Crocs Q3 Earnings Drop

31 Oct Crocs Q3 Earnings Drop

Posted at 09:46h in Latest News by Andy Polk

Crocs Inc. reported earnings slumped 71.1 percent in the third quarter, to $13.0 million or 15 cents per share, compared with net income of $45.1 million, or 49 cents, in the prior year period. Revenue slid 2.4 percent to $288.5 million compared with revenue of $295.6 million. On a constant currency basis revenue increased 0.9 percent for the third quarter of 2013.

Third Quarter 2013 Highlights:

Revenue of $288.5 million
Gross Margin of 53.2 percent
Net income of $13.0 million
Earnings per diluted share of $0.15
Non-GAAP adjusted net income1 per diluted share of $0.18
Global cash balance increased by $43.1 million in the quarter

“During the third quarter we saw strong performance in our Asia Pacific region and marked improvement in all channels of our European business,” said John McCarvel, president and CEO. “This positive performance was counterbalanced by weakness in the Americas and Japan where all sales channels performed below our expectations. The underperformance was especially acute in the Americas where we were impacted by wholesale accounts trimming at once orders to remain lean on inventory coupled with weak consumer confidence affecting our consumer-direct performance.”

Share Repurchase Authorization

On October 29, 2013, the company’s board of directors approved the repurchase of up to an additional 15.0 million shares under the company’s existing stock repurchase authorization. This brings the total shares available for repurchase by the company under the existing authorization to approximately 17.8 million shares, or approximately 20 percent of the common outstanding shares at September 30, 2013. The number, price and timing of repurchases will be at the company’s sole discretion and will be evaluated depending on market conditions, liquidity needs or other factors. The company’s board of directors may suspend, modify or terminate the program at any time without prior notice.

Third Quarter Results

Revenue for the third quarter of 2013 was $288.5 million compared with revenue of $295.6 million reported in the third quarter of 2012. On a constant currency basis revenue increased 0.9 percent for the third quarter of 2013.

For third quarter of 2013, the company had net income of $13.0 million or $0.15 per diluted share, compared with net income of $45.1 million or $0.49 per diluted share in the prior year period.

Adjusting for the impact of the $3.1 million relating to the implementation of a new ERP system including non-cash accelerated depreciation and cash expenses for program management, training and other non-capitalized costs, the company had Non-GAAP adjusted net income of $16.1 million in the quarter or $0.18 per diluted share.

Margins

Gross profit for the third quarter of 2013 was $153.6 million, or 53.2% as a percentage of sales, compared with $160.7 million, or 54.4% as a percentage of sales in the prior year period. The year- over-year decrease in gross profit as a percentage of sales was primarily related to lower wholesale and internet revenue in the Americas and Japan. Selling, General & Administrative (“SG&A”) expenses increased 12.4% to $135.7 million compared with $120.7 million a year ago, due primarily to increases in retail store space, marketing expenses, and the company’s ERP project. As a percentage of sales, SG&A increased to 47.0% compared with 40.8% in the third quarter of 2012.

⁽¹⁾	Non-GAAP adjusted net income is a financial measure not calculated in accordance with U.S. Generally Accepted Accounting Principles (non-GAAP). See the non-GAAP reconciliations set forth later in this press release for additional information.

Revenue Results – Channel and Regional

The following tables detail the company’s three and nine months 2013 and 2012 revenues:


	Three Months Ended September 30,				Change				Constant Currency Change⁽¹⁾
($ thousands)	2013		2012		$		%		$		%
Channel revenues:
Wholesale:
Americas	$	45,134	$	56,445	$	(11,311)	(20.0)	%	$	(10,504)	(18.6)	%
Asia Pacific		43,268		42,291		977	2.3			1,352	3.2
Japan		24,536		34,685		(10,149)	(29.3)			(3,807)	(11.0)
Europe		27,414		22,667		4,747	20.9			3,463	15.3
Other businesses		37		161		(124)	(77.0)			(118)	(73.3)
Total Wholesale		140,389		156,249		(15,860)	(10.2)			(9,614)	(6.2)
Consumer-direct:
Retail:
Americas		59,839		58,798		1,041	1.8			1,369	2.3
Asia Pacific		33,469		28,549		4,920	17.2			5,013	17.6
Japan		12,397		13,277		(880)	(6.6)			2,285	17.2
Europe		18,995		11,550		7,445	64.5			6,985	60.5
Total Retail		124,700		112,174		12,526	11.2			15,652	14.0
Internet:
Americas		11,221		16,705		(5,484)	(32.8)			(5,414)	(32.4)
Asia Pacific		2,669		2,124		545	25.7			573	27.0
Japan		2,051		2,769		(718)	(25.9)			(192)	(6.9)
Europe		7,494		5,548		1,946	35.1			1,548	27.9
Total Internet		23,435		27,146		(3,711)	(13.7)			(3,485)	(12.8)
Total revenues:	$	288,524	$	295,569	$	(7,045)	(2.4)	%	$	2,553	0.9	%



