CROX: Conference Call Puts & Takes

CROX beat both the high end of guidance and the street by a nickel in Q1 and despite guiding below consensus for Q2, reassured investors this evening on the call that revenues would grow 15%-20% in F12 and earnings would exceed the current street estimate of $1.43.


Below are the key deltas relative to forward looking commentary given on the 4Q11 conference call as well as key takeaways from this evening’s call.



Key Deltas Relative to the Fourth Quarter Call



Financial Guidance (Headed into this evening’s call):


"For the first quarter of 2012, we expect to generate revenues in the range of $263 million to $268 million with EPS estimated in the $0.24 to $0.26 per share range." Both Revenues and EPS exceeded Guidance at $272mm & $0.31 respectively


"We expect gross margins to be consistent with last year and foresee an increase in our effective tax rate to 24%. Currency estimates used for the quarter are $1.32 U.S. dollars to euro and ¥77 to the U.S. dollar." Gross Margins improved 70bps YoY


"However, as we enter into 2012, the backlog for Europe is down versus the same time last year. " Europe revenues were down 3% (+2% FX neutral)


"Moving on to bookings, we ended the quarter with backlog of $307 million, which represents about a 19% growth rate over last year. The 19% increase is on top of a 57% increase from a year ago." Backlog currently stands at +11%

"Of the backlog, orders for Q1 deliveries are up about 18% to $190 million. Orders for Q2 deliveries are up about 21% to $117 million. ASPs in our backlogs are about $18.71 compared to about $16.50 last year." Q1 ASP increased 11% to $19.22




Updated Guidance (Provided on this evening’s call):


“Moving on the guidance for the second quarter of 2012 we expect to generate revenue in the range of $335 million to $345 million.” (Note: Consensus: $352.7)


We estimate EPS (for 2Q12) into $0.63 per share range, currency estimates used for the quarter are $1.31 to Europe and 82.5 Yen to the U. S dollar.” (Note: Consensus: $0.65)


“We still expect full-year sales on a currency neutral basis to increase 15% to 20% over 2011. We pleased with the increase backlog growth in the America and Asia.”


“Based on where we are today, we feel comfortable that we will exceed the current first call diluted earnings per share consensus of $1.43 for 2012.”




2012 Store Additions (Headed into this evening’s call):


"In 2012 we plan on opening 25 to 50 stores in Asia" On Track


"Retail locations in Europe are expected to increase by 20 to 25 in the year. Our focus in the 2012 retail expansion will be to expand stores in northern Europe where our stores are presently concentrated in countries such as Germany, UK, France, Finland and the Netherlands. " Planning 25-35 openings in Europe


"We have identified and will open additional sites in the U.K., France and Germany in the second quarter with plans to open 20 to 25 new stores, bringing our total count to 55 to 60 by the end of 2012. In total, we anticipate opening between 80 and 100 net new stores globally in 2012." On Track


"Our (wholesale) door count is up modestly in 2012 with expansion to all Kohl's locations for men's and kids products." Continue to gain shelf space and expand doors


"In 2012, we will be closing about half of our remaining 50 kiosk locations in the USA Some of these will be converted into stores within the same shopping center but some centers will be exited all together. Moving forward, changes in our retail formats and portfolio of stores will periodically result in certain one time expenses. We expect this to impact Q1 EPS by $0.01 to $0.02 which is included in our guidance. For the full year 2012, we anticipate opening about 25 to 50 stores in the Americas before the kiosk closings." On Track- closed 11 kiosks in Q1 which impacted EPS by $0.01




Key Takeaways from the conference Call


Recap of the Quarter:


Revenues: +20% (+21% FX neutral, FX impacted Q1 revs by $4.3mm)

