Crocs (CROX)

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 of the world as the company still reported a very healthy quarter, but the confidence was shattered and CROX began its long, shameful round trip. Yet digging behind the headlines, a funny thing is happening. The company itself continues to grow with quarterly sales numbers up 100% or more consistently and earnings showing robust increases each period. While sales growth levels in the US are less than what was seen last year, numbers are still impressive. At the same time, international sales levels are up to extraordinary levels and will likely eclipse domestic sales in the first half of 2008. The company has flexible manufacturing capabilities using third party partners which helps reduce the capital requirements of owning plants and gives the company flexibility as to when and how to ramp up production. Inventory levels are high leading into the spring selling season and initial checks point to strong demand for shoes this year.

Still while Analysts project earnings of $2.69 per share for the current year and $3.22 for 2009, the stock is now trading at a very depressed price. It appears that the market is pricing in a complete failure of the company this year despite the fact that earnings should be 35% higher than last year’s record breaking performance. At the current price, CROX certainly seems to be a bargain, but investors should be cautious about current sentiment as that may have more bearing on the stock price than fundamental earnings for now. Over time, I believe we will see the stock double which would only put the price at levels seen in February.^[1]

1. ↑ http://seekingalpha.com/article/69289-crocs-value-building-or-value-trap

Crocs is levered to the international market, selling huge amounts in China.

Crocs is levered to the international market, selling huge amounts in China.

Crocs, Inc. has tapped into Shoe 2.0. Snyder is correct in saying that Crocs is a global lifestyle brand. People who spend all day on their feet have reason to keep buying Crocs... their feet don't hurt when the come home from work and can be out and about versus on the couch rubbing their toes.

Crocs inc. (crox) increasing their production this year was a great idea. They decided to produce jewelry, shoe sizes for infants, and tie die shoes. Not only was the jewelry and infant shoe sizes a big hit but the tie die shoes were an even bigger hit.