	Three Months Ended September 30,				Change				Constant Currency Change⁽¹⁾
($ thousands)	2013		2012		$		%		$		%
Regional Revenue:
Americas	$	116,194	$	131,948	$	(15,754)	(11.9)	%	$	(14,549)	(11.0)	%
Asia Pacific		79,406		72,964		6,442	8.8			6,938	9.5
Japan		38,984		50,731		(11,747)	(23.2)			(1,714)	(3.4)
Europe		53,903		39,765		14,138	35.6			11,996	30.2
Other businesses		37		161		(124)	(77.0)			(118)	(73.3)
Total revenues:	$	288,524	$	295,569	$	(7,045)	(2.4)	%	$	2,553	0.9	%

⁽¹⁾	Current period results have been restated using 2012 average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

	Nine Months Ended September 30,				Change				Constant Currency Change⁽¹⁾
($ thousands)	2013		2012		$		%		$		%
Channel revenues:
Wholesale:
Americas	$	195,827	$	187,870	$	7,957	4.2	%	$	9,824	5.2	%
Asia Pacific		180,205		147,628		32,577	22.1			31,374	21.3
Japan		78,116		101,863		(23,747)	(23.3)			(6,645)	(6.5)
Europe		107,689		97,773		9,916	10.1			8,166	8.4
Other businesses		200		333		(133)	(39.9)			(135)	(40.5)
Total Wholesale		562,037		535,467		26,570	5.0			42,584	8.0
Consumer-direct:
Retail:
Americas		156,784		149,296		7,488	5.0			8,167	5.5
Asia Pacific		93,937		79,290		14,647	18.5			14,195	17.9
Japan		30,625		31,476		(851)	(2.7)			6,131	19.5
Europe		46,734		25,158		21,576	85.8			21,076	83.8
Total Retail		328,080		285,220		42,860	15.0			49,569	17.4
Internet:
Americas		39,267		46,700		(7,433)	(15.9)			(7,298)	(15.6)
Asia Pacific		7,553		5,322		2,231	41.9			2,181	41.0
Japan		6,074		6,997		(923)	(13.2)			404	5.8
Europe		20,996		18,603		2,393	12.9			1,786	9.6
Total Internet		73,890		77,622		(3,732)	(4.8)			(2,927)	(3.8)
Total revenues:	$	964,007	$	898,309	$	65,698	7.3	%	$	89,226	9.9	%



	Nine Months Ended September 30,				Change				Constant Currency Change⁽¹⁾
($ thousands)	2013		2012		$		%		$		%
Regional Revenue:
Americas	$	391,878	$	383,866	$	8,012	2.1	%	$	10,693	2.8	%
Asia Pacific		281,695		232,240		49,455	21.3			47,750	20.6
Japan		114,815		140,336		(25,521)	(18.2)			(110)	(0.1)
Europe		175,419		141,534		33,885	23.9			31,028	21.9
Other businesses		200		333		(133)	(39.9)			(135)	(40.5)
Total revenues:	$	964,007	$	898,309	$	65,698	7.3	%	$	89,226	9.9	%

⁽¹⁾	Current period results have been restated using 2012 average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

Other Financial Information

Comparable Store Sales Results

Comparable store sales on a constant currency basis for the three months ended September 30, 2013 compared with the prior year period were as follows:

	Constant Currency		Constant Currency
	Three Months Ended		Three Months Ended
Comparable store sales growth ⁽¹⁾	September 30, 2013 ⁽²⁾		September 30, 2012 ⁽²⁾
Americas	(8.3)	%	5.5	%
Asia Pacific	6.0		(2.2)
Japan	(16.3)		(15.1)
Europe	8.8		0.9
Total	(4.2)	%	1.0	%

Comparable store sales on a constant currency basis for the nine months ended September 30, 2013 compared with the prior year period were as follows:

	Constant Currency		Constant Currency
	Nine Months Ended		Nine Months Ended
Comparable store sales growth ⁽¹⁾	September 30, 2013 ⁽²⁾		September 30, 2012 ⁽²⁾
Americas	(5.1)	%	3.7	%
Asia Pacific	7.2		5.9
Japan	(16.1)		(11.2)
Europe	3.1		7.5
Total	(2.4)	%	3.1	%

⁽¹⁾

Current period results have been restated using 2012 average foreign exchange rates for the comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.

⁽²⁾

Comparable store status is determined on a monthly basis. Comparable store sales begin in the thirteenth month of a store’s operation. Stores in which selling square footage has changed more than 15% as a result of a remodel, expansion or reduction are excluded until the thirteenth month they have comparable prior year sales. Temporarily closed stores are excluded from the comparable store sales calculation during the month of closure. Location closures in excess of three months are excluded until the thirteen month post re-opening.

Balance Sheet

Cash and cash equivalents at September 30, 2013 were $332.5 million, an increase of 13.0% compared with December 31, 2012. Inventories at September 30, 2013 were $176.1 million, up 6.9% compared with inventory at December 31, 2012.

Backlog

Backlog at September 30, 2013 was $398.6 million compared with $395.5 million in the prior year period. On a constant currency basis backlog at September 30, 2013 was an estimated 4% higher than the prior year period.

Financial Outlook

For the fourth quarter of 2013, the company expects revenue between $220 million and $225 million and a loss between $(0.20) and $(0.23) per share. This outlook includes $(0.03) per share of ERP implementation expense and reflects an impact of $(0.04) for currency translation.