Crocs, Inc. (CROX)

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Crocs, Inc. (CROX)

Q3 2010 Earnings Call

November 4, 2010 5:00 pm ET


John McCarvel - CEO and President

Russ Hammer - CFO, SVP of Finance and Treasurer


Jeff Klinefelter - Piper Jaffray

Jim Duffy - Stifel Nicolaus

Jim Chartier - Monness, Crespi, Hardt & Co

Sam Poser - Sterne Agee

Reed Anderson - D.A. Davidson

Steven Martin - Slater Capital Management



Please stand by. Thank you for standing by, everyone. Welcome to the Crocs, Incorporated fiscal 2010 third quarter earnings conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time. I would like to remind everyone that this conference is being recorded.

Earlier this afternoon, Crocs announced its third quarter 2010 financial results. A copy of the press release can be found on the company's website at

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 statement 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 25th, 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 would like to turn the call over to Mr. John McCarvel, Chief Executive Officer of Crocs. Please go ahead, sir.

John McCarvel

Thank you, operator. Welcome to everyone for joining us on our third quarter earnings call. With me today is Russ Hammer, our Chief Financial Officer.

We are pleased to have delivered another quarter with solid results. Our recent success has been broad-based from six to the progress we have made, diversifying our business in terms of products and collection, distribution channel geographies.

All areas of the business are contributing to our growth with the performance of our new credit feeling our current momentum. Our result of past quarter in a year-to-date have been very encouraging and we are ahead of where we thought we would be at this time.

Our 2010 was about returning the company to profitable growth. We did not plan to achieve these levels of sales and earnings at this point in the company’s development.

Importantly, the out performance has been across the board with sales, tracking ahead of the expectation in each of our distribution channel. Wholesale, retail and internet and the geographic region in America, Asia and in Europe.

In the U.S, this past quarter, we had a productive summer and back-to-school selling season. Our wholesale partners reporting very good weekly sales through, pharmacies of our Spring-Summer collections throughout June and August. And this trend was repeated with our new back to school line later in the quarter.

After a small changed last year, we doubled the numbers of SKU for back-to-school and featured three of them and a TV ads campaign that ran on Cartoon Network, Nickelodeon, E-Network amongst other.

We’re very pleased with our first attempt to capitalize on this key selling period. And we look to build on a performance with a broader, assortment on products next year.

Makes a wholesale backlog for Spring, 2011 has more than double which exists spread across abroad, crossed section on wholesale account. This account includes foreign goods, better department stores, family footwear at approximately 40% of our U.S wholesale business is still coming from independent.

This is a reflection of the hard work that is going through restoring these key relationships and a success of our visual merchandising program in 2009 and 2010.

Two additional areas of focus for Crocs in the Americas, first, the development of Crocs [flagship store] with some of our key customer.

This program provides our customers with the access across products on their internet site. Orders have been shipped direct from our distribution operation. Our initial partners experience thing, extra ordinary demand for Crocs product and this model will exceed our projections over the traditional business model today.

We have two more; the ship partners live in 2010 and will have an extensive roll out in 2011.

Secondly, expansion of the brand into other markets in Americas. Specifically, in Q3, revenue grew by 40% in Canada and nearly a 120% in Central and South America. The Central and South American markets are clearly growth opportunities for Crocs.

Asia's growth year-over-year in Q3, 2010 has once again exceeded our expectations. And is being fueled by the acceptance of new products and continued expansion and our wholesale business in Japan, Korea, and China.

We continue to expand our retail presence and key markets as well. And this also assist us in building brand equity in the region. Our new line of products preformed well in a quarter and a pre-booking for the Spring-Summer ‘11 line have been very positive.

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