Crocs, Inc (CROX, Financial), a world leader in innovative casual footwear for men, women and children, offers several distinct shoe collections with more than 300 four-season footwear styles. Since its inception in 2002, Crocs has sold more than 200 million pairs of shoes in more than 90 countries around the world.
Strong Financial Results
Full Year and Fourth Quarter Financial Highlights:
- GAAP revenue increased 0.5% year over year to $1.2 billion. On a constant currency basis, revenue increased 1.8% as compared to the prior year. For the fourth quarter, revenue was $206.5 million, a decline of 9.7% as compared to the fourth quarter of 2013. On a constant currency basis, fourth quarter revenue declined 5%.
- Net loss attributable to common stockholders on a GAAP basis was $0.22 per diluted share for the year and $0.70 per diluted share for the fourth quarter. Excluding certain non-recurring and special charges, the company reported non-GAAP adjusted net income attributable to common stockholders of $50.0 million for the year and a non-GAAP adjusted net loss of $30.0 million for the fourth quarter.
Gregg Ribatt, Chief Executive Officer, said: "We delivered fourth quarter sales in line with expectations. Our business was essentially flat to last year, on a constant currency basis across all regions including the Americas, Europe, Japan and Asia with the exception of Latin America and China. We believe the strategy the company outlined last July will position Crocs for sustained success in the future. We are making meaningful progress on implementing the strategy including: strengthening our brand; elevating our product stories while eliminating non-core categories; evolving our international business to focus on our six core markets while building best in class partnerships in the rest of the world; strengthening our relationships with key wholesale partners; improving our direct to consumer capabilities; simplifying our business model; and, building a best in class team. More specifically, in the second half of 2014 the company eliminated non-core product categories, closed more than 100 stores, reduced headcount, and simplified our international operations. We are confident these moves will enable us to streamline our business model, focus on our biggest and most meaningful opportunities, and position the company for growth in the future."
Financial Review
Fourth quarter operating results
In the fourth quarter of 2014, the company incurred a GAAP net loss attributable to common stockholders of $56.9 million or $0.70 per diluted share, compared with a net loss of $66.9 million or $0.76 per diluted share in the same quarter of the prior year.
As outlined in detail in the non-GAAP reconciliations set forth later in this press release, the company recorded $26.8 million in non-recurring and special charges (of which $15.3 million were non-cash charges) in the fourth quarter of 2014; compared with $49.2 million in non-recurring and special charges (of which $46.5 million were non-cash charges) in the fourth quarter of 2013.
Excluding these items, the company reported a non-GAAP adjusted net loss attributable to common stockholders of $30.0 million in the quarter, or compared with a non-GAAP adjusted net loss of $17.7 million in the fourth quarter of 2013.
Full year 2014 operating results
The company generated net loss attributable to common stockholders of $19.0 million or $0.22 per diluted share for the full year ended 2014, compared with net income of $10.4 million or $0.12 per diluted share in 2013.
As outlined in detail in the non-GAAP reconciliations set forth later in this press release, the company recorded $69 million in non-recurring and special charges (of which $27.7 million were non-cash charges) for the year ended 2014; compared with $62.4 million in non-recurring and special charges (of which $49.3 million were non-cash charges) for the full year 2013.
Excluding these items, the company generated non-GAAP adjusted net income attributable to common stockholders of $50.0 million for the year ended 2014 compared with non-GAAP adjusted net income of $72.8 million during 2013.
Balance Sheet
Cash and cash equivalents at December 31, 2014, amounted to $267.5 million. Inventory was $171.0 million at the end of 2014 compared with $162.3 million on December 31, 2013.
Financial Outlook
Mr. Ribatt continued, "As we look forward, 2015 will be a transition period for the company. Our business continues to stabilize across all of our regions while we address the continuing challenges of the stronger US dollar and our China business. We expect Q1 revenues to be down on a constant currency basis by 10% to 12%, to a range of $260 to $265 million, driven primarily by declines in our China business. We expect the declines to moderate substantially in Q2 and growth to return in the second half of 2015 as many of the strategic changes we implemented in late 2014 positively impact the business."
Stock Repurchase
The company repurchased 10.6 million shares of common stock in 2014, of which 4.5 million shares were repurchased in the fourth quarter of 2014 at an average price of $12.38. The company ended the year at 78.5 million common shares outstanding and fourth quarter weighted average shares outstanding was 80.9 million.
(Source: Company’s Website)
To End
CROX's management is currently focusing on reducing capital expenditures and this could lift the cashflows of the company significantly in 2015. By 2019, the global footwear market can worth about $200-$220 billion. Asia is expected to contribute significantly to this growth. Crocs has a huge potential in this part of the globe. The good news is that Crocs performed well in this region. Rising income of the middle class, an awareness to look and feel good are contributing to this growth.
The Asian countries hold tremendous opportunities for this company. It is already closing down underperforming stores. It is expanding the products its offers and diversifying into sneakers, loafers, and boots. With robust innovation, continuing research and development activities CROX is bound to create shareholder returns. CROX is headed for a turnaround strategy. The company is expected to comeback in the near future.
