Crocs Has Great Value to Offer
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Crocs (NASDAQ: CROX), the designer and maker of colorful footwear, posted blowout results recently that were way above expectations. The results, which looked about perfect, thrilled investors and sent its stock price soaring. Let’s unravel the secrets of this footwear maker in such a tough economic environment where companies are struggling to keep up the pace.
A Promising Quarter
Having a strong product is the most important quality needed in a company. The rest would fall in place automatically. This is exactly what happened with this shoe maker. With a number of new varieties of footwear, Crocs set the stores on fire. New innovations in sandals, shoes and wedges made shoppers go gaga over the products so much so that they probably forgot their restrictions on spending. This resulted in revenue shooting up by 12% to $330.9 million with the largest boost coming from the Asian market. Exclusively high demand for its new products having higher prices made the margins look healthier at 59.3% from 57.6% a year ago.
Geographically, Asia was the star performer of the quarter witnessing 20.5% revenue growth over prior year. This growth was important since it makes 44% of Crocs’ total sales. However, the American market wasn’t far behind with 10.9% growth. Together, Asia and America covered the setback experienced in the European segment.
European segment has been weak for most of the footwear retailers which has been hampering their performance from quite some time now. Even a footwear giant such as Nike (NYSE: NKE) witnessed the same problem so much so that its bottom line dropped 5.6% in its recent quarter. But to overcome this, Nike has been planning to restructure its Western Europe business.
Crocs’ Earnings grew 10.8% to 68 cents per share. This came in sharp contrast to Deckers Outdoor’s (NASDAQ: DECK) loss of 53 cents per share posted a day later. Nevertheless, both the companies beat market’s earnings expectations for the period. Moreover, both suffered lackluster sales from Europe.
Another value driver for Crocs was its wholesale business which comprises more than 50% of revenue and witnessed growth of 7.3% due to high demand for its new spring collection of footwear. The retail business was even better with 22.6% growth in the segment driving revenue to $112.5 million. All thanks to the large scale store expansion during the quarter with more than 80 new stores with the shoe retailer. This makes us consider the same store metric of the company which stands at 1.8% for the period.
Future Prospects
The future looks as promising as the present since it comes with a whole lot of great news. With great results from Asia, the company is planning to expand its presence there further, especially in India and China where it foresees huge potential and subsequent demand. This is affirmed by the shoe maker’s move of opening maximum new stores in the Asian region in the last three months. Moreover, Crocs is going to continue its streak of product innovation in the next season. It admitted that it expects to roll out new collection for the winter season which includes great variety in boots and the like. The retailer makes investors’ faith stronger by giving a bright outlook which did the rest for it to be a “complete” quarterly report.
My Takeaway
Crocs has been an exceptional performer since its performance has been very less affected by the weak economic trends. Also, it has been performing well from last 3 years with a double digit growth in revenue each quarter. Delivering sound results in such a difficult situation is a sign of a great company. Product innovation has been very important to the players in the industry and this retailer knows how to use it. The winter surprise is again going to be beneficial for the company especially with its larger store base, already in place. Additionally, the expansion moves on the cards seems to further company’s growth and bring delight to its investors. This is a stock which I would like to have from a long term perspective.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Crocs. Motley Fool newsletter services recommend Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
