Crocs Earnings Reaction Uglier Than Its Shoes (CROX)

Crocs, Inc. (NASDAQ: CROX) has posted its fourth Quarter revenues rose more than 99% to $224.8 Million while its diluted EPS rose more than 73% to $0.45.  First Call had estimates at $207.6 million and $0.44 EPS.

For fiscal December-2008, Crocs reiterated its previously issued growth targets of 50% for the first half, and it expects revenues of approximately $1.16 Billion and net income per diluted share of approximately $2.70.  We show First Call estimates at $1.18 Billion and $2.71 EPS.  That means that the bulls are going to have to hope the company is merely under-promising so it can over-deliver.

Ron Snyder, President and CEO: "…We experienced better than expected sell through of our fall line across men’s, women’s, and children’s in each of our markets. To meet the higher than anticipated orders over the holiday period we delivered a meaningful amount of Mammoths by air-freight, which impacted our gross margin."

If you think we are critical of Crocs shoes being an ugly fad, you should see what we said about OLD NAVY after its president left today. CROX shares closed down 4% today at $32.08 ahead of results, yet shares are down another 12% at $28.25 in after-hours trading.  Its 52-week trading range is $21.68 to $75.21.  That low is from a year or so ago, because over the last couple of months shares only traded as low as $25.28 during the sell-off.

The truth is that this reaction is the initial reaction in after-hours trading.  By the morning, we could even see a recovery if the value investors manage to show any force.  In a slower economy and after a more than 60% cut in the stock price you would expect that at some point even a fickle Wall Street will learn to factor in a lack of upside in apparel fads.  This now trades with a 10.46 forward P/E if its own estimates for 2008 come to fruition.  Even if we think the shoes are ugly, this one is starting to look cheap on valuations if that fad just stabilizes rather than disappears.

Jon C. Ogg
February 19, 2008