The Eco Elite

NEW YORK — Three U.S. footwear firms — Crocs Inc., Heelys Inc. and Deckers Outdoor Corp. — reported largely disappointing second-quarter performances Thursday at the close of the stock market. While Crocs’ earnings fell, Heelys and Deckers posted quarterly losses compared with profits the prior year.

Crocs, based in Niwot, Colo., had net income that shrunk 24-fold to $2.1 million, or 3 cents a diluted share, from $48.5 million, or 58 cents, the prior year. Revenues fell 1 percent to $222.8 million. The firm said international sales rose 20 percent to $130.1 million, while domestic sales fell 20 percent to $92.6 million.

Analysts had been expecting a profit of 5 cents a share on revenues of $219.7 million.

“The first half of 2008 was a challenging period for our company as we dealt with a difficult macroeconomic environment and lower-than-expected demand in certain markets. Despite our recent financial results, we continue to be confident about the strength of the Crocs brand and we remain optimistic about the future potential of this business,” said Ron Snyder, president and CEO of Crocs, in a written statement. “Over the near-term, we are focused on further reducing our expenses in order to exit this year with a leaner infrastructure while at the same time strategically increasing the retail presence and consumer awareness of our more recent product introductions.”

Dallas-based Heelys had a second-quarter loss of $394,000, or a penny a share, compared with earnings of $12.8 million, or 45 cents, the prior year. Net revenues were $18.2 million down from $74.3 million last year.

Wall Street was expecting a profit of 2 cents on revenues of $24.5 million.

“Throughout the second quarter, we executed several initiatives that we believe have helped stabilize both our business and market position, as well as strengthened our organization. Strategically, we continued to work successfully with our account base to reduce the level of inventory on select merchandise in the channel, while at the same time increase retail price points and margins on more recent product introductions,” said Don Carroll, CEO of Heelys, in a statement. “While there is still much work to be done and the current environment remains challenging, we are confident we can build on our recent momentum and continue to drive sequential gains during the back half of this year.”

At Deckers, despite reporting a 73 percent surge in sales, a non-cash write-down pulled down the firm’s bottom line. The Goleta, Calif.-based owner of the Ugg brand said it had a second-quarter loss of $3.8 million, or 29 cents a diluted share, versus the prior year’s profit of $2.3 million, or 17 cents.

Excluding the $14.9 million write-down, which involved an “impairment evaluation” of its Teva trademarks, the firm said it would have earned 39 cents. Analysts had been expecting a profit of 24 cents.

Net revenues rose to $91.1 million from $52.7 million. Ugg brand sales totaled $60.6 million, up more than 130 percent, while Teva sales rose 5 percent to $25.2 million and Simple sales jumped 94 percent to $4.7 million.

“The positive momentum that the Ugg brand experienced at the start of the year continued into the second quarter, which allowed us to once again exceed expectations. A significant increase in fall orders both domestically and overseas, combined with solid sell-through of spring product in our direct-to-consumer business contributed to the brand’s outperformance,” said Angel Martinez, chairman, president and CEO of Deckers, in a written statement.

The firm upped its revenue expectation to a 43 percent increase versus a prior forecast for a 31 percent rise.


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