SHOEMAKER Crocs lowered its outlook for the first time in three years as it faces softening sales at its stores, amid a weak economy in Europe and shaky consumer confidence in the US.
The dim outlook sparked a sell-off in the Crocs’ stock, wiping out nearly 40 per cent of the company’s market value in extended trading. Shares were trading at $17.08 in after-market trade, after closing at $26.64 on Monday on Nasdaq.
“I am not surprised by this type of market reaction,” Wall Street Strategies analyst Brian Sozzi said..
“Any time you have a wholesaler like Crocs saying they missed sales and their margins are below plan, you immediately think of an inventory pile up in the channel.”
Crocs, known for its colourful clogs, has seen its stock gain over 55 per cent so far this year, excluding Monday’s losses, benefiting from streamlining its business, lowering inventory levels and introducing new styles to win customers.
Footwear products like trainers and boots offered by peers such as Nike, Genesco and Footlocker, have been selling well, Sozzi said.
There is now increased competition among footwear companies and each is vying for consumers’ attention, he added.
“(If) they have to choose between Nike shoes and a pair of Crocs that are higher priced than last year, I think they are going to opt for the Nike boots,” Sozzi said.
The lower direct-to-consumer sales also ate into the company’s gross margins, chief executive John McCarvel said in a statement.
Crocs sells its footwear in more than 90 countries through retailers and distributors.
City A.M. Reporter