Earlier this month, I strapped on some snazzy sandals and outlined a few reasons investors should be excited about the innovative shoe company, Crocs (NASDAQ:CROX). At that time, the stock had enjoyed a more than 70% gain from the 52-week low it logged in June. Shares have only climbed higher since then, and the company's third-quarter earnings report is fast approaching, scheduled for Oct. 30.

In preparation for those results, here's what current investors, or those looking to invest, should be watching later this month.

A row of Crocs shoes in various colors and sizes

Image source: Getty Images.

Continued growth in the e-commerce business

Crocs has made proactive changes to cultivate its e-commerce business. In the second quarter:

  • The company reported $75.4 million in e-commerce revenue, an 18% increase over the prior year.
  • Q2 2019 was the ninth consecutive quarter of double-digit growth in its e-commerce channel.
  • E-commerce revenue increased to make up 21% of the top line.

In the third-quarter report, look to see whether Crocs can maintain the pace of growth in its e-commerce channel. The company reported e-commerce revenue of $45.81 million in Q3 2018, so in order for Crocs to sustain its double-digit growth streak, e-commerce revenue will need to come in at $50.39 million or more.

Otherwise, investors should dig into growth numbers in its largest market, the Americas. Last quarter, e-commerce revenue in the region was $34.6 million with year-over-year growth of 27%.

During the second quarter earnings call, Crocs said it expects e-commerce to continue to be its fastest-growing channel. Management outlined plans to support the channel by continuing to grow Crocs-owned e-commerce websites and expanding into high-traffic digital marketplaces operated by third parties. Investors should be on the lookout for updates from management here.

While Crocs isn't putting all its clogs in one basket, it does seem to be staking a big part of its future success on e-commerce. As a result, underperformance in this channel is going to upset investors, even if offset by gains elsewhere.

Is the sandals market still as strong as projected?

While the classic clog is the heart of the Crocs brand -- it made up 57% of footwear sales last quarter -- the company is looking to grow in other areas of the footwear market, too. One category investors should be monitoring closely is sandals. Through the second quarter, the company has seen nine consecutive quarters of double-digit growth for its sandals revenue, which now represents over a quarter of footwear sales.

The growth is geographically diverse with strong results across all markets. Management drove home the message last quarter that it was looking to focus on increasing brand awareness and driving sales for sandals.

While the company did not provide guidance for this specific category, deceleration in this high-growth product category would also be a red flag.

Revenue growth and a decrease in expenses

Crocs has outlined an attractive and simple plan to maintain growth -- increase revenue while decreasing selling, general, and administrative (SG&A) expenses. In other words, Crocs wants to make more money and spend less in the process. For the third quarter, the company projects:

  • Revenue between $295 million and $305 million
  • SG&A of approximately 40% of revenue

Those revenue projections represent year-over-year growth between 13.0% to 16.8% at the bottom and top of the guidance range, respectively. And a hit on the SG&A guidance would reflect a nearly eight percentage point decline from the prior-year period.

The company stated in its last investor presentation that it would like to hit these financial targets alongside an increase in marketing spending. Cutting costs is one thing, but reductions to marketing just to fall within guidance can have negative impacts on growth going forward, especially as the company approaches the important holiday shopping season.

Despite the stock's volatility in 2019, Crocs has proven that its business is firing on all cylinders. And given the recent bullish trading, investors' expectations are high going into this next report, and this is one stock worthy of your attention.