Crocs, Inc. lowered its first quarter 2008 revenue guidance to be in the approximate range of $195 million to $200 million and its earning per share expectations to a loss per diluted share in the range of 5 cents to breakeven. The company's previous guidance held revenues of $225 million and diluted earnings per share of 46 cents. At the same time, Crocs lowered its outlook for the fiscal year ending December 31, 2008. The company also announced it has made the strategic decision to close its Canadian manufacturing operations in order to consolidate its production at its lower cost company-owned and third-party facilities.
The companys revised revenue expectations of $195 million to $200 million represents an increase of approximately 37% to 41% over the prior year, with domestic sales expected to increase 13%, European sales expected to increase approximately 90%, and Asia sales are expected to be up approximately 75%. The companys expected loss per diluted share in the range of 5 cents to breakeven, includes a portion of the one-time, pre-tax charge associated with the shutdown of the companys Canadian manufacturing operations equaling approximately $16 million, or 13 cents per diluted share. Excluding this charge, the company expects first quarter 2008 diluted earnings per share in the range of 8 cents to 13 cents. Based on its lower revenue expectations for the first quarter, the company now expects inventories as of March 31, 2008 to increase approximately 5% to 10% as compared to December 31, 2007.
For the second quarter of fiscal 2008, revenues are expected to increase between 10% and 15% over the corresponding period a year ago with diluted earnings per share in the range of 42 cents to 47 cents, including a portion of the aforementioned one-time, pre-tax charge associated with shutdown of the companys Canadian manufacturing operations equaling approximately $4 million, or 3 cents per diluted share. Excluding this charge, the company expects second quarter 2008 diluted earnings per share in the range of 45 cents to 50 cents. For fiscal 2008, revenues are now expected to increase between 15% and 20% over 2007 with diluted earnings per share in the range of approximately $1.54 to $1.64, including the total one-time, pre-tax charge of approximately $20 million, or 16 cents per diluted share associated with the shutdown of the companys Canadian manufacturing operations. Excluding the charge, fiscal 2008 diluted earnings per share are expected to be between $1.70 and $1.80.
Ron Snyder, president and CEO of Crocs, Inc. commented, “The retail environment in the U.S. has become increasingly challenging as consumer spending and traffic levels have slowed. Despite general weakness across the industry we continue to witness solid sell-through of our Crocs branded footwear and still expect domestic sales to still grow roughly 13% during the quarter. However, retailers in general are planning more cautiously, and therefore, we did not experience the level of at once business we originally expected. In addition, because of our current expense structure, a shortfall in sales versus our expectations disproportionately impacts our earnings results.”
“Canada has been and remains an important market for our Company,” continued Mr. Snyder. “While it was a difficult decision to close down our manufacturing facility we believe it was necessary in order to improve our cost structure going forward. We are maintaining our sales and marketing office and retail store in Quebec City and will be expanding our presence throughout the country including the opening of four additional Crocs branded stores this year.”
Mr. Snyder concluded, “We remain optimistic about our business as we continue to expand the breadth and depth of the Crocs brand around the globe. That said, in light of the current marketplace we believe it is prudent to adopt a more conservative outlook for the year and this is reflected in our updated guidance. Over the near-term we are taking steps to maximize profitability without compromising the long-term potential of the brand which include: initiating cost cutting measures, delaying certain infrastructure investments, and continuing to drive to low cost manufacturing locations as well as increasing our share repurchase program. At the same time, given our current inventory position coupled with our demand driven manufacturing model, we believe we are well positioned to meet any potential upside that materializes during our peak summer season. We are confident that we still have significant growth prospects into the future and we move forward fully committed to capitalizing on the many opportunities that lie ahead.”
