Published
May 10, 2017
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Crocs Q1 report bodes well for 2017, stocks soar

Published
May 10, 2017

Earlier this year Crocs announced it would be closing down 160 stores by 2018 (a first for the casual footwear brand) due to a loss of $31.7 million in 2016. But Wednesday, the brand finally had some good news, reporting first quarter sales of $268 million, down 4.4 percent on a constant currency basis, but still exceeding Wall Street expectations.

Crocs Q1 2017 report looks promising - Crocs


While sales slumped during the quarter, gross margin improved, thus boosting the bottom line. Thanks to higher-quality sales, a shift toward molded products and lower input cost, the gross margin came in at 49.9 percent in comparison to 46.3 percent in 2016. Crocs stock price rose 17.24 percent on Wednesday to $7.28 a share.

"Customers responded favorably to our Spring/Summer 2017 product, enabling us to achieve revenues that exceeded our guidance, while simultaneously driving gross margin improvements," said Crocs CEO Gregg Ribatt in a statement. He added that the company is rapidly rolling out its cost cutting plan and paring down its retail network.

Crocs ended the quarter with 542 stores, down from 558 in 2016. The company is partnering with distributors in China and the Middle East to take over store operations. Although Crocs says this will reduce its own retail revenues, the company believes it will ultimately bolster the bottom line through leaner operations and relying on local partners that can foster growth.

Wholesale and retail revenues declined by 4.1 percent, and 6.1 percent respectively, with only wholesale business in Europe showing any growth. The brand's bottom line got a slight boost from e-commerce sales, which rose 2.7 percent over the same quarter last year, mostly powered by online sales in the Asia-Pacific region, up 21.7 percent. 

Crocs' slip-on plastic shoes became wildly popular a decade ago, sending its stock up over 500 percent in under two years after its 2006 initial public offer. But after expanding quickly, the company and its footwear fell out of favor, with annual revenue shrinking in the past two years. Like other retailers, it has also been hurt by falling mall traffic and changes in consumer spending trends. Despite the jump in share price Wednesday, the stock is still down 20 percent over the past 12 months.

Crocs anticipates second quarter 2017 revenues to hit between $305 and $315 million, with the gross margin 150 points higher than Q2 2016. An aggressive marketing program might very well help it achieve this goal. The brand is currently running several high-profile campaigns with celebrities such as Drew Barrymore and wrestler John Cena as well as a collaboration with the Smiley brand.

With additional reporting by Reuters

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