) jumped 12.4% yesterday as the company released its second-quarter
2014 results and revealed its strategic plans.
Though Crocs' adjusted earnings of 36 cents a share plunged 20%
year over year, it beat the Zacks Consensus Estimate of 31 cents,
primarily driven by the company's focus on profitability and
strength witnessed at its European business, partly offset by
weakness at the Asia Pacific and American business.
Crocs, Inc - Earnings Surprise |
On including one-time items, the company posted GAAP earnings
per share of 19 cents, plummeting 52.5% from 40 cents reported in
the last-year quarter.
Benefitting from its strategic plans, the company's revenues
grew 3.6% to $376.9 million during the quarter.
Crocs' gross profit marginally inched up to $202.6 million while
the adjusted gross margin contracted 90 basis points (bps) to
54.3%. Margin was mainly impacted by rising shipment expenses,
partly compensated by a fall in promotional and clearance
Further, selling, general and administrative (SG&A) expenses
came in at $160.7 million, as against $150.4 million in the
prior-year period. Also, as a percentage of sales, it rose 120 bps
to 42.6%, owing to retail store impairment charges, restructuring
expenses and Crocs' enterprise resource planning (ERP) project.
The branded footwear retailer ended the quarter with cash and
cash equivalents of $409.0 million, reflecting the impact of both,
sale of a preferred stock in Jan 2014 and share buybacks made since
the beginning of the year. Inventories were $191.6 million as of
Jun 30, 2014
At the quarter end, long-term borrowings stood at $9.0 million
with total shareholders equity at $623.9 million.
During the second quarter, Crocs bought back nearly 2.3 million
shares, bringing the total number of shares repurchased to 3.2
billion, as part of its previous authorization of $350.0
Concurrent to the earnings release, the company announced its
strategic growth plans, which centre around four main points.
Firstly, Crocs aims at efficiently channelizing its
international product and marketing portfolio. Next, it plans to
minimize direct investments in small markets. Thirdly, the retailer
is committed towards enhancing its organizational structure to
curtail overhead expenses and improve the decision making
procedure. Finally, Crocs intends to shut down or convert
roughly 75-100 of its retail stores worldwide.
With these initiatives underway, management anticipates cost
savings of approximately $4 million in the current year and $10
million next year. However, these store closures are likely to
adversely affect revenues by $35-$50 million, while SG&A is
expected to reduce by $17-$25 million.
Following the announcement, management forecasts revenues to
range between $300 and $305 million in the third quarter.
Management seems impressed with its performance and long-term
plans, and also intends to remain focused on its share repurchase
activities in an organized manner, reflecting confidence in its
Other Stocks to Consider
Crocs currently carries a Zacks Rank #3 (Hold). However, other
better-ranked stocks in the same industry include
Columbia Sportswear Company
Vince Holding Corp
), each carrying a Zacks Rank #1 (Strong Buy).
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