Crocs posts revenue growth of 8.5 percent in Q4

Crocs, Inc. said revenues for the fourth quarter were 216 million dollars, growing 8.5 percent or 11.3 percent on a constant currency over the fourth quarter of 2017. The company added that store closures and business model changes reduced revenues by approximately 7 million dollars, while wholesale business grew 9.7 percent, e-commerce businesses grew 18.9 percent and retail comparable store sales saw a growth of 13.4 percent. Revenues for the full year were 1,088.2 million dollars, up 6.3 percent or 5.2 percent on a constant currency over 2017. Crocs said, store closures and business model changes reduced our revenues by approximately 60 million dollars, while full year wholesale business grew 7.8 percent, e-commerce business grew 22.5 percent and retail comparable store sales grew 10.8 percent.

Commenting on the results, Andrew Rees, President and Chief Executive Officer of Crocs, said in a statement: "Our fourth quarter results contributed to what was a very successful year. We had record revenues in many key markets, with the U.S. market leading the way. We have hit multi-year highs in revenues and gross margin, while at the same time significantly reducing our SG&A run rate. We anticipate delivering revenue growth of 5 percent to 7 percent in 2019.”

Review of Crocs’ fourth quarter operating results

Gross margin for the fourth quarter was 46.2 percent, an increase of 80 basis points over last year's fourth quarter driven by strong sales of high-margin clogs, the strength of direct-to-consumer business and a disciplined approach to promotions. Loss from operations declined 54.1 percent reaching 13.9 million dollars compared to 30.4 million dollars in the fourth quarter of 2017. Excluding non-recurring SG&A charges, adjusted loss from operations declined 55.3 percent to 9.4 million dollars.

Crocs said that net loss attributable to common stockholders, primarily related to the December 2018 repurchase and conversion of the company’s preferred stock previously owned by Blackstone Capital Partners VI L.P. was 118.7 million dollars compared to 28.3 million dollars in the fourth quarter of 2017. After adjusting for the above charges, the company’s non-GAAP net loss attributable to common stockholders were 7.7 million dollars and 18.9 million dollars in the fourth quarters of 2018 and 2017, respectively.

Meanwhile, diluted net loss per common share was 1.72 dollars for the fourth quarter compared to 41 cents in the fourth quarter of 2017 and after adjusting for non-recurring SG&A and the Blackstone Transaction, non-GAAP diluted net loss per common share was 10 cents compared to 27 cents in the fourth quarter of 2017.

Highlights of Crocs’ FY18 performance

For the year 2018, Crocs reported gross margin of 51.5 percent, an increase of 100 basis points over 2017. Income from operations grew 263.1 percent at 62.9 million dollars compared to 17.3 million dollars in 2017, and the operating margin was 5.8 percent compared to 1.7 percent in 2017. Excluding non-recurring SG&A charges, adjusted income from operations grew 144.8 percent to 84 million dollars and adjusted operating margin was 7.7 percent compared to 3.4 percent in 2017.

Net loss attributable to common stockholders was 69.2 million dollars compared to 5.3 million dollars in 2017. After adjusting for the non-recurring SG&A charges and accounting adjustments relating to the Blackstone Transaction, non-GAAP net income attributable to common stockholders was 65.9 million dollars and 9.8 million dollars in 2018 and 2017 respectively.

Crocs’ diluted net loss per common share was 1.01 dollars in 2018 as a result of the accounting adjustments related to the Blackstone Transaction. Diluted net loss per common share was 7 cents in 2017, while non-GAAP diluted net income per common share was 86 cents compared to 13 cents in 2017.

Crocs expects FY19 revenue growth between 5 to 7 percent

For the fiscal year 2019, the company expects revenues to be up 5 percent to 7 percent over 2018 revenues of 1,088.2 million dollars with negative impact of approximately 20 million dollars resulting from store closures and approximately 20 million dollars of currency changes. Gross margin of is expected to be approximately 49.5 percent compared to 51.5 percent in 2018.

An operating margin is expected to be approximately 8.5 percent which includes non-recurring charges associated with new distribution center and SG&A cost reduction initiatives. Excluding those non-recurring charges, Crocs expects to achieve its interim target of a low double digit operating margin.

For the first quarter of 2019, the company expects revenues to be between 280 and 290 million dollars compared to 283.1 million dollars in the first quarter of 2018. The company anticipates revenues for the quarter will be negatively impacted by approximately 6 million dollars due to store closures and by approximately 10 million dollars due to currency changes. Revenues are also expected to be impacted by strong demand in last year's fourth quarter, which constricted inventory available for certain at-once orders, as well as the timing of Easter. Gross margin is expected to be approximately 45.5 percent compared to 49.4 percent in the first quarter of 2018.

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