  • Comp: +10% (FX neutral)
  • Americas: +9%
  • Asia: +9%
  • Europe: +21%
    • Growth broad based w/new introductions representing 38% of Q1 sales
    • Non clog silhouettes made up more than half of quarterly volume
  • Top performing platforms:
    • Daily Collection
    • Women's flat & wedges
    • Duet sport line
    • cross mesh series
  • Americas: +17% (+18% constant currency)
    • Retail: +25% (driven by larger locations, product breadth, ASP growth and positive comps)
    • Internet: +28%
    • Wholesale: +12%
  • Asia: +40% (+39% constant currency)
    • Japan: growth enhanced due to tragedy last year which resulted in a $3mm delay in sales
    • Retail: +46%
    • Internet: +57% (small base last year)
  • Europe: -3% (+2% constant currency)
    • Wholesale: -7%
    • Retail: +52%
    • Internet: +3% 
  • GM +70bps
    • Benefitted from leveraging infrastructure cost and improved economics of new product launches



Store Count at End of Quarter:

  • Americas: 190 locations
    • Closed 11 kiosks and remain on track to close 20-25 kiosks this year
  • Asia: 211 stores
    • On track to open 25-50
  • Europe: 38 stores


Product Performance:

  • Clogs represented 49% of sales
  • New product intros were 38% of unit sales
  • ASP +11%
  • Unit sales +8%



  • Up 11% overall
  • Americas: +12%
  • Asia: +18%
  • Europe: -13%
  • Q2 backlog: +11%
  • 2H backlog: +11%




  • 2Q12 Revenue: $335-$345 (currency will negatively impact sales by 3% in Q2)
  • EPS: $0.63 (assumes $1.31 USD to Euro)
  • Assumes 22% tax rate
  • Continue to expect full year revenues growth of 15%-20%
  • 1H performance remains on track with Q1 outperforming and Q2 slightly below expectations
  • Comfortable that CROX will exceed current F12 consensus of $1.43


Additional Forward Looking Commentary


  • Global internet expansion in Japan, Korea, Holland & Brazil slated for completion later this year
  • Expect FX impact to begin in Q2 (55% of business overseas)
    • Expected to impact Q2 revenues by $10mm or 3%
  • Plan to open 25-50 stores in the Americas in 2012
  • Plan to open 25-50 stores in Asia in 2012
  • Plan to open 25-35 stores in Europe in 2012
  • Globally, expect to open 80-100 net stores


Q&A Rundown:


Expectations for 2H

  • Crossover between Q1 and Q2- first half performance expected to be inline with expectations
  • Q1 & Q2 revs combined are more inline with 1H consesnus
  • Bottom line will be anywhere from $0.01-$0.03 ahead of 1H expectations coming out of Q2
  • More revenue will be driven by direct channel in 2H
  • Expect favorable Gross Margin trends with backlog ASPs up $4


Backlog: +11%

  • Main weakness in 2H
  • 2Q bookings above last year so positioned to execute on the "at once" business
  • Q3 and Q4 deliveries are up but slightly lighter on Q4 deliveries at this point
  • In some markets, have not booked orders for Nov and December deliveries
  • Will give an update on Q4 bookings at investor day at the end of May
  • Q4 component of backlog is less important, currently represents ~20% of backlog
  • Q2 and Q4 are typically more "at once" weighted quarters vs. Q1 and Q3


Retail Comps:

  • Converting half the remaining kiosks into full price retail stores
  • Comp performance benefited from Easter shift
  • Get more difficult in 2Q reflecting Easter Shift and the Japan Tragedy compare in Q1
  • About 1/3 of comp in America/Asia driven by units, 2/3 driven by price


Inventory positions:

  • +10% QoQ and YoY, have adequate outlet channels built up to work through inventory levels if necessary
  • Quality of inventory in Europe and the US and manufacturing facility in Mexico well positioned to capitalize in Q2


Gross Margin puts & takes:

  • Benefited from expansion of new product and leveraging COGS infrastructure
  • Controlled products costs in the Q controlling both labor and product costs as well as streamlining the design process to mitigate excess costs 

CROX: Conference Call Puts & Takes - CROX SIGMA

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