Shares of shoe company Crocs (NASDAQ: CROX) dropped on Tuesday after the company reported financial results for the third quarter of 2024. While most of the numbers looked good, investors don't like the ongoing weakness with its HeyDude brand. And that's a big reason why Crocs stock was down 17% as of 11 a.m. ET and down nearly 30% from its 52-week high.

Strong financial results come with a big pocket of weakness

Crocs' management had expected its Q3 revenue to be up by 0.5%, at most. But it did far better. The company generated Q3 revenue of $1.06 billion, which was up 2%.

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That said, it owns two major shoe brands: Crocs and HeyDude. And its outperformance in Q3 was solely thanks to its strength with Crocs. By contrast, HeyDude continues to underperform investors' hopes.

For reference, Q3 revenue for the Crocs brand itself was up more than 7%, whereas management only guided for 3% to 5% growth. By contrast, HeyDude's revenue plunged 17% year over year, even though management only expected a 14% to 16% drop.

It seems that Crocs' shareholders are increasingly frustrated with poor results from HeyDude when the Crocs brand is so strong. And that's why the stock was down today.

Crocs keeps pushing past headwinds

As a Crocs shareholder myself, I can appreciate investors' frustrations with HeyDude today. The deal was big at $2.5 billion, and it's approaching its three-year anniversary with still little progress. It was supposed to catalyze growth and profits, but that hasn't been the case.

That said, investors may be missing some big improvements with HeyDude. In Q3, HeyDude's gross margin jumped to nearly 48%, compared to a gross margin of less than 43% in the prior-year period. HeyDude's Q3 gross profit was consequently only down 7.5% year over year, which is far more palatable than its 17% drop in revenue.

Moreover, Crocs as a whole is still performing remarkably well in spite of the headwind from HeyDude. Its Q3 operating margin is over 25%, which is great for a shoe stock. Therefore, while HeyDude is frustrating, I believe investors are overreacting today, and Crocs stock is consequently a good value stock to buy.

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