Crocs, Inc.s forecast for a “significant loss” in the first quarter-after a grueling fourth quarter in 2008-was dead-on as the company reported first quarter revenue of $134.9 million, down 32.0% from $198.5 million in the year-ago period. The company quadrupled its net loss for the period.
The company reported a net loss of $22.4 million in the first quarter with a diluted loss per share of 27 cents compared to a net loss of $4.5 million, or 5 cents per share in the year-ago period. Selling, general and administrative costs were cut 6.2% from the same quarter a year-ago, but increased considerably as a percentage of sales.
Gross margins fell 610 basis points to 36.8% of sales, compared to 42.9% of revenue in the first quarter of 2008. Driving the gross margin down was a drop in the companys average selling price. In addition, as the company reduces its global warehouse footprint, it is experiencing some short term cost inefficiencies attributable to the consolidation of its warehouse space. The company expects these cost inefficiencies will continue to weigh on its gross margin in second and third quarter as well.
During the first quarter, revenue from the global retail channel increased 60.3% to $27.9 million, which outpaced the 36% increase in the number of company operated retail locations. CROX had 290 retail locations at March 31 versus 213 the year-ago quarter-end. The increase has primarily been in U.S. outlet and Asia retail stores. Internet sales improved 46.3% to $11.7 million for the period. As a result, wholesale revenues fell 45.0% to $95.3 million in the quarter.
By geographic region, first quarter sales in the U.S. declined 37.3% to $59.2 million. Sales outside the U.S. were down 27.3% to $75.7 million. Canada sales fell 41.7% to $4.2 million. Asian market revenues were up 6.5% to $39 million. This increase was largely a result of increased retail sales in the region. First quarter sales in the European market were down 49.0% to $28.3 million compared to the first quarter of 2008. On a positive note, the company is encouraged by strong acceptance of its internet platform in the region and it expects this to be a continued source of growth in the region. Sales in the Americas were down 37.0% from Q1 2008 to $67.6 million in Q1 2009.
Management said the declines were fueled in large part by the ailing economy, which has led to reduced demand and retailers operating at lower inventory levels.
Sales of footwear declined 31.4% to $126.4 million, while sales of other products, including Jibbitz, fell 40.9% to $8.5 million for the period.
Inventories decreased 8.4% to $131.2 million compared at quarter-end. Management said some of the decline is attributable to the $70 million in inventory write-downs during 2008. However, $54 million of the decline came because the company was able to move footwear inventory on hand with the remaining difference being the result of more efficient supply chain management.
Cash and cash equivalents were $50.9 million down slightly from the $51.7 million the company reported at the end of 2008. However, compared to the comparable 2008 quarter, the company increased its cash by $21.3 million despite the fact that it reduced borrowing and its credit facility during this period from $42.8 million at March 31, 2008 to $19.8 million at the end of the first quarter 2009.
