Shares for Crocs Inc. are down more than 7% in Thursday premarket trading after the clog maker delivered a first-quarter earnings miss and announced a series of defensive business measures, including furloughs and reduced compensation for its leadership team.
During the three-month period ended March 31, the Niwot, Colo.-based company posted adjusted diluted earnings per share of 22 cents, compared to analysts’ bets of 36 cents a share. Revenues declined 5% to $281.2 million — also missing consensus estimates of $295.3 million — as total retail sales dropped 15% due to coronavirus-induced store closures.
“Amidst unprecedented market conditions globally, our total revenue held up well with exceptional performance in our Americas and e-commerce businesses that was overshadowed by COVID-19-related store closures,” said president and CEO Andrew Rees. “Despite this recent softness, Crocs remains a strong, vibrant brand that is very well-positioned. In the near-term, we have no liquidity concerns and have taken quick action to ensure we will be strongly cash flow positive for the remainder of the year.”
As many of its 367 company-operated outposts remain shuttered, Crocs has resorted to furloughing its retail associates — who will continue to receive benefits — in North America. The shoemaker, however, has retained store managers and their assistants in the region, albeit with reduced hours. In other parts of the world, its workers are receiving full or reduced pay in accordance with local government regulations.
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What’s more, compensation for its senior leadership team and board of directors has been “significantly reduced for the foreseeable future.” It has also asked some employees to shift to a reduced work day, as well as placed others on temporary unpaid leave and eliminated certain roles as it “adjusts to an organization structure for the future.” (Across the company, Crocs has reduced hiring as well as paused raises and annual bonuses scheduled for this year.)
While the majority of its stores in China and Korea are now open, Crocs is seeing declines in Japan, India and areas of Southeast Asia due to a second wave of COVID-19. The brand is forecasting that stores will begin to open “in stages” over the coming months, but it also anticipates a “larger decline” in revenues during the second quarter, as most of its retail and partner stores are expected to remain closed for the entire second quarter.
Uncertainties around the spread of COVID-19 had led Crocs to withdraw its guidance in late March. At the time, the company had $107 million in cash and cash equivalents. Its revolving credit facility with its lenders was increased to $500 million from $450 million, while it also suspended share repurchases and expects to reduce its capital expenditures this year by nearly half to roughly $30 million.