Crocs in Transition Amid Leadership Changes

NEW YORK — While sluggish U.S. retail sales hurt Crocs Inc.’s numbers in the fourth quarter, analysts praised the Niwot, Colo.-based firm for making progress in its search for a new CEO and a shift in strategy.

Despite soft results, investors reacted positively to management’s outlook for the year, which Crocs Chairman Thomas Smach said will involve substantial change, including the planned departure of President and CEO John McCarvel in April.

“Management re-emphasized that 2014 will be a significant transition period, which includes a sharper focus on earnings growth with less emphasis on topline growth,” Robert W. Baird & Co. analyst Mitch Kummetz wrote in a note to clients.

McCarvel said sales in the fourth quarter were impacted by the tough retail picture in the U.S., noting the recent $200 million lifeline from Blackstone Group LP will benefit Crocs over the long term as the company adjusts its strategy.

“It wasn’t totally a surprise that earnings came in a little bit soft. And since the company is undergoing a CEO change, the fact that the backlog is up 7 percent is an indicator that they should be able to grow their wholesale business in 2014,” said BB&T Capital Markets analyst Scott Krasik.

On a conference call with investors, McCarvel said, “While the search for my successor is going on, the work at the company has not subsided. I’m still fully engaged with the business, and Blackstone is actively involved, already adding significant value in many aspects.”

Crocs predicted revenues of between $305 million and $315 million in the first quarter of fiscal 2014.

“[The] light revenue guidance reflects the [late timing] of the Easter holiday, current adverse weather patterns and the timing of wholesale orders,” Kummetz said.

On the conference call, McCarvel said Crocs has moderated the pace of investments in new retail stores, in addition to consolidating several existing locations, as part of efforts to boost profits.

“Together [with Blackstone], we are working with the reconstituted board to refine our short-term and long-term strategic plans,” he said.

Sterne Agee analyst Sam Poser said he expects Crocs will trim its staff by about 1,500 in 2014 as the company works to improve profitability. “We are forecasting revenue growth to be flat in fiscal 2015, as we are assuming [Crocs will make] 18 store closures,” Poser wrote in a note.

Excluding one-off items, the firm posted an adjusted net loss for the quarter of $17.7 million, or 20 cents a share, slightly better than Wall Street’s consensus forecast for a loss of 22 cents.

For the fourth quarter, revenue rose 1.6 percent to $228.7 million.

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