Crocs slashes second-quarter, 2008 forecasts; shares drop
LOS ANGELES (Reuters) - Shares of Crocs Inc (CROX.O) lost almost half of their value on Thursday after the shoemaker slashed second-quarter and 2008 profit and revenue forecasts on an unexpected slowdown in business and weak reorders.
Shares in the maker of brightly colored casual shoes, which had topped $75 in October, dropped to $4.93 in extended trade from a Nasdaq close of $8.95.
Crocs shares have been volatile this year as investors worried about its high inventory levels, which are liability in an economic downturn.
Soft and water-proof, Crocs were introduced in 2002 and quickly moved from niche to mainstream. But over the past year, bad news has rained down on the once high-flying company.
Consumers have complained that the shoes can get caught in escalators and cause injuries, and the European Union ruled one of Crocs' patents invalid.
The slowing U.S. economy has hit hard as retailers have trimmed shoe stocks. The company is closing its factory in Canada, and said on Thursday that more cost-cutting moves were in store.
Chief Executive Ron Snyder said in a statement that retailers across the board were "extremely cautious" with reorders and that overseas performance was weaker than expected.
"The domestic marketplace proved to be more challenging during the second quarter than we had originally anticipated," Snyder said.
Crocs now sees second-quarter revenue of $218 million to $223 million, down from its $247 million to $258 million revenue forecast issued in May.
The shoemaker also cut its earnings per share forecast to 3 cents to 7 cents, including a 1 cent-per-share charge related to the shutdown of its Canadian manufacturing operations. Three months ago, it had forecast second-quarter earnings of 42 cents to 47 cents, including the charge.
Despite lower revenue expectations for the second quarter, Crocs said it still expected inventories as of June 30 to decrease 10 percent to 15 percent from $266 million in the first quarter.
The Niwot, Colorado-based company also said receivable days sales outstanding were expected to improve 20 percent to 25 percent compared with March 31.
Crocs now expects 2008 revenue to be down modestly from last year's level. In May, its forecast called for 15 percent to 20 percent year-over-year revenue growth.
It now sees 2008 earnings per share at break even, including a total pretax charge of 16 cents per diluted share associated with the Canadian manufacturing shutdown, down from its previously issued forecast for earnings including the charge of $1.54 to $1.64.
The company now forecasts revenue of $195 million to $205 million and diluted earnings per share of 1 cent to 5 cents.
Snyder said the company is taking further steps to cut costs. Among other things, Crocs plans to improve its supply chain, reduce costs and improve working capital.
"We are currently in the process of sizing our business to be profitable on lower projected sales volumes and these cost actions will continue through the end of the year," Snyder said.
(Reporting by Lisa Baertlein; Editing by Gary Hill, Braden Reddall, Leslie Gevirtz)
