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Cheers for Crocs

http://www.fool.com/investing/general/2006/06/01/cheers-for-crocs.aspx

Brendan Mathews
June 1, 2006

Cheers bartender Sam Malone once asked, "What is the point of life?" Trivia maven and U.S. Postal Service employee Cliff Clavin had the answer: "Comfortable shoes." Cliff would no doubt have been a fan of Crocs (Nasdaq: CROX  ) .

The company makes comfortable, brightly colored footwear that is part shoe, part sandal, and all foamy plastic. If Cliff were an investor, Crocs is a stock he might buy. Last week, management cited strong consumer demand and raised guidance for the second quarter to $0.23 to $0.25 per share from $0.21 to $0.22.

It should be a hot summer for Crocs, and it's time for investors to sit up and take notice (fellow Fool Tim Beyers certainly has). Seasonality and a growing distribution network as part of this company's strategy could ignite some serious growth.

It goes without saying that sandals sell better during the summer, and the next two quarters should be strong for Crocs. According to the recently raised guidance, management is expecting revenues of $62 million to $65 million for the second quarter (April through June). That has to be a conservative estimate. In the first quarter (January through March), the company booked $45 million in revenue. If consumers are willing to purchase $45 million worth of sandals in the dead of winter, they will certainly purchase more than $65 million during spring and summer months. Last year, Crocs increased sales to $26 million from $10 million from the first quarter to the second quarter. While I don't expect another increase of 160% this year, hopefully, the 44% increase predicted by management will turn out to be too conservative.

Crocs is also beefing up its distribution channels, or outlets. It has 7,300 doors, 900 of which were added last quarter. This includes traditional footwear retailers like Dick's (NYSE: DKS  ) , Journey's, West Marine, and Dillard's (NYSE: DDS  ) , but Crocs also sells through nontraditional footwear channels. Hallmark, Wild Oats (Nasdaq: OATS  ) , and Barnes & Noble (NYSE: BKS  ) are also selling Crocs. Crocs is able to sell through these retailers because the si