Crocs continues with sinking income and plans to close stores

United States
Company’s revenue grew 3.6% and performed better in the second quarter of the year after the first 3 months characterized by frozen sales. Net income continues to free fall, and stores closures have been announced

In the second quarter of the year (3 months period ended 30th June) company’s revenue increased 3.6%, reaching 376.9 million USD (363.8 million US dollars in similar period last year). The total for the semester was up by 2.1% from 675.5 million US dollars in 2013 to 689.3 million US dollars in 2014. During the second quarter the business generated net income attributable to common shareholders over 19.5 million US dollars, down 44.8% from last year’s 35.4 million US dollars. For the semester net income deteriorate 59.7%, coming down from 64.3 million US dollars to 25.9 million US dollars.

Analyzing total revenue by channel of sales, 55.4% of total revenue is generated via Wholesale (55.3% in similar period last year), followed by retail with a stabilised share of 36.4% and internet with the remainder 8.2% (8.3% in similar period in 2013)

The Americas are still the main region for revenue generation, with 141.6 million US dollars obtained in the quarter, however, a 3.2% deterioration was registered (compares to 146.3 million US dollars posted in the second quarter in 2013). Asia Pacific is the second largest region in terms of revenue, and continues its dynamic of growth with 8.6% increase from 111.8 million US dollars posted last year to 121.5 million US dollars. However, the most impressive revenue consolidation came from Europe with a growth rate of 20.9%, from 60.2 million US dollars in the second quarter in 2013 to 72.8 million US dollars in the same period this year.

"Crocs' performance in the second quarter demonstrates the underlying potential of our global brand and business and the need for dynamic change in our strategy, organization and approach to the market", commented Crocs' President Andrew Rees. "Overall, revenue was in line with our expectations, and we have set a course for meaningful change going forward."

While presenting the latest financial results, the company also announced strategic initiatives for long-term improvement and growth of the business. These plans comprise four key initiatives, including: streamlining the global product and marketing portfolio; reducing direct investment in smaller geographic markets; creating a more efficient organizational structure including reducing duplicative and excess overhead which will also enhance the decision making process; closing or converting approximately 75 to 100 Crocs branded retail stores around the world. The company expects cost savings associated with the reduction in force of 4.0 million US dollars in 2014 and 10.0 million US dollars in 2015.

"We have identified the key strategic and structural improvements that we expect will allow the company to achieve its potential," President Rees commented, adding: "We have a clear, well-defined strategy for addressing these issues and improving performance. Work is underway already to drive significant change throughout our company in four key areas. Our objective is to create a more efficient organization that can sustain profitable growth in a multi-channel global business model (…) Our near-term focus is controlling costs and re-organizing for better operating margins, which will prepare us for future revenue growth from our core products and markets. The actions that we are announcing today are expected to result in the return to industry leading operating margins of more than 12 percent over time. We expect that 2015 revenue will be impacted by store closures before revenue growth resumes in 2016 and beyond.”

"The business performance improvement plans announced by the company represent the next stage of a Crocs transformation which began with Blackstone's investment late last year," added Thomas J. Smach, Chairman of the Board of Directors.”

The company expects revenue of approximately 300 million US dollars to 305 million US dollars in the third quarter of the current fiscal year.

Company’s shares were last traded at 15.87 US dollars at the NASDAQ on the 1st of August.

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