Crocs (CROX)

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See all 5 Bulls Reasons Bulls: Reasons To Buy Trading at a discount 100% agree Trading at a discount The bubble popped. The company stumbled and all of the sudden no one wanted to own this darling. The issue revolved around management’s inability to project growth for the most recent quarter and the resulting inventory crunch that caused sales to be missed. It wasn’t the end... read more View or Edit Reason 2 votes 100% agree "Crocs is levered to the international market, selling huge amounts in China." 0% agree "Crocs is levered to the international market, selling huge amounts in China." Crocs is levered to the international market, selling huge amounts in China. View or Edit Reason 0 votes 0% agree Crocs is levered to the international market, selling huge amounts in China. 0% agree Crocs is levered to the international market, selling huge amounts in China. Crocs is levered to the international market, selling huge amounts in China. View or Edit Reason 0 votes 0% agree See all Bears Reasons Bears: Reasons To Sell Lost targets and credibility 100% agree Lost targets and credibility Before the market opened Tuesday, Crocs management issued a press release and hosted a conference call to update expectations for the recently completed first quarter. While the accountants are still dotting all the I’s and crossing all the T’s, it appears the first quarter is... read more View or Edit Reason 2 votes 100% agree Shutting down Canadian prduction plant 75% agree Shutting down Canadian prduction plant In response to the weakening demand, the company is shutting down its Canadian production plant which operated at a higher cost than many of its overseas production facilities. This will give the company less flexibility when ramping up orders for short-term demand (something... read more View or Edit Reason 4 votes 75% agree Shares at a premium 100% agree Shares at a premium Despite falling short of EPS estimates for the first time in its history, shares of CROX are ramping up the tune of 16%. CROX reaffirmed its second quarter and full year guidance, which are currently slightly above consensus estimates. However, CROX has not yet put a headlock on... read more View or Edit Reason 1 votes 100% agree Send the authors a comment or suggestion Sales have been falling for a while now. [Dismiss] [Done] See All Suggestions

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Crocs Inc. (NASDAQ:CROX) is an American footwear company, founded in 2002 in Boulder, CO. Crocs is best known for its lightweight shoe that uses patented Croslite material, yet following a boom in popularity, the company has developed a range of products. Crocs currently has 250 different models of their orginal shoe, that include products made by Ocean Minded, YOU by Crocs, and Bite, companies purchased in 2007.^[1] Originally Crocs was the cheif marketer for plastic shoes developed by Canadian company Foam Creations, Inc. Crocs bought Foam Creations in 2004, securing exclusive rights to the proprietary foam resin known as "croslite".

In 2006, the company bought Jibbitz, a company that produced accessories for Crocs shoes, and Fury, a lacrosse and hockey company that uses croslite material in its products.^[2] Of note, Mr. Snyder, CEO, has estimated that stores offering Jibbitz sell 10% more shoes.

Crocs went public in 2006, and the stock price escalated quickly from $50 to "split" at around $100 a share. A stock "split" occurs when shares double but does not change the market capitalization, all other things equal, and occurs usually when the stock's price has increased dramatically.

[edit] Management

The company is essentially the old Flextronics International (FLEX) team. FLEX is a mass producer of cheap plastic used to mass produce a wide area of commodity products, for example, the plastic casings on computers, mice, medical devices like Insulet (PODD), etc.

The chairman of the board is Richard Sharp of Richmond, VA. Mr. Sharp has a long career as the person who took Circuit City Stores (CC) to the next level, introducing the concept of no haggle pricing on electronics. While at CC the concept of no haggle car buying was tested, and CARMAX (KMX) was born from its electronics retailer parent. In 2007 Mr. Sharp resigned as chairman at KMX and has been devoting more time to CROX. So in many ways CROX is run by a group of folks that can mass produce cheap plastic in a reliable form all around the globe.

1. International Sales represented 53% of their sales with Japan representing the strongest region.
2. Regarding costs, CROX will be increasing advertising spend.
3. CROX expects Cap EX to be approx $85 million, down to previous expectations
4. Generally speaking, sell through rate was less than expected but still remains encouraging and “well positioned” for a strong 2009. CROX wants to beat industry growth in 2009 and beyond. Company will drill down on cutting costs going forward.
5. Crox believes inventory will be down 10-15% by the end of Q2; will continue to pull it down at the end of the next quarter.

[edit] Recent Developments

In the 3rd quarter of 2007, the CEO said at a UBS conference that international sales were to exceed US sales. It is worth noting that CROX only started selling internationally (in a significant way) only 12 months prior.

The company can now produce over 4 million pairs of Crocs a month. Crocs funds all production and capacity additions with cash flow from operations.

[edit] Products

Crocs has a wide variety of new products.

• The casual sandal has been modified into a running show\e and is very popular in western US.
• Golf shoes in the "Bite" line accompany the PGA tour licensing agreement.
• You by Crocs is a high-end Italian leather women's boot. It competes with other luxury goods and in England it is frequently featured in windows next to Louis Vuitton. It is fancy Italian leather on top of comfortable Crocs soles.
• Crocs has taken the 'croslite' material and woven it into fabric to create a very unique feeling garment, similar to Under Armour (UA).
• Kids' selections include full athletic/active wear shows, boots, etc. Licensing agreements with Nickelodeon and Disney created Crocs with popular kids characters, (e.g., Spongebob Squarepants, Cindarella, Spiderman). Also in the kids section are book bags for school. There are a large number of Jibbitz holes that kids can use to spell their names or send a message

To this point the primary accomplishment of Crocs is to have ultra successful uptake in test markets. The first time selling with college logos was in the 2006 NCAA football championship. The Ohio State lot was sold out in the first day, and it is cold in Ohio in the winter.

[edit] Legal Proceedings

Crocs has been in a legal battle with Wally's, a Maryland company who sold to footwear to people at boat shows who were on their feet all day long. While the croslite material came from a Canadian foam company, Wally's claims that the original design idea was theirs.

[edit] References

1. ↑ CROX 10k 2007, Item 1, pg.4
2. ↑ CROX 10k 2007, Item 1, pg.3