Crocs Stock Now Exponentially Uglier Than Its Shoes (CROX)

Crocs, Inc. (NASDAQ: CROX) just joined the category of stocks that the old term of "S.N.A.F.U." would apply to. 

The maker of the faddish and notoriously ugly shoes came out warned for the quarter and for 2008.   

The warning isn’t just a small one either.  You’d think they put fungus in those ugly shoes or at least had the shoe sales people smashing the toes of loyal customers.  It’s no wonder the CEO made our fresh list of 9 CEO’s that are likely to be gone by year-end.

It now expects its Q2-2008 revenue to be $218 to $223 million andexpects EPS in the range of $0.03 to $0.07 (including a portion of thepreviously announced pre-tax charge associated with the shutdown of theCanadian manufacturing operations equaling approximately $1.4 million,or $0.01 per diluted share).   This compares to prior guidance of $247to $258 million in revenues and $0.42 to $0.47 EPS (including items).

The company noted it still sees June 30 inventories to decrease about10% to 15% and expects its receivables days sales outstanding toimprove approximately 20% to 25% compared to March 31.

The company said major accounts had solid sell-through rates, but notedspecifically that retailers were extremely cautious with their level ofreorders and chose to operate with leaner inventories versus a yearago.  The company said that solid growth of 65% in Asia and 13% inEurope were also below the company projections.

If you think this is a growth story still masquerading as a valuestock, forget about it.  The company now anticipates that fiscal 2008revenues will be down modestly from 2007 with diluted earningsapproximately break-even. after a charge for shutting down Canadianoperations.  Last year’s revenues were $847.35 million and we showestimates from analysts were 2008 were actually $972+ million.  It wasalso expected to earn $1.52 by Wall Street.

It is putting Q3 revenues in a range of $195 to $205 million and EPS ina range of $0.01 to $0.05.  First Call estimates were $282+ million inrevenues and $0.57 EPS.

While this stock was priced so low that you knew not to trust theanalyst estimates, this was so far under plan and so bad that it is farworse than any of the analysts or traders were looking for.   Sharesare being cut so hard that the little Crocodile logos should havebandages all over them.  Shares closed down 9% at $8.95 today in normaltrading.

In after-hours we are seeing a 48% drop down to $4.67.  That isn’t just a 52-week low.  Chalk it up as an all-time low.  At one point this was a $75.00 over the last year.  Keep this lesson in mind the next time you have an exponential stock rise in an obvious fad that is run by ugly apparel.

Jon C. Ogg
July 24, 2008