GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

This Footwear Company Is a Weak Investment

July 22, 2014 | About:



Shoe creator Crocs (CROX) has got off to a disappointing start this year. Its final quarter was upsetting because of numerous factors, and rivalry from Wolverine World Wide (WWW) and Deckers Outdoor (DECK) is a thistle in the flesh for Crocs. So, does this make Crocs a stock to stay far from?

A closer view of the results

Crocs performed well despite unfavorable macro monetary conditions. It reported record sales of 54.3 million pairs of footwear, resulting in a 9% rise in revenue in 2013 as contrasted with 2012. Also, web sales rose 10%.

Crocs performed extremely well in Asia and Europe as a result of wholesale expansion and business recuperation in these regions. This resulted in a joined 12% increase in sales in Asia, and in Europe, it posted a 46% increase in revenue for the quarter. In the retail segment, Crocs surpassed its own particular expectations and delighted in handsome revenue as a result of more focus on the retail channel.

Anyway, because of a soft wholesale market and slow sell-through of stock, the wholesale segment's revenue dropped 15%.

Then again, in America, lean stock in wholesale accounts harm Crocs. What's more, import restrictions, coin debasement, and lower request in Latin America caused the organization's revenue to shrink. Also, Crocs' universal sales were influenced by coin depreciation in Japan, resulting in a revenue loss of $30 million.

The path forward

Looking ahead, Crocs expects 2014 to be a year of transition. The organization is wanting to focus all the more on long haul strategic plans, one of which includes installing another CEO. Additionally, as it saw weakness in retail channels in America and Japan, Crocs is focusing on keep up its margins. It is embraced aggressive strategic plans to enhance operations in America and Japan in 2014.

Crocs is focusing on retail locations by restricting investments in new retail locations and focusing on consolidating the existing stores. Also, in 2014, Crocs is wanting to grow all the more in Asia and Europe. It sees great sales in the summer and spring seasons, determined by new item categories and segments. Then again, Crocs expects its loafer shoe business to do well in 2014. The Easter holidays are required to be an alternate development driver for the organization, yet getting more customers into the stores isn't going to be easy for Crocs because of stiff rivalry from rivals.

A look at the opposition

For instance, to bait more customers, peers like Wolverine World Wide are focusing all the more on development. Wolverine will be dispatching another Sperry Apparel gathering, which helped most to its quarterly revenue development last time. Moreover, the Rockford-based footwear titan has also teamed up with celebrities like Taylor Swift and Kate Spade to push sales of its Keds class. On the other hand, Wolverine's development was essential determined by its October 2012 acquisitions, while revenue from its Heritage bunch has been disappointing. As a result, Wolverine's shares have lost about 20% this year.

Then again, Deckers has reflected the performance of Wolverine and has lost almost 20% since it offered a disappointing earnings standpoint. Deckers expects 6% revenue development in the first quarter, while analysts were searching for 11.6% development. On the earnings front, Decker's expects a loss of $0.16 per share, missing the mark regarding analysts' focus of $0.10 per share profit. Deckers has always been conservative about its direction, in any case, the viewpoint was excessively feeble and it didn't go unpunished.

Subsequently, Wolverine looks to be a more tenable danger for Crocs since Deckers is struggling a considerable measure. Then again, Crocs' expensive valuation can scare esteem investors far from the stock. It trades at an expensive 130 times last year's earnings, which is high considering its slow development rate and the way that it acquired a loss last quarter. In comparison, Wolverine trades at a modest 28 times earnings and posted superior revenue development last quarter.


With everything taken into account, it might be inferred that Crocs posted disappointing results and it is confronting numerous headwinds. Also, its high valuation doesn't make it a decent investment, especially when peer Wolverine trades at a much cheaper valuation. So, it would be better for investors to stay far from Crocs.

Rating: 0.0/5 (0 votes)


Please leave your comment:

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial