Crocs Wraps Q1 With Loss, Executive Changes

Management for Colorado-based Crocs Inc. said the company’s loss in both revenues and profits in Q1, announced today, were in line with their expectations for the quarter.

The company also announced a series of senior level organizational changes including the elimination of the COO role—most recently held by Scott Crutchfield—and the SVP of global supply chain role as well as the addition of the SVP of global sourcing, Phil Blake, and the promotion of Dennis Sheldon to SVP of global distribution and logistics.

The company’s stock was up more than 6 percent following the earnings release and executive changes as analyst and investors seem optimistic that a turnaround is eminent.

Net Income: The company posted a net loss for the quarter ended March 31, 2015 of $6 million, compared with net income of $6.4 million in the same year-ago quarter.

EPS: Losses per diluted share came in at 8 cents compared to earnings per diluted share of 6 cents in last year’s Q1.

Net Revenue: Net revenues were also on the decline—totaling $262.2 million this quarter, down 8 percent, on a constant currency basis, from the same year-ago quarter’s $312.4 million.

Adjustments: The company recorded $10.7 million in non-recurring and special charges in the first quarter of 2015 compared with $8.1 million in non-recurring and special charges in the first quarter of 2014. Excluding these, net income attributable to common shareholders of $4.7 million in the quarter versus $14.5 million in the first quarter of 2014.

Hit, Miss or Beat: The company’s performance for revenue was nearly a hit on Street which (Yahoo Finance analyst poll) forecasted sales of $262.6 million. Crocs’ EPS loss however, fell lower than Wall Street’s estimate of a loss of 2 cents per share (Yahoo Finance analyst poll).

Executive Insights: “This is a dynamic time at Crocs, as we transform our brand and business … During the quarter, we continued to work through the internal challenges of the transformation, while addressing the external challenges, including a strong dollar and the West Coast port delays.”

“Despite these issues, we continued to make great progress on the strategic initiatives … strengthening the Crocs brand, elevating our product stories, exiting non-core categories and businesses, evolving our international business model to focus on our six most important markets, strengthening our relationships with key wholesale partners, improving our direct-to-consumer capabilities and performance, simplifying our operations and processes, and building a best-in-class team.” Gregg Ribatt, Crocs’ CEO, May 8 conference call.

Looking Ahead: “As our business continues to stabilize, we expect Q2 revenue in the $340 to $350 million range, showing slight growth excluding the impacts of our China business and store closings and discontinued product lines.” –Ribbat, in a May 8 release.

Analyst Insights: “1Q15 results and management commentary make us more confident that success is on the horizon as turnaround plan is well underway. 2015 is a transition year as the company moves toward an asset light model. A strong management team with a footwear background is finally in place, the product mix is becoming more focused and compelling, and systems and processes are improving. Retailers’ initial reaction to spring ’16 product and brand strategy is very positive. Material improvement in sales trends and margins will commence by 4Q15. The trends will accelerate into 2016…” – Sam Poser, Sterne Agee analyst in a May 8 note.

“Despite material FX headwinds, Crocs continues to fine-tune its business model from hiring seasoned talent to enhancing operational systems and allocating resources to key growth markets and profitable distribution. Not only is Crocs focused on turning the business in the short term, but it is repositioning the business for future growth. Our confidence continues to build in the turnaround and is reflected in our revised valuation. We reiterate our Buy rating.” –Danielle McCoy, Wunderlich Securities Inc. analyst in a May 8 note.

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