Crocs (NASDAQ:CROX), the manufacturer of colorful footwear, is going through a difficult phase. Its recently reported third-quarter results were below Street estimates, leading to a drop in its stock price.
A not so good quarter
Revenue dropped slightly to $288.5 million, down from $295.6 million in the year-ago quarter . Unfavourable currency movements and lower volumes affected the top line. Lower sales in America and Japan were offset by increased sales in Europe and Asia Pacific, where customers are showing great interests in Crocs' products.
However, the bottom line was hit the worst. Adjusted earnings plunged 63% to $0.18 per share as wholesale revenue decreased and marketing costs increased. Also, the retailer's ERP project and increased store space affected the net income.
In fact, Crocs is not the only company to face such a situation. Even Foot Locker (NYSE:FL), a maker of athletic shoes as well as an apparel retailer, is experiencing lower earnings as the costs of labor and raw materials increase. In addition, there is a need to stir demand for its products, which Foot Locker plans to do by remodelling its stores and expanding its e-commerce business. The launch of SIX:02, a new store concept by Foot Locker for women, is expected to attract more customers that might boost the company's earnings.
A host of strategies
Crocs plans to improve its business with the help of a number of strategies. The company has started focussing on non-clog footwear such as wedges, loafers, and casual shoes since sales of such footwear have increased . Its new Shamaal collection in the Middle East has performed well. New product ranges such as Boat Line, A-Leigh, and Huarache have also driven revenue higher in Europe and Asia Pacific.
With a wider range of products, the company is expanding its global footprint, especially in Asia Pacific and Europe. Crocs added a total of 95 new stores in the last year, which in turn led to a jump of 11% in its retail revenue .
A hopeful future
The footwear retailer plans to come up with a wide variety of products and a new range of collections in the coming months. Its recent launch of A-Leigh's winter collection has attracted female customers and is expected to do well in the holiday season. Moreover, it will be launching new products in 2014, one of them being a stretch sole product that will be high on comfort.
Crocs will also launch the leather-like product called Colorlite, which will not only expand its product line but will also help in saving costs as the retailer plans to introduce more styles.
Crocs will also partner with Star Wars to bring out limited-edition footwear in May. This will be accompanied with huge promotions and a wide variety of sizes. The company seems to be strengthening its position by having a wide number of options for its customers to choose from.
Innovation has been the key to success for many footwear companies, including Nike (NYSE:NKE), which posted great numbers in its recently-ended quarter. One of the major drivers behind the company's 8% revenue growth was Nike's drive for introducing new products such as Nike Free, which continues to attract more and more customers. Nike's earnings jumped 36.5% over last year as the company increased its product prices and undertook cost-cutting measures .
Although Crocs had a lackluster quarter, its efforts look increasingly stronger. Innovation is the most important factor for any retailer, and this footwear retailer is making the most of it. Its new launches, accompanied by higher promotions and geographical expansion, will help the company grow remarkably. If it goes well, this company might stage a great comeback.
Pratik Thacker has no position in any stocks mentioned. The Motley Fool recommends Nike. The Motley Fool owns shares of Crocs and Nike. 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.