Crocs Beats on Q2 Earnings Estimates, Falls Y/Y; Shares Up - Analyst Blog

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Shares of Crocs, Inc. ( CROX ) 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 | FindTheBest

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.

Deeper Insight

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 operations.

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.

Financials

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 million.

Going Forward

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 business structure.

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 ( COLM ), Hanesbrands Inc. ( HBI ) and Vince Holding Corp ( VNCE ), each carrying a Zacks Rank #1 (Strong Buy).


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HANESBRANDS INC (HBI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: COLM , HBI , CROX , VNCE

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