Crocs Inc.'s quarterly results beat Wall Street expectations as strong demand in Asia and the Americas offset weakness in Europe. But the cushy footwear maker joined a long line of vendors disappointing investors with orders coming in less than hoped.
On a conference call with analysts, John McCarvel, Crocs' president and CEO, said fall bookings are up 11 percent year-on-year. Gains of 12 percent in the Americas and 18 percent in Asia offset a 13 percent decline in Europe. McCarvel said that the warm 2011 winter in both Europe and the US has created a “tough selling environment” for fall 2012. He said, “While feedback from accounts on our expanded selection of shoes and boots were very positive, it unfortunately has not translated into the level of bookings we anticipated. We continue to hear that retailers in general have more limited, opened dollars for established cold weather brands, and even then, only top-performing styles. We do expect our fall/winter collections will have improved presence with several key wholesale accounts versus last year.”
McCarvel added that despite these external issues, “nothing has changed with regard to how we're thinking about the full year” and the company remains comfortable with the Street consensus numbers for 2012 revenue and profitability.
In the first quarter, net income jumped 31.6 percent to $28.3 million, or 31 cents a share. Revenue increased 19.9 percent to $271.8 million on top of a 36 percent increase in the same quarter a year ago.
Sales in the Americas increased 17.1 percent to $117 million. Sales from Wholesale increased 12 while growing 25 percent at Retail and 28 percent in E-commerce. The Retail gain was driven by a combination of larger locations, store openings, higher average footwear selling prices and 9 percent same-store growth. In the US, revenue increased 19 percent for the quarter and represented 34 percent of total global sales. The Americas region ended the quarter with 190 locations, up from 189 last year.
In its Asia region, revenues jumped 40.5 percent to $102 million, helped by a 43 percent jump Japan as the country recovers from its Tsunami tragedy. Asia's retail sales increased 46 percent during the quarter with 9 percent comp growth. In Europe, revenues slid 2.7 percent to $52 million. A 7 percent decrease at Wholesale was partly offset by gains of 52 percent at Retail. Comps grew 21 percent in Europe.
From a global channel perspective, Wholesale sales increased 15.9 percent to $190.7 million and Retail sales increased 33.2 percent to $60.6 million. The company ended the quarter with 439 retail store locations, versus 371 a year ago. Global comps increased 10.2 percent currency neutral. For the full year, the company continues to expect to open 80 to 100 net store locations. Internet sales increased 23.3 percent to $20.5 million.
Crocs said it continues to diversify its product line with its clog silhouette sale growing but still reducing its portion of the business to 49 percent of revenues, down from 51 percent. New product introductions globally represented about 38 percent of its Q1 unit sales. Top performing styles included its A-Leigh collection, women's flats and wedges, including its new Springi product, duet sport line, and its cross mesh series of products.
Gross margins improved to 53.3 percent, up 70 basis points compared to Q1 last year. Average selling price in Q1 increased $1.84, or 11 percent to $19.22 compared to last year in the same period.
The company expects earnings of 61 cents to 63 cents per share for the second quarter, on revenue of $335 million to $340 million. In the year-ago period, it earned 61 cents on sales of $295.58 million. Analysts were looking on average for earnings of 65 cents on revenue of 352.7 million.
