A 32 percent drop in sales at Crocs to $134.9 million led to a net loss of $22.4 million in the first quarter of this year, nearly five times the $4.5 million loss in the same period in 2008, but the company’s new management, led by John Duerden, expects to reach profitability in 2010.
Retailers cut back their Crocs business sharply in the quarter ended March 31 as wholesale revenues declined by 45 percent to $95.3 million, while retail revenues rose by 60 percent to $27.9 million and internet sales rose by 46 percent to $11.7 million. Crocs’ new offerings on the internet have been strongly accepted in Europe.
Geographically, Asian sales rose by a modest 7 percent to $39.0 million, but European sales plunged by 49 percent to $28.3 million while revenues from the Americas fell by 37 percent to $67.6 million.
Duerden is embarking on a plan to clean up the company’s distribution, cut costs and restore some sizzle to the brand, with an immediate focus on the women’s and kids’ markets. It is expected to continue its losses in the current fiscal year as it consolidates distribution centers globally to five and cuts its space for distribution centers by half: Average sale prices will be brought back up in 2009, and inventories will be brought down.
Crocs is not giving annual sales guidance or a target sales number for profitability; however, it believes it can achieve inventory turns of three to four times in the next 12-18 months, and repair relationships with wholesale accounts in North America and Europe, while continuing to grow its retail presence, especially in Asia.
Sell-throughs at retail have gotten much better, but Crocs still has excess inventory in the market. It said it would move this inventory by the end of the year or consider programs to donate it. It also said it has cut its retail distribution in the U.S. and would open mostly outlet stores there in the future. Meanwhile, it will continue opening regular retail stores in Asia, including 22 this year in addition to the 116 open there now. Knock-offs are a big issue in Europe, it acknowledged, and Crocs said it would work aggressively to enforce its intellectual property rights in the region.