CROX: CEO Discusses Q2 Financial Results and Growth Plans for Rest of 2008
Submitted By Knobias ClipReport
By Fain Hughes, fhughes@knobias.com
Crocs, Inc. (CROX) reported financial results on Thursday for the quarter ended June 30, 2008. Revenues for the quarter were $222.8 million compared to $224.3 million for the quarter ended June 30, 2007. The Company reported net income of $2.1 million, or $0.03 per diluted share, compared to net income of $48.5 million, or $0.58 per diluted share, for the quarter ended June 30, 2007.
For the year ending December 31, 2008, Crocs reiterated that it expects revenues to be down modestly compared to 2007 levels with diluted earnings per share of approximately break-even, including the total pre-tax charge of approximately $20.0 million, or $0.16 per diluted share, associated with the shutdown of the Company’s Canadian manufacturing operations. For the quarter ending September 30, 2008, the Company reiterates that it expects revenues to be in the range of $195.0 million to $205.0 million and diluted earnings per share of approximately $0.01 to $0.05.
Ron Snyder, President and CEO of Crocs, Inc. commented in a conference call, “Our Q2 sales came in below our initial projections, primarily due to a weaker than expected demand in the U.S. for our core products. We also experienced some softness in Europe, namely the U.K., which also impacted our top line performance. While we have recently made progress in reducing costs at manufacturing and distribution platforms, it was not enough to offset the lower-than-expected sales volumes for the quarter.”
“The first six months of this year have been difficult, as we dealt with a challenging retail enviroment, unfavorable weather, increased competition and a slowdown of sales for core styles in the U.S. That said, there were also a number of positives in the quarter. Our international business continues to perform well. We now sell in more than 100 countries, with sales from outside the U.S. accounting for 58% of total sales in Q2. Sales in Asia grew 69%. Australia and SE Asia pre-books for Q3 are particularly strong. Our business is also gaining momentum in South America.”
Mr. Snyder explained, “Over the next two quarters, we will be focused on right-sizing our operations to better align with projected volume. This will include reductions in worldwide headcount, shutdown of Canadian facility, right-sizing our distribution and infrastructure facilities and delaying certain capital expenditures. We are also enacting a 25% cut in executive management salaries until the end of the year and foregoing executive bonuses for 2008.”
“We will be implementing new initiatives aimed at broadening consumer awareness of our new products and strategically increasing our presence in the marketplace. Our plan is to focus on key accounts that have the resources and real estate to merchandise a larger assortment of Crocs footwear beyond just a handful of styles. Therefore, we do expect that our U.S. store count will come down by year end. We expect to end the year with fourteen additional outlet stores and three additional fill-price retail stores. We plan to open additional stores in Asia to take advantage of the momentum there.”
He added, “We are developing strategies to grow our business where we are presently under-penetrated and implementing new merchandising strategies. We will also be implementing additional internal processes to manage product life-cycle and inventory levels. Our marketing resources will also be re-aligned to fit closely with our key retail partners and the customer. If we are able to successfully execute these initiatives, even modest sales growth could generate gross margins in the range of 46%-48% and operating margins of 13%-15% by mid-2009.”
