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Bear of the Day: Crocs (CROX)

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Headquartered in Bloomfield, CO, Crocs (CROX - Free Report) is known for its broad range of casual footwear for men, women, and kids. All of its shoes feature Croslite material, a proprietary technology that gives each pair of shoes soft, comfortable, lightweight, non-marking and odor-resistant qualities.

CROX plunged 16% after the company reported Q4 and full year 2019 results back in February; investors were reacting to both weak guidance and the broader coronavirus-related panic.

But the company’s fourth quarter was actually better than expected. Revenue of $263 million jumped 21.8% and comparable store sales rose 16% due to the strategic decision to focus on core clog and sandal categories; e-commerce sales were up 34.3% year-over-year.

Earnings of 12 cents a share beat the Zacks Consensus Estimate and improved significantly over Q4 2019.

However, almost a third of Crocs’ total sales come from its Asia-Pacific region, and Q1 revenues will now see a negative impact of $20 million to $30 million; fiscal 2020 revenue will now be $40 to $60 million lower than expected.

Like many other retailers, a number of Crocs stores in China are still closed or operating with reduced hours.

“Despite this difficult situation, we continue to be very optimistic about our long-term growth prospects in China and our Asia region,” said president and CEO Andrew Rees.

CROX is now a Zacks Rank #5 (Strong Sell). Two analysts have cut their full year earnings estimates, and the consensus estimate has fallen 54 cents from $2.10 to $1.56 a share.


Crocs, Inc. Price and Consensus

Shares of the footwear retailer are down almost 60% year-to-date. The S&P 500 is down about 19% year-to-date in comparison.

Despite the impact the coronavirus pandemic has had on its business, Crocs has been making significant improvements to boost sales and cut costs. Shares are currently trading at just a 10.6X forward multiple, and if management continues to make smart, strategic moves, CROX could be poised for a recovery once concerns about the outbreak begin to wane.

Most apparel retailers are experiencing a lot of short-term pain because of the coronavirus, so those who are interested in adding a retail stock to their portfolio could consider wholesaler Costco (COST - Free Report) . COST is a #2 (Buy) on the Zacks Rank, and anticipates 7.3% earnings growth for 2020; the company also offers shareholders a 0.89% dividend yield.

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