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Crocs posts record revenues; coronavirus damages guidance

Published
Feb 27, 2020
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Niwot, Colorado-based footwear company Crocs, Inc. announced record fourth-quarter and full-year revenues on Thursday but saw its shares slip 1.1% in premarket trading as it revealed a disappointing outlook for 2020 due to the coronavirus outbreak.


The majority of Crocs' partner stores in China are temporarily closed due to the coronavirus outbreak - Instagram: @crocs

 
For the fourth quarter ended December 31, 2019, Crocs reported total revenues of $263.0 million, up 21.8% (22.7% in constant currencies) from $216.0 million in the prior-year period, despite a negative impact of around $2.0 million related to store closures.
 
Growth was strong across the company’s different distribution channels but was led by a 34.3% increase in e-commerce sales. Wholesale revenues grew 22.4%, while retail comparable sales rose 16.0% on a constant currency basis.

Net income for the period was $19.9 million, or $0.29 per diluted share, increasing from a loss of $118.7 million, or $1.72 per diluted share, in Q4 2018.
 
In the full fiscal year 2019, Crocs’ revenues came to $1.23 billion, up 13.1% from $1.09 billion in fiscal 2018. In constant currencies the increase was 15.6%.
 
Here too the company’s e-commerce business led growth with an increase of 24.2% in sales. Annual wholesale revenues rose 13.5%, with retail comparable sales growing 12.4%.
 
Crocs’ full-year net income totaled $119.5 million, or $1.66 per diluted share, up from a loss of $69.2 million, or $1.01 per diluted share, in the previous year.
 
“Our record fourth quarter and full year top-line combined with our double-digit operating margin underscores the progress we have made executing our key strategic initiatives,” commented Crocs president and CEO Andrew Rees in a release.
 
“Although we begin the new year with great momentum and exciting plans in place to build on our recent growth, our immediate focus is with everyone affected by the coronavirus and ensuring that our employees in China, along with our partners, safely navigate the risks associated with this global health epidemic,” added the executive.
 
With many of the company’s partner stores in China temporarily closed due to the ongoing outbreak, Crocs currently expects that its revenues will be negatively impacted to the tune of around $20 million to $30 million in the first quarter of 2020.
 
The company therefore expects to report Q1 revenues in the range of $305 million to $325 million, compared to $295.9 million in the same period in the previous year.
 
Crocs also expects its operating margin to suffer from around $3 million in non-recurring expenses related to provisions being taken by the company in response to the coronavirus epidemic. With this in mind, operating margin for the first quarter of 2020 is predicted to be between 9% and 12%.

As for the full fiscal year 2020, Crocs currently expects revenues to grow in the range of 8% to 12% year over year, suffering a negative impact of between $40 million and $60 million due to the coronavirus outbreak.
 
Rees was, however, keen to reassure investors of the company’s hopes for the region most affected by the epidemic, concluding, “despite this difficult situation, we continue to be very optimistic about our long-term growth prospects in China and our Asia region.”
 

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