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LOS ANGELES — Shares of Crocs Inc. lost about half of their value Thursday after the shoe maker slashed second-quarter and 2008 profit and revenue forecasts on an unexpected slowdown in business and weak reorders.
Shares in the maker of brightly coloured casual shoes, which had topped $75 (U.S.) in October, dropped to $4.75 in extended trade from a Nasdaq close of $8.95.
Crocs shares have been volatile this year as investors worried about its high inventory levels, which are a liability in an economic downturn.
Soft and water-proof, Crocs were introduced in 2002 and quickly moved from niche to mainstream. But over the past year, bad news has rained down on the once high-flying company.
Crocs Inc.
Crocs Inc.
Consumers have complained that the shoes can get caught in escalators and cause injuries, and the European Union ruled one of Crocs' patents invalid.
The slowing U.S. economy has hit hard as retailers have trimmed shoe stocks. The company is closing its factory in Canada, and said Thursday that more cost-cutting moves were in store.
Chief executive officer Ron Snyder said in a statement that retailers across the board were “extremely cautious” with reorders and that overseas performance was weaker than expected.
“The domestic marketplace proved to be more challenging during the second quarter than we had originally anticipated,” Mr. Snyder said.
For the second quarter, Crocs now sees revenue of $218-million to $223-million and diluted earnings per share of 3 cents to 7 cents, including a 1 cent-per-share charge related to the shutdown of its Canadian manufacturing operations.
In May, the company had forecast second-quarter revenue of $247-million to $258-million and diluted earnings per share of 42 cents to 47 cents, which included the charge associated with the shutdown of the Canadian manufacturing operations.
Despite lower revenue expectations for the second quarter, Crocs said it still expected inventories as of June 30 to decrease 10 per cent to 15 per cent from $266-million in the first quarter.
The company also said receivable days sales outstanding were expected to improve 20 per cent to 25 per cent compared with March 31.
Crocs now expects 2008 revenue to be down modestly from last year's level. It also sees earnings per share at break even, including a total pretax charge of 16 cents per diluted share associated with the Canadian manufacturing shutdown.
In May, its 2008 forecast called for revenue growth of 15 per cent to 20 per cent and earnings per share of $1.54 to $1.64, including charges related to closing the Canadian operations.
The company Thursday also forecast revenue of $195-million to $205-million and diluted earnings per share of 1 cent to 5 cents.
Mr. Snyder said the company is taking further steps to cut costs. Among other things, Crocs plans to improve its supply chain, reduce costs and improve working capital.
“We are currently in the process of sizing our business to be profitable on lower projected sales volumes and these cost actions will continue through the end of the year,” Mr. Snyder said.
