Crocs: Off the Endangered List

Can Crocs (Nasdaq: CROX  ) bite back? The footwear purveyor posted heartening first-quarter results, but the long-term sustainability of its growth remains in question.

Crocs swung to a first-quarter profit of $5.7 million, or $0.07 per share. Last year this time, it reported a harrowing net loss of $22.4 million, or $0.27 per share. Revenue surged 23.7% to $166.9 million, but that's an easy comparison to last year's malaise, when first-quarter revenue dropped 32%.

Crocs distributes through many retailers across the board; it discussed its relationship with DSW (NYSE: DSW  ) , Shoe Show, and Famous Footwear in its conference call. Wholesale revenue made up the lion's share of its quarterly sales. However, Crocs plans continued expansion of its own retail stores -- a questionable move in economically uncertain and volatile times. Is the brand hardy enough to warrant such expansion?

The company did reveal international strength; Asia led the way, with sales there jumping 40.3% to $54.7 million. Of the 39 stores the company plans to open in the second quarter, two-thirds will reside in Asia.

On the balance sheet, Crocs' accounts receivable line grew by 60.8%, exceeding revenue growth. This means the company has not yet been paid for some of the sales recorded during the quarter, a caveat worth noting. (In fairness, this is nothing compared to the midst of Crocs' most troubling times, when both its inventories and its accounts receivable burgeoned big time.)

Still, kudos to Crocs for paying down the debt that made such a risky stock during the financial crisis and credit crunch. In the conference call, newly minted CEO John McCarvel gave a shout-out to the company's crocodile-like survival skills, mentioning the "relentless will to survive, to thrive, even when conditions weren't exactly ideal."

Any company that relies on fickle fashion will always face ongoing risk, though. Crocs has survived one travail, but it still faces stiff competition from the likes of Nike (NYSE: NKE  ) , Skechers (NYSE: SKX  ) , VF's (NYSE: VFC  ) Vans, and many more for a place on the feet of well-heeled consumers. Crocs also recently lost a fairly new CEO. And while investors who bottom-fished the foamy-footwear maker have done well, the company doesn't look especially cheap right now, with a PEG ratio of 1.79.

Crocs appears to be off the endangered list, but I still think long-term investors would find firmer footing in far more stable stocks.

Think the shoemaker still has teeth? Chime in on Crocs in the comment boxes below.

Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (7) | Recommend This Article (14)

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  • Report this Comment On May 10, 2010, at 5:24 PM, plange01 wrote:

    if crox is off the endangered list itys only because the company is dead...

  • Report this Comment On May 11, 2010, at 9:49 AM, sbarrios126 wrote:

    I received a pair of crocs for xmas 3 years ago and they are still going strong. I don't see myself purchasing any for another few years. Even the heartiest wearer will only use a pair every two years without having to replace them.

  • Report this Comment On May 11, 2010, at 8:30 PM, lovemycrocs wrote:

    Love my crocs...have 5 pairs (different style and colors) and wear them all the time...get compliments daily with my latest...will buy more and very popular here still and picking up even more than in beginning...

  • Report this Comment On May 14, 2010, at 10:54 AM, jamieb9 wrote:

    I didn't want to write this in comments but send it to a general email for your staff to read. One thing that you overlook in ALL your coverage of Crocs is that your opinion that the shoes are "ugly" - every article but this one I've read from MF about the company uses this word - is simply not shared by a great great number of people. Kids love 'em, suburban and rural people of all ages love 'em. Yuppies love 'em. And even some hipsters, while you say they're faddish, STILL sport their crocs as a comfort AND fashion statement onstage in bands, in the cafes and bars, etc. I'm not much of an investor, but own some crox stock suggested to me at its very nadir ($2-something per share, I believe, lucky me!). I went along with my financial advisor precisely because I'm an admittedly shoe-lovin' dood who happened to own three pairs of Crocs at the time. My wife owns three as well, an original pair, a pair of mary janes, and a sexy pair of crocs heels. So please please please stop insisting crocs are ugly. It's beyond inapropriately subjective - it's misinformed and NOT YOUR JOB.

    -JB, formerly of New York and SF, now of rural Massachusetts, all of which are full of Crocs lovers

  • Report this Comment On May 14, 2010, at 2:27 PM, laimd06 wrote:

    Another overlooked fact is the role of crocs in the medical world. Working in the surgical environement, I notice many people wearing crocs (me included) on a daily basis. I have had mine for 4 years now and are still going strong. Perhaps they made too good of a shoe.

  • Report this Comment On May 17, 2010, at 5:12 PM, ImaWright wrote:

    Alyce kudos to you; you finally wrote an analysis based on fact and not your opinion of what is and is not fashionable. Finally a financial analysis backed by financial information. Granted your acknowledgement in this article of Crocs paying off its debt actually happened way back in August 09 when you were carelessly writing about how Crocs will go under in September of 09 but better coming to the party late than not to come at all. Maybe you won't recommend Crocs yet and that's ok but an apology to the people who actually take your advice (fools indeeed!) maybe in order at some point because when the debt was paid off Crocs value has increased by over 900% even as you continued to bash them. Well even if you can only point out others faults and not your own this article is at least a step in the right direction.

  • Report this Comment On September 21, 2010, at 3:06 PM, ifool100 wrote:

    I think you have to know the shoe to really judge it, and understand of the company. Comfort is key. Proprietary resin inhibits odor. They are colorful, light, durable and not too expensive. I love these shoes, and they are what I wear every chance I get. Regular Crocs for Spring/Summer - nothing better for Kayaking. Offroads for Fall/Winter, Mammoths for Winter. They are must have for kids. No laces to tie, comfy, fun. I haven't even ventured into the new fashions yet. Regarding the company, well, they have shown endurance. I think it's important to note though, CROX is not a Heely's or Sketchers or Nike. I couldn't care less about those shoes. If I want wheels (good grief) or a good running shoe - I'll go there. CROX is (so far) in a zone of it's own.

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