The Crocs Inc. fourth quarter loss was narrower than its recent guidance, but the company followed up that loss with a forecast for a significant loss in the first quarter. Fourth quarter revenues dropped 43.9% to $126.1 million with a net loss of $33.2 million, or 40 cents a share, including $21.1 million in foreign currency exchange rate losses and approximately $900,000 in charges to shut down its plant in Brazil. 


Results were ahead of a November forecast that saw a loss between 50 cents to 65 cents a share on sales between $100 million to $120 million. Excluding the foreign currency impact, Crocs posted a net loss of $16.1 million, or 20 cents a share, for the quarter, compared with earnings of $38.3 million, or 45 cents a share, a year ago.

Gross margins eroded to 44.4% of sales in the fourth quarter versus 56.0% of sales in the year-ago period.  Selling, general, and administrative expenses, including foreign currency exchange rate gains and losses, was 77.4% of sales versus 32.0% a year ago. Inventories decreased 42.3% to $143.2 million from $248.4 million a year ago, primarily due to inventory write-downs during the 2008 third quarter.
For the full year, total sales decreased 14.8% to $721.6 million. Sales grew 22.4% to $204.9 million in Asia but fell 16.2% to $150.7 million in Europe and were down 26.9% to $366 million in the Americas region.   Wholesale sales fell 25.3% to $552.1 million, while sales jumped 68.7% to $125.8 million in owned-retail stores and gained 28.9% to $43.7 million in e-commerce.

Direct-to-consumer sales, including Crocs’ e-commerce site and  its stores grew to 38% of total sales in the fourth quarter.
Cash and cash equivalents improved to $51.7 million as of December 31 from $36.3 million a year earlier. Borrowings under the company's credit facility were $22.4 million at December 31 compared to $7.1 million a year ago.

On a conference call with analysts, John McCarvel, Crocs COO, said Crocs “remains popular,” with the Cayman model ranking as the number one shoe sold on Amazon last year. Success of new offerings also helped the company to become less reliant on key styles. But McCarvel noted that retailers in the U.S. “remain extremely cautious about placing any significant inventory commitments.”

Although Crocs received strong pre-bookings for the new offerings, McCarvel said “flexibility and at-once delivery capability will be critical to servicing the wholesale market in this environment.”

Ronald Snyder, Crocs president and CEO, noted on the call that, given the current environment, the primary focus for CROX will be generating cash and driving profitability on a smaller revenue base. That strategy includes increasing productivity by rationalizing its SKU count to focus on higher-volume products; refreshing key styles with new materials, new prints and new colors to build seasonal collections; and focusing on larger retailers in its wholesale business that have the ability to merchandise a broader assortment of Crocs footwear.

For the first quarter ending March 31, Crocs expects revenues between $110 million to $135 million (down from revenues of $198.5 million a year ago) and a loss per share ranging from 17 cents to 35 cents (versus earnings of 9 cents). Guidance includes an estimated non-cash foreign currency exchange loss of $10 million.