What happened

Crocs (CROX -0.24%) shareholders lost ground to the market this week as their stock fell 16% through trading on Thursday compared to a 0.9% decline in the S&P 500.

The drop added to significant paper losses since late 2021, when the shoemaker briefly touched $180 per share (it is trading at about half that price today). This week's slump was powered by fourth-quarter earnings results that failed to meet Wall Street's high expectations.

A woman shopping on her smartphone.

Image source: Getty Images.

So what

Crocs announced on Wednesday that it finished a record 2021 on a positive note. Sales jumped 44% after adjusting for currency exchange rate shifts, and profitability expanded. These factors combined to push adjusted earnings up by more than 100% to $2.15 per share.

"A strong 2021 holiday season completed a very successful year for our brand," CEO Andrew Rees said in a press release. Crocs' broader results featured 65% higher revenue for the year and an increase of 7 percentage points in gross profit margin, to 62% of sales.

Now what

Investors focused instead on a few disturbing signs in the report. Crocs is projecting that sales gains will slow to 20% in the core business in 2022, for example. And profitability will decline as the company pays up for things like air freight as it works to overcome supply chain and inventory challenges. These pressures will be especially strong in the current quarter, management warned, which will show only modest sales and earnings gains.

That slowdown is no threat to Crocs' wider growth ambitions, given that the business in 2022 is still likely to be much stronger than it was before the pandemic struck. However, investors had to lower their short-term earnings expectations, and that shift pushed the stock lower this week.