Although Crocs' revenues for the third quarter were off by 1.1 percent from the year-ago quarter, down to $243.3 million, they were above the top end of the company's revenue guidance, exceeding analysts' expectations. Income from operations improved to $2.7 million, as compared to last year's loss of $1.2 million.
The company also cut its net loss to $2.3 million from a net loss of $5.3 million a year earlier, outperforming the stock market's consensus. It would have been in the black without a planned $3.8 million dividend payment on convertible preferred securities sold to Blackstone back in 2013.
Despite these positive results, the share value fell by nearly 4 percent as analysts were disappointed about the outlook given by the management for the quarter. Its guidance calls for revenues to range in the current quarter from $180 million to $190 million, while Wall Street was looking at revenues of around $191 million. Crocs also expects full-year sales to be down by a low single-digit rate from last year's level of $1,040 million, while analysts had projected them to grow to $1,100 million.
The drop in turnover follows the company's announcement earlier this year that it would close its Taiwan business and shut down 160 stores globally by 2018, after a loss of $31.7 million incurred in 2016. Still, the management remained positive, noting that the perception of the brand continued to rise, with results from its latest annual brand survey showing double-digit increases in brand desirability, relevance and consideration as compared to last year.
The Clogs category made up the largest segment of the company's revenues in the latest quarter, with its share rising to 52 percent from 51.5 percent in last year's third quarter. Classics and the Crocband remained the best-selling plug styles, with new colors and graphics, including licensed images, driving the growth. Sandals, including flips and slides, represented a large and growing category, accounting for 18.6 percent of sales, up from 13.8 percent. The bestsellers included Swiftwater for men, women and kