Is Crocs on Firmer Ground Today?

The shoemaker has walked a rocky road in recent years, but certain metrics show stability. Is Crocs at a turning point?

Feb 24, 2014 at 1:10PM

Hole-filled-shoe company Crocs (NASDAQ:CROX) is still trying to get back on its feet after a stumble in mid-2011 that cut the company's rich market capitalization in half. As so frequently occurs in the fashion world, Crocs' utilitarian shoes were all the rage until they weren't -- the very definition of a fad. These days, Crocs is a money-losing business, but recent losses were better than expected and gave hope to investors and analysts that management is steering the ship around. The company is in deep turnaround, with its CEO going out the door and the search for a new one under way. Crocs is still trying to find its way back to the good graces of the market and, much more important, the consumer.

One step at a time
Year over year, Crocs posted a wider loss in its fiscal fourth quarter. The company saw an adjusted $0.20-per-share loss -- a good bit more than 2012's $0.04-per-share loss.

Sales actually climbed slightly -- up 2% to $228.7 million. Both figures were above analyst estimates.

Throughout 2013, Crocs saw its U.S. business decline as customers just haven't caught on to the company's subsequent product offerings. Sales in Japan, where Crocs finds a huge portion of business, were down as well.

In the final quarter, though, things did look to be stabilizing a bit. On a constant currency basis, Crocs saw U.S. wholesale sales decline 8.8%. In the third quarter of last year, wholesale sales had plummeted nearly 19% on the same basis. Japan improved as well -- down just 1.9% in the just ended quarter, compared to 11% in the third quarter.

While the Americas remain Crocs' biggest segment, Asia-Pacific and Japan are perhaps more compelling regions for the company going forward. The biggest vote of confidence behind Crocs comes not from its financials but instead from a recent investor.

Back up
Private equity giant Blackstone recently announced a $200 million investment in Crocs. In isolation, this isn't an immediate green light to invest in Crocs, but it is a compelling factor. Blackstone has a deep retail history and will be a good advisor for getting Crocs back to a good place. Furthermore, it opens the door to greater investment or even a go-private transaction in the future. Neither would be bad for existing investors.

Absent of Blackstone's involvement, Crocs appears to be in better shape today than just a few months back. But as mentioned before, this is still a business underwater. We do not yet have any concrete evidence that Crocs' products are finding the demand they need to get the business moving toward profitability. It would be one thing if the stock traded at seven times earnings and was priced to sell, but it's still a relatively richly valued 18 times forward expected earnings. On an EV/EBITDA basis, things look better at 9.68 times trailing EBITDA. If the turnaround is successful, these numbers don't quite express the underlying potential, but that is still one big if. These levels still leave plenty of downside risk.

It's doing better than before, but investors should still tread carefully when considering Crocs.


Walk a mile in Buffett's shoes
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal "The Motley Fool's 3 Stocks to Own Forever." These picks are free today! Just click here now to uncover the three companies we love. 

Michael Lewis has no position in any stocks mentioned. The Motley Fool owns shares of Crocs. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information