Crocs, Inc. Reports Third Quarter 2018 Results
NIWOT, Colo.--(BUSINESS WIRE)--Nov 8, 2018--Crocs, Inc. (NASDAQ: CROX) a world leader in innovative casual footwear for men, women, and children, today announced its third quarter 2018 financial results.
Andrew Rees, President and Chief Executive Officer, said, “By executing against our strategic priorities, we drove strong quarterly performance with revenues up 7.3%, gross margin increasing 250 basis points to 53.3% and income from operations increasing 418% to $13.9 million. Our diluted EPS was $0.07, improving significantly compared to last year’s third quarter $0.03 loss. We achieved these strong results by continuing to grow our brand strength and demand for our clogs and sandals. We anticipate a strong finish to the year and have increased our 2018 guidance accordingly, and we are excited about our growth prospects for 2019.”
Third Quarter 2018 Operating Results:Revenues were $261.1 million, a 7.3% increase over the third quarter of 2017, or 9.3% on a constant currency basis. This growth was achieved despite the loss of approximately $15 million due to operating fewer stores and business model changes. E-commerce grew 23.2%, wholesale grew 9.3%, and retail comparable store sales increased 15.0%. Gross margin was 53.3%, improving 250 basis points over last year’s third quarter. Selling, general and administrative expenses (“SG&A”) were $125.2 million compared to $120.8 million in the third quarter of 2017. This was higher than guidance due to incentive compensation and other variable costs associated with higher revenues. As a percent of revenues, SG&A improved 170 basis points to 47.9%. Third quarter 2018 results included $6.3 million of non-recurring charges compared to $3.6 million in last year’s third quarter. Those charges consisted of $5.0 million incurred in connection with the closure of the Company’s manufacturing facilities, approximately $3.7 million of which were non-cash, and $1.3 million associated with the Company’s SG&A reduction plan. Income from operations increased to $13.9 million from $2.7 million in last year’s third quarter. Net income attributable to common stockholders was $6.5 million, or $0.07 per diluted share, compared to a loss of $2.3 million, or a $0.03 loss per diluted share, in last year’s third quarter. We had 72.8 million and 71.9 million weighted average diluted common shares outstanding during the three months ended September 30, 2018 and 2017, respectively.
Balance Sheet and Cash Flow Highlights:Cash and cash equivalents as of September 30, 2018 increased 13.9% to $203.0 million compared to $178.2 million as of September 30, 2017 in response to higher sales and gross margins in combination with a disciplined approach to expenses. At September 30, 2018, there were no borrowings outstanding on our credit facility, and in November 2018, we increased the size of the facility to $150 million from $100 million. Inventory declined 16.1% to $117.7 million as of September 30, 2018 compared to $140.3 million as of September 30, 2017, reflecting the Company’s continued focus on inventory management. Cash provided by operating activities increased 6.8% to $85.9 million during the first nine months of 2018 compared to $80.4 million during the first nine months of 2017. Capital expenditures during the first nine months of 2018 were $5.2 million compared to $14.3 million during the same period in 2017, as the Company incurred lower technology-related expenditures.
Share Repurchase Activity:
During the third quarter of 2018, the Company repurchased 604,000 shares of its common stock for $11.1 million, at an average price of $18.39 per share. As of September 30, 2018, approximately $182 million of the Company’s current $500 million share repurchase authorization remained available for future share repurchases.
Fourth Quarter 2018:
With respect to the fourth quarter of 2018, the Company expects:Revenues of $195 to $205 million compared to $199.1 million in the fourth quarter of 2017, including a negative currency impact estimated at $5 million. Gross margin to be approximately 80 to 100 basis points above last year’s 45.4% rate. SG&A to be approximately $10 million below last year’s fourth quarter SG&A of $120.7 million. This includes non-recurring charges of approximately $2 million compared to $9.4 million of non-recurring charges in the fourth quarter of 2017.
