Crocs Inc. reported sales slumped 16.1 percent in the first quarter, to $262.2 million. On a currency-neutral basis, revenue decreased 8 percent. The company showed a loss of $6.0 million, or 8 cents a share, against a profit of $6.4 million, or 6 cents, a year ago.
Non-recurring and special charges amounted to $10.7 million in the latest quarter versus $8.1 million in the first quarter of 2014. Excluding these items, operating income dropped 66.6 percent to $8.3 million from $24.9 million a year ago. Net earnings plunged 67.6 percent to $4.7 million from $14.5 million in the first quarter of 2014.
On a conference call with analysts, Gregg Ribatt, Crocs’ CEO since January, said first quarter sales in line with expectations. Excluding China, store closings and discontinued operations, sales were up slightly to last year on a currency-neutral basis. Crocs still expects to see “material progress” in China in Q2 based on actions already taken and sales growth is expected to resume in the region beginning in the third quarter.
Ribatt also said other external challenges including a strong dollar and the West Coast port slowdown impacted Crocs performance in the quarter. But he added Crocs “continues to make great progress” in its transformation initiatives, including strengthening the Crocs brand, elevating its product stories, exiting non-core categories and businesses, evolving its international business model to focus on its six most important markets.
“Our business continues to stabilize around the globe,” said Ribatt, ”We are confident that these moves are laying the foundation to position the company for sustained growth in the future.”
He highlighted four strategic updates, including the launch of its “Find Your Fun” marketing campaign that has seen a strong early response from consumers. Product-wise, the Free Sale, a core molded Croc with a tapered last, as well as the Sloan, a molded sandal, were both launched on a limited basis and are selling “extremely well.” Said Ribatt, “These two shoes demonstrate our ability to take our core molded category, reinvent products with updated styling and connect deeply with consumers evolving taste and style needs.”
On the technology side, a new SAP ERP system went live on January and “while there’s still work to be done” in the implementation, it’s expected to help Crocs better control operations, speed global data aggregation and improve decision making.
Organizationally, Crocs’ COO, Scott Crutchfield, is leaving the company as part of a series of senior level organizational changes that include the elimination of the COO and the SVP of global supply chain roles. Phil Blake is joining the company as SVP of global sourcing. Blake previously served as the VP of sourcing at Clarks Americas, SVP of sourcing at Collective Brands Performance & Lifestyle Group and VP of manufacturing at Timberland. Dennis Sheldon, an 8-year Crocs veteran who recently led Crocs SAP initiative, has been promoted to SVP of global distribution & logistics.
“We are grateful to Scott and the significant contributions he made to the success of Crocs in his nine years with the company,” said Ribatt. “Streamlining the organization at this time will help improve communication, speed decision making and provide better coordination between Crocs and its customers and suppliers.”
Ribatt said its first quarter financial results reflect the strategic shift to focus the organization on a narrower range of businesses, fewer owned-retail stores and a narrowed geographic focus. He added, “The balance of our business continues to stabilize across all of our regions while we address the continuing challenges of the stronger U.S. dollar, our China business and the impact of the slowdown at the U.S. ports. Our balance sheet at the end of the first quarter reflected lower inventory and global accounts receivables”
Crocs expects Q2 revenue in the $340 to $350 million range, showing slight growth excluding the impacts of its China business and store closings and discontinued product lines.
