Citing weak at-once orders and direct-to-consumer sales in the Americas, Crocs Inc. lowered its guidance for revenues and earnings in the third quarter ending Sept. 30.
The cushy shoemaker now expects revenue between $285 million and $295 million and EPS between 15 and 18 cents. This compares with the prior financial outlook provided on July 24, of revenue between $300 million and $310 million and EPS between 20 and 23 cents.
The guidance includes a 2-cent per share of ERP implementation expense and 4 cent per share for adverse foreign currency translation.
With the new guidance, sales are expected to be flat to slightly down in the quarter versus 2012 third quarter’s revenues of $295.6 million. Earnings will be down more than half from 37 cents a share a year ago.
The updated guidance was prompted by Crocs’ appearance Tuesday at a Goldman Sachs investment conference, as well as a CL King conference visit on Wednesday.
Croc said while Americas’ sales are running below expectations, the company still expects third quarter gross margins to be generally in-line with prior year performance.
In a statement, John McCarvel, president and CEO, also noted that the company is “very satisfied to date” with its Asia Pacific and Europe retail sales performance in the quarter. Also, pre-books from its wholesale customers for spring/summer 2014 product are running ten percent ahead of last year
Added McCarvel, “We believe our brand is well positioned to take advantage of our customers demand for colorful and fun footwear in 2014.”
At Goldman Sachs conference, Jeff Lasher, Crocs’ CFO, said Crocs is finding wholesale accounts in the Americas continuing to be conservative with at-once ordering.
“They are conservative on their inventory levels as they he plan out their fall holiday coming into the season for them,” added Lasher. He noted that the department store channel has been “a little more challenging” than the family footwear channel.
Lasher also noted that Crocs did choose to do about $7 million of discount deals in the second quarter to reduce inventories that will not be repeated in the third quarter. In the future, clearance sales will be pushed out at its outlet stores.
Overall, Lasher said Crocs Americas group is “striving to increase our overall wholesale doors next year,” with some unnamed new accounts set for 2014. It also is working to increase allocations at existing accounts.
He called out some “fantastic partners” throughout the southeast, naming Academy as well as Bealls, Belk's and Dillard’s. The focus will also continue on the family footwear channel, which Lasher described as “a great channel” for the last few years.
“We are very encouraged by all those signs, and as we look out into 2014 we are excited about the spring summer prebooks that are going into the US which is up double digits right,” said Lasher.
At its own stores, Crocs was less promotional in the current quarter this year versus past years, which will help margin at the expense of lower revenues due to decreased traffic.
On the positive side, Slasher noted that Europe is exceeding expectations in its direct channel and Asia “continues to perform very strongly.”
Slasher did confirm a recent analyst report that some general managers “for various reasons” had decided to leave the company. But he added that a new Americas general manager will join the company “in the back half of the year, and we're really excited about him coming on to this organization to really drive our very important Americas marketplace.” A new general manager has also been promoted to run the Asia business.
Crocs also said it is actively working to adjust its capital allocation strategy by the end of the fourth quarter. From $80 million to $100 million of domestic cash is expected to be deployed to fund potential stock repurchases or other strategic investments in the future.