Crocs shares soar to highest level since Aug 2008
SAN FRANCISCO (Reuters) - Shares in Crocs Inc (CROX.O) rose to their highest level since last August on Friday after analysts upgraded their ratings on the shoe maker and said turnaround efforts appeared to be gaining traction.
The company, known for its brightly colored plastic clogs, saw its shares surge as much as 40 percent a day after forecasting sales far exceeding estimates and reaffirming it could turn a profit sometime next year.
Piper Jaffray upgraded the stock to "Overweight" from "Neutral." Analyst Jeffrey Klinefelter cited "a reasonable trajectory toward achieving profitability in 2010."
"Key concerns surrounding the company's fundamental health have been alleviated and early signs of a successful turnaround exist," Klinefelter wrote.
A stronger balance sheet also relieved investors. Wedbush Morgan analyst Jeff Mintz -- who introduced a $5 price target on the stock from no target before -- cited the company's repayment of debt and net cash gains of almost $29 million in the second quarter.
"The company is clearly moving in the right direction as evidenced by reduced inventory, elimination of debt and improving gross margins," Mintz wrote.
Still, analysts cautioned that there was more work to be done at the company, which has suffered recently from plummeting sales and a bloated infrastructure, and has not made a profit in about a year.
"Recent results are encouraging but underlying demand remains very weak in traditional channels and profitability still seems distant," wrote D.A. Davidson analyst Reed Anderson.
On Thursday, the company posted a second-quarter net loss above analysts' expectations, and said that third-quarter revenue would range between $150 million and $160 million.
Wall Street had expected revenue of $140.8 million, according to Reuters Estimates.
Crocs shoes appeared midway through the decade, sporting bright colors and novel resin materials. Oversaturation, along with a flood of knock-offs, eventually hurt sales.
The company has been laying off workers and shutting down distribution centers while reducing inventory.
While Crocs sales in company stores have been robust, wholesale sales to department stores and other retailers have been weak as those outlets sharply cut back on orders in the weak spending environment.
"We think returning to profitability is possible in 2010 but are mindful that inventory liquidation in the current macro environment where demand is compressed may prove a challenge - extending the timeline for margin recovery," Klinefelter wrote.
Crocs shares were up 34.19 percent, or $1.46, to $5.73 in afternoon trading on the Nasdaq stock market.
(Reporting by Alexandria Sage)
