $5 billion of revenue, your current ASP, I mean, that would require close to 200 million pairs a year. So just any broader context as we think about that five-year projection, how you get comfortable with those types of volumes?

Andrew Rees -- Chief Executive Officer

Yeah. I mean, look, it does imply -- and we talked about that explicitly, I think at Investor Day. We do see some ASP growth over that time frame, but still, the biggest driver of the growth will be pairs. And what I would say is if you just look at other brands and you look at the availability of production, it requires forethought and planning, and it requires anticipation.

But there is absolutely available capacity to be able to produce those kind of pairs and partners that are willing and able to and frankly, make good money out of producing those pairs. So, they're anxious to support us and stand up new facilities. So, we don't really have any huge concern about that. It's definitely something that we feel very confident we can deliver against.

Jonathan Komp -- Baird -- Analyst

OK. And then, Anne, maybe one follow-up. I know at Investor Day, you talked about roughly a flat gross margin over time, looking against the 2021 level. It looks like gross margin obviously is trending higher, closer to 60% or a little above for '21 here.

So, is that sort of the new bar you think is sustainable going forward? Or do you think over that five-year horizon, you'll give back some gross margin? Or how should we think about that? 

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Yeah. I think where we specifically talked about to you for our Investor Day is that we're comfortable with the 26% adjusted operating margins over the long term and 26% or plus. And I think those that's best-in-class. I think as far as the pieces, what we'll try to do is update you guys more on a full year on each of the initiatives and how that's playing in.

So, I would say that 26% operating margin guidance over the long term still stands. Obviously, next year, we guided higher, excluding the airfreight of 28%.

Operator

And at this time, there are no further questions. I will now turn the call back over to management for any closing remarks.

Andrew Rees -- Chief Executive Officer

I just want to conclude by thanking everybody for their ongoing interest in our company. And thank you very much.

Operator

[Operator signoff]

Duration: 49 minutes

Call participants:

Corinne Lin -- Vice President, Corporate Finance

Andrew Rees -- Chief Executive Officer

Anne Mehlman -- Executive Vice President and Chief Financial Officer

Erinn Murphy -- Piper Sandler -- Analyst

Jonathan Komp -- Baird -- Analyst

Laura Champine -- Loop Capital Markets-- Analyst

Sam Poser -- Williams Trading -- Analyst

Susan Anderson -- B. Riley FBR Inc. -- Analyst

Steven Marotta -- C.L. King & Associates -- Analyst

James Chartier -- Monness, Crespi, Hardt & Co., Inc. -- Analyst

Jim Duffy -- Stifel Financial Corp. -- Analyst

Jay Sole -- UBS -- Analyst

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