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Crocs, Inc. (CROX)
Q3 2011 Earnings Call
October 27, 2011 05:00 pm ET
John McCarvel - CEO & President
Jeff Lasher - CFO
Jeff Klinefelter - Piper Jaffray
Jim Duffy - Stifel Nicolaus
Jim Chartier - Monness, Crespi, Hardt
Robert Samuels - WJB Capital
Reed Anderson - D.A. Davidson
Sam Poser - Sterne Agee
Steven Martin - Slater Capital
Previous Statements by CROX
» Crocs' CEO discusses Q2 2011 Results - Earnings Call Transcript
» Crocs' CEO Discusses Q1 2011 Results - Earnings Call Transcript
» Crocs CEO Discusses Q4 2010 Results - Earnings Call Transcript
Earlier this afternoon, Crocs announced its third quarter 2011 financial results. A copy of the press release can be found on the company’s website at www.crocs.com. 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 the Federal securities laws.
The statement includes but are not limited to statements regarding future revenue and earnings, backlog and future orders, prospects and product pipeline. Crocs cautions you at these statements and are subject to a number of risks and uncertainties described in the risk factors section of the Company’s 2010 annual report on Form 10-K, filed on February 25, 2011 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.
Thanks for joining us today to discuss our third quarter. With me on the call is Jeff Lasher, Chief Financial Officer who will review the financials in a moment. Let me begin today with details about our operating performance by region and provide more insight on the preliminary results we announced last week.
Overall, we are pleased with the top line performance during the third quarter. Revenue increased 28% to $275 million as we continue to experience strong global demand for our spring and summer products with the positive momentum from the second quarter carrying over into early Q3. Revenue growth for the first nine months of 2011 was nearly 31%. We were also pleased with the initial sell-in of our fall line of products.
The short-term revenue versus our initial guidance was primarily in our US direct-to-consumer channels and to a lesser extent Europe. Let me take a few minutes and discuss the US direct-to-consumer channel.
In retrospect, we feel there were two key decisions taken by management that affected US retail. First, we changed the type of product merchandise in our outlet in kiosks that was not as promotional as previous years or as other retailers. Second, we changed our retail to back-to-school promotion too early in August as warm weather drove consumers to purchase more where known products which we didn’t have available in all occasion. While we experienced specific merchandising challenges in Q3, our outlet in kiosks location, we were happy with the performance of our full priced stores relative to our initial outlook as these channels benefitted from the introduction of new fall-winter products. Therefore, we view the short fall more as an execution issue versus the broad judgment call by consumers about our brand.
From a growth perspective, Asia was again our best performing region with sales increasing 41% to $111 million. After a very strong in season sales of our warm weather products, we witnessed healthy demand for a new fall sales during August and September.
Japan continues to grow and has rebounded from the earthquake and Tsunami in March to record another strong quarter of growth. Self through ratio, our 32 retails stores and at our wholesale partners throughout the country have accelerated from earlier this year underscoring both the resiliency of the Japanese people and the strength of our brand in this key Asian market. The rest of Asia also showed nice growth during the third quarter led by China where we have continued to build out our presence in Tier 2 and Tier 3 cities through new retail stores and distribution partners.
In our other Asian markets, Korea, Hong Kong, Taiwan and the ASEAN countries, new products are being well received and we continue to see solid baseline demand for our core products as well. Our recent performance in the US coupled with our backlog for 2012 highlights the progress we have made building our wholesale business over the past few years and evolving CROX into a more casual footwear brand.
We’re pleased with the success that we’ve had this year broadening RPO and creating new Crocs consumers through a broader portfolio of new products. The Crocband, Translucent Sneaker and Chameleon collections have all brought excitement to the marketplace and help change the perception that Crocs is a one shoe, one style company. This has led to new points in distribution more shelf space within our existing account base of department stores, family footwear chains, specialty retailers and independents across the country.