Crocs Diversification Pays Off

Analysts are upbeat about Crocs Inc. following its fourth quarter.

“We expect nibbles in the first quarter and a bite out of the balance of the year,” said Sam Poser, analyst at Sterne Agee. “The first quarter will be an investment quarter as the company continues to close underperforming kiosks and enter large retailers. Actions such as taking distributors in-house, creating license agreements and geographic expansion are beginning to turn Crocs into a legitimate brand.”

Jim Duffy, analyst at Stifel Nicolaus, said the firm’s margin strength and healthy inventory levels are encouraging. “They signal the general health of the business following uncertainty exiting the third quarter,” he said.

Crocs President and CEO John McCarvel said in a call with analysts that building a fall/winter business remains a key priority for the company in 2012.

“We are developing seasonally appropriate products including a broader line of sneakers and boots that will allow us to stay relevant. Early feedback on the line, coupled with early pre-books, indicates we’re making good progress,” he said.

Looking toward cost issues for the year, Jeff Lasher, Crocs’ SVP and CFO, told analysts, “We haven’t really seen any significant manufacturing increases. We’ve shifted [things so that] about 14 percent of our production in 2012 will come out of Vietnam. We continue to try to optimize our supply chain. We’ve got a pretty good game plan to address those cost increases that we have seen around in 2011 and try to drive cost reductions in 2012.”

For the fourth quarter ended Dec. 31, the Niwot, Colo.-based firm earned a net income of $5.6 million, or 6 cents a share, representing a 19.1 percent increase over $4.7 million, or 5 cents, a year earlier.

Revenue advanced 14 percent to $203.7 million, while backlog as of the end of 2011 increased 19 percent to $307.4 million.

For the full year, the firm hit its $1 billion sales target on growth of 27 percent, while profit surged 66.6 percent to $112.8 million, or $1.24 a share.

By sector, retail revenue grew the most, rising 24 percent to $74.1 million. E-commerce advanced 17 percent, while wholesale revenue edged up 6 percent. By region, Asia surged 22 percent, the Americas grew 10 percent and Europe advanced 6 percent.

Crocs holds cash and cash equivalents of $257.6 million, and no long-term debt.

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