Crocs Swings to Q4 Profit on Broad Sales Gains

 

When combined with a revenue jump of 31.8% to $179.2 million for the quarter, results easily beat estimates when the company released third quarter results when Crocs had projected EPS of 2 cents on revenue of $165 million.

Most promising, backlogs at year-end were up 57%, with all regions posting strong increases.

On a conference call with analysts, company CEO John McCarvel noted that the company achieved profitability in all four quarters for the first time since 2007. He said the results show the company making clear progress diversifying its product line and evolving into a year-round brand. It also reflects the success of its multi-channel strategy and response to its Feel the Love marketing campaign.

“Our sell-through performance at wholesale in 2010 helped strengthen retailer confidence in Crocs and has fueled the acceleration in our backlog in 2011 through the past few quarters,” said McCarvel.
Fourth quarter wholesale sales increased 26.9% to $97.7 million, retail sales advanced 36.1% to $59.6 million, and Internet sales jumped 43.1% to $21.9 million.

New products globally represented 31% of fourth quarter unit sales. Total boot sales doubled globally in 2010. Core products represented 18% of unit sales in Q4, with sales of classics representing 9% in the same period. Selling prices in 2010 rose to $17.69 from $16.60 in 2009. Kids expanded from 23% of revenue in 2009 to 25% in 2010.

By region, sales in the Americas increased 36.6% to $94.1 million in Q4, driven by an improving wholesale outlook and “healthy growth” from its consumer direct channels, which represented 56% of Americas segment sales. Overall store comps in the region were positive in the low-single-digits with the U.S. inching up 1%. In the U.S., a 10% comp gain at outlets offset flat comps at its full-priced doors. Kiosks' comps declined partly due to new store locations in the same malls.

Asia grew 23.6% to $62.4 million, driven by 40% growth in Japan and over 35% expansion in China. Europe increased 37.6% to $22.7 million, bolstered by better than expected sell-through and an opening of additional store locations.

Gross margins in the quarter improved 770 basis points to 48.2% of sales from 44.3% of sales in the prior-year period. SG&A expenses (including foreign exchange, restructuring, impairment, and charitable contributions) decreased to 45.1% of sales from 54.5% in the fourth quarter of 2009.

For the first quarter, earnings are expected to reach 19 cents a share on revenues of $215 million. In the 2010 first quarter, CROX earned 7 cents on sales of $166.9 million. For the full year, growth is expected to be stimulated by the expansion of newer collections, including translucent sneakers, toning and Winter boots.

 

On a marketing front, a particular effort will be on developing visual merchandising programs inside wholesale accounts as well as social media, digital and viral marketing overall. It also sees room to open up more smaller independents in the U.S. while expanding further with core wholesale accounts. Crocs plans to add 25 to 35 stores in the Americas as well as 20 to 30 in both Europe and Asia. The company ended the year with 378 company-owned retail locations, including full-price stores, outlets in-store shops and kiosks.