Crocs Set to Hit Billion in 2011

Shoe manufacturer Crocs Inc (CROX - Snapshot Report) recently announced that it expects to achieve the higher end of its revenue guidance of $200 million to $205 million for the fourth quarter of 2011, based on the solid performance of retail business. Thus, the Niwot, Colorado-based company expects to post revenues of more than $1 billion for fiscal 2011, as against revenues of $790 million in 2010.

We believe that it is a remarkable achievement for the company to garner revenues of $1 billion in less than a decade. The footwear company succeeded in driving its revenue on the strength of its brand and solid presence in the international market.

Encouraged by the news, the company’s share price surged $2.61 to close at $18.56 on Wednesday.

However, the company reiterated its earnings forecast in the range of 3 cents to 5 cents for the fourth quarter of 2011, as business in Europe remains soft owing to the challenging macroeconomic conditions.

Crocs, which primarily operates in Europe, Asia and America, continues to make efforts to drive margins and expects gross margin to be in the mid-50% range in 2011. Crocs balance sheet position also remains strong with no debt and a new $70 million line of credit

For 2012, the company plans to open net 80 to 100 retail stores globally and shutdown a number of kiosks in the United States. In the first half of 2012, the company expects to close 25 to 30 kiosks.

The company’s long-term growth objectives are to sustain growth as well as expand in regions, product growth with average selling price (ASP) expansion, direct-to-consumer roll out and continuous investment in both the retail and Internet businesses.

In the recently concluded third quarter, revenue jumped 27.5% to $274.9 million. Sales rose 24.3% at wholesale, 31.4% at Retail and 33.7% at Internet. Gross profit enhanced 23.9% to $147.2 million.

The Zacks Consensus Estimates for fiscal 2011 and 2012 are pegged at $1.23 and $1.46, respectively. We expect estimates to go up in the coming days as the company has raised its sales outlook.

Crocs, which competes with Deckers Outdoor Corp. (DECK - Analyst Report) and Nike Inc (NKE - Analyst Report), expects to report fourth quarter 2011 results on February 24, 2012.

Crocs, which sell more than 250 designs for men, women, and children, currently retains a Zacks #3 Rank, implying a short-term Hold rating on the stock. Our long-term recommendation for the stock remains Neutral.

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