Crocs Inc., citing “more challenging” retail conditions, said it expects Q2 sales to range between $218 million to $233 million and earnings per share in the range of 3 cents to 7 cents. The revised estimates compare to previous guidance of revenues ranging from $247 million and $258 million and EPS between 42 cents and 47 cents. For fiscal 2008, Crocs now expects revenues to fall “modestly” on break-even results after charges to close its Canadian manufacturing operations…

The quarter included a previously-announced pre-tax charge associated with the shutdown of the companyâ€s Canadian manufacturing operations equaling approximately $1.4 million, or 1 cent a share.


Despite lower revenue expectations, the company still anticipates inventories as of June 30, to decrease approximately 10% to 15% from $266 million in the first quarter, and receivable days sales outstanding to improve approximately 20%-25% as compared to March 31, 2008.


“The domestic marketplace proved to be more challenging during the second quarter than we had originally anticipated,” said Ron Snyder, president and chief executive officer of Crocs. “While we did experience solid sell-through with many of our major accounts, retailers across the board were extremely cautious with their level of reorders, choosing to operate with leaner inventories versus a year ago. Our international markets continued to perform better than the U.S., with Asia up roughly 65% and Europe up approximately 13%, however this was below our initial projections. Although we made important progress reducing costs in our manufacturing and distribution platform, primarily shutting down our Canadian facility and lowering our headcount, it was not enough to offset the lower than projected sales volumes. At the same time, we continue with our global brand building initiatives and while the increase in marketing, retail and advertising spend negatively impacted our near-term profitability we believe this is a key component to our long-term success.”


Crocs also revised its outlook for the fiscal year ending December 31, 2008. For fiscal 2008, revenues are now expected be down modestly compared to 2007 levels with diluted earnings per share of approximately break-even, including the total pre-tax charge of approximately $20 million, or $0.16 per diluted share associated with the shutdown of the Companyâ€s Canadian manufacturing operations. For the third quarter ending September 30, 2008, the company expects revenues to be in the range of $195 million to $205 million and diluted earnings per share of approximately $0.01 to $0.05.


Snyder concluded, “We are obviously disappointed with the economic situation in the U.S. and parts of Europe, however, we remain confident about the long-term prospects of this business. We are currently in the process of sizing our business to be profitable on lower projected sales volumes and these cost actions will continue through the end of the year. Operationally, we are implementing several strategic programs aimed at enhancing our supply chain, further reducing costs and improving working capital. We believe that many of our markets are underpenetrated and should provide meaningful growth opportunities for our products well into the future. While in the U.S. we are focused on expanding consumer awareness, shelf space and distribution for our new collections of footwear. Our entire organization is committed to executing our business plan and returning greater value to our shareholders.”


Crocs will host a conference call to discuss its revised outlook, July 25, 2008 at 8:30 am ET.