Full Year 2018:
With respect to 2018, the Company now expects:Revenues to be 4 to 5% higher than 2017 revenues of $1,023.5 million, up from prior guidance of a low single digit increase based on the strength of our results. Gross margin to increase approximately 100 basis points over 2017 gross margin of 50.5%, up from our prior guidance of a 70 to 100 basis point increase. SG&A to be approximately $495 million compared to last year’s $499.9 million and prior guidance calling for SG&A to be slightly higher than $485 million. This change reflects increased incentive compensation and other variable costs associated with higher revenues. Non-recurring charges are expected to be $19 million. Approximately $13 million of that amount relates to the closure of our manufacturing facilities, approximately $6 million of which will be non-cash. Non-recurring charges in 2017 were $17 million. Income from operations to be slightly under $60 million compared to $17.3 million in 2017 and our prior guidance of $50 million. Depreciation and amortization to be approximately $30 million compared to $33.1 million in 2017. Income tax expense of approximately $17 million compared to $7.9 million in 2017.
With respect to 2019 revenues, the Company expects a mid-single digit increase over 2018 revenues. We anticipate that e-commerce and wholesale growth will more than offset lower retail revenues associated with our reduced store count, which we expect to reduce revenues by approximately $25 million. Adding back that $25 million reduction, we would expect 2019 revenues to be up mid to high single digits over our anticipated 2018 revenues.
Conference Call Information:
A conference call to discuss third quarter 2018 results is scheduled for today, Thursday, November 8, 2018 at 8:30 a.m. EST. The call participation number is (888) 771-4371. A replay of the conference call will be available two hours after the completion of the call at (888) 843-7419. International participants can dial (847) 585-4405 to take part in the conference call, and can access a replay of the call at (630) 652-3042. All of these calls will require the use of the conference identification number 47676603. The call will also be streamed live on the Crocs website, www.crocs.com, and that audio recording will be available at www.crocs.com through November 8, 2019.
About Crocs, Inc.:
Crocs, Inc. (Nasdaq: CROX) is a world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers know and love. Every pair of shoes within Crocs’ collection contains Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step.
In 2018, Crocs reinforces its mission of “everyone comfortable in their own shoes” with the second year of its global Come As You Are™ campaign. To learn more about Crocs or Come As You Are, please visit www.crocs.com or follow @Crocs on Facebook, Instagram and Twitter.
Forward Looking Statements:
This news release includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding prospects, expectations and our revenue, gross margin, SG&A, income from operations, depreciation and amortization, and tax expense outlook. These statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from any future results, performances, or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the following: current global financial conditions; the effect of competition in our industry; our ability to effectively manage our future growth or declines in revenues; changing consumer preferences; our ability to maintain and expand revenues and gross margin; our ability to accurately forecast consumer demand for our products; our ability to successfully implement our strategic plans; our ability to develop and sell new products; our ability to obtain and protect intellectual property rights; the effect of potential adverse currency exchange rate fluctuations and other international operating risks; and other factors described in our most recent Annual Report on Form 10-K under the heading “Risk Factors” and our subsequent filings with the Securities and Exchange Commission. Readers are encouraged to review that section and all other disclosures appearing in our filings with the Securities and Exchange Commission.
All information in this document speaks as of November 8, 2018. We do not undertake any obligation to update publicly any forward-looking statements, including, without limitation, any estimates provided in the “Financial Outlook” section above, whether as a result of the receipt of new information, future events, or otherwise.
CROCS, INC. AND SUBSIDIARIES NON-GAAP MEASURES (UNAUDITED)
In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America (“U.S. GAAP”), we present certain information related to our current period results of operations through “constant currency”, which is a non-GAAP financial measure and should be viewed as a supplement to our results of operations and presentation of reportable segments under U.S. GAAP. Constant currency represents current period results that have been retranslated using exchange rates used in the prior year comparative period to enhance the visibility of the underlying business trends excluding the impact of foreign currency exchange rate fluctuations.
Management uses non-GAAP results to assist in comparing business trends from period to period on a consistent basis in communications with the board of directors, stockholders, analysts, and investors concerning our financial performance. We believe that these non-GAAP measures are useful to investors and other users of our condensed consolidated financial statements as an additional tool for evaluating operating performance. We believe they also provide a useful baseline for analyzing trends in our operations. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP.
Impacts on revenue of segment composition change:
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CONTACT: Crocs, Inc.
Marisa Jacobs, 303-848-7322
Ryan Roccaforte, 303-848-7116
KEYWORD: UNITED STATES NORTH AMERICA COLORADO
INDUSTRY KEYWORD: DEPARTMENT STORES ONLINE RETAIL RETAIL FASHION SPECIALTY OTHER RETAIL
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PUB: 11/08/2018 07:00 AM/DISC: 11/08/2018 07:00 AM