What happened

Shares of Crocs (NASDAQ:CROX) were tumbling last month after the casual-footwear maker warned that the coronavirus would impact its performance in 2020 when it reported fourth-quarter earnings. As a result, the stock finished February down 31% according to data from S&P Global Market Intelligence

As you can see from the chart below, the stock plunged during the last week of the month as the company reported earnings and got caught up on the broader coronavirus sell-off.

^SPX Chart

^SPX data by YCharts

So what

Crocs shares plunged 16% on Feb. 27 after the earnings report came out. Its results for the fourth quarter were actually better than expected as revenue jumped 21.8% to $263 million, ahead of expectations of $260 million. Comparable store sales jumped 16% as the company's strategic decision to focus on it core clog and sandal categories paid off. E-commerce sales in the quarter were also strong, up 34.3%. 

Priyanka Chopra Jonas modeling a pair of classic crocs.

Image source: Crocs.

That performance translated into improved profitability as gross margin rose from 46.2% to 48% and it shaved 790 basis points off overhead costs to 44.8% of revenue. That led to an adjusted profit per share of $0.12, a significant improvement from an adjusted loss of $0.10 in the quarter a year ago. The result also beat estimates of a $0.07 per share profit.

Despite that strong performance, investors were rattled by weak guidance due to the coronavirus outbreak. Nearly a third of Crocs' sales come from the Asia-Pacific region and the company said first-quarter revenues would be impacted by $20 million to $30 million and that full-year revenue would be $40 to $60 million lower than expected. Consequently, both forecasts were below expectations. A number of the company's retail partners in China have closed their stores or reduced their hours so sales will be affected until the situation changes.

Now what

Crocs shares have continued to fall through the first week of March on coronavirus concerns, but investors shouldn't overlook the significant improvements in the business that led to the strong fourth quarter as management has successfully boosted sales and cut costs. Though it's clear the virus will have an impact on sales in Asia, the stock could be primed for a recovery once concerns about the outbreak taper off.