CROX

Crocs, Inc. (CROX)

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Crocs, Inc. (CROX)

Q1 2010 Earnings Call

May 6, 2010 5:00 p.m. ET

Executives

John McCarvel - CEO

Russ Hammer - CFO

Analysts

Jeff Klinefelter - Piper Jaffray

Jim Duffy - Thomas Weisel Partners

Mitch Kummetz - Robert Baird

Reed Anderson - D.A. Davidson

Jim Chartier - Monness, Crespi, Hardt

Presentation

Operator

Welcome to the Crocs, Inc. fiscal 2010 first quarter earnings conference call. (Operator Instructions) I would like to remind everyone that this conference is being recorded. This call will end no later than 6 p.m. Eastern Time.

Earlier this afternoon, Crocs announced its first quarter 2010 financial results. A copy of the press release can be found on the company's website at www.crocs.com. Reconciliations of the non-GAAP measures mentioned on the call today can be found on the Investor Relations section of the Crocs website.

The company would like to remind everyone that some of the information provided in this call will be forward-looking, and accordingly, are subject to the Safe Harbor provisions of federal security laws. The statements concern plans, beliefs, forecasts, guidance, projections, expectations, and estimates for future operations.

Crocs cautions you that these statements are subject to a number of risks and uncertainties described in the Risk Factors section of the company's 2009 Annual Report on Form 10-K, filed on February 25, 2010 with the Securities and Exchange Commission.

Accordingly, actual results could differ materially from those described on this call. Those listening to the call are advised to refer to Crocs' Annual Report on Form 10-K, as well as other documents filed with the SEC for additional discussion of these risk factors. Crocs intends that all of its forward-looking statements in this call will be protected by the Safe Harbor provisions of the Securities and Exchange Act of 1934. Crocs is not obligated to update its forward-looking statements to reflect the impact of future events.

Now at this time, I'd like to turn the call over to Mr. John McCarvel, Chief Executive Officer of Crocs. Please go ahead sir.

John McCarvel

Thank you. Good afternoon and thank you for tuning into our first quarter earnings conference call. On the call with me today is Russ Hammer, Crocs' Chief Financial Officer.

We are very happy with the performance of Crocs in the first quarter. Our revenue growth reflects the market acceptance of our new products, and operating income is solidly ahead of our Q1 guidance we provided earlier. In fact, this marks the fourth consecutive quarter we have exceeded expectations.

We are ahead of the multi-year strategy we laid out a year ago. Today's earnings call would be a little more concise and more focused on key metrics and events in our business than in our prior earnings calls.

When I wrapped up the Q4 2009 earnings call, I left you with five key objectives from the Crocs management perspective. They were, first, to bring innovative products to market; second, to continue to find creative ways to engage our targeted customer base; three, to grow the top-line, especially in wholesale to effectively manage the cost structure of our business; and fifth, to continue to invest in future enterprise wide systems. After all, we are a fairly young company with a significant global reach.

We were off to a good start in the first quarter, where our results were dramatically better than one year ago and above guidance, highlighted by diluted earnings of $0.07 per share. Improvement began at the top with sales of $167 million, up 24% from last year, and above high end of our forecasted range of a $155 million to $160 million.

As a reminder, last year's first quarter included $19.3 million in sales of impaired footwear that we previously stated, we would not expect to anniversary in 2010. Excluding last year's impaired footwear sales, our growth in this quarter was 44%.

Importantly, our growth this quarter was driven by strength of wholesale which was up 26% in the first quarter versus last year.

As you saw on the press release, we experienced double digit revenue growth in every region this quarter. Sales are benefiting from a much more focused product and marketing strategy. We've invested in considerable time and resources over the past 12 to 18 months to bring to market innovative footwear collections that are appealing to a broader audience and better represent the fun and relaxed lifestyle nature of the Crocs brands.

Some of the initial efforts can be seen in our spring 2010 line, highlighted by the Crocband collection, our women's wedges and flats collections, and a wide range of new kids' products. We rolled out our new Feel the Love marketing and advertising campaign in the U.S. in March and have started in Europe in early May.

Initial reactions have generally been very positive, and we are encouraged by April sell-through in both the U.S. wholesale channel and our own retail stores. Our customers already realize it's all about comfort. And our more consumer direct advertising strategy is about showing them we are much more than one ugly shoe.

With over 200 distinct models today there's so much to love about Crocs. We made significant progress in restructuring the business operations in Crocs in 2009, and the results reflect many of our accomplishments. We have benefited from stronger pre-book business in Q1.

We will continue to offer our consumers a unique replenishment model in-season or the summer on many of our core products. We also realize we have a lot more work ahead of us to create a company that can deliver consistent growth, enhance profitability over the long-term, and our entire organization remains committed to this objective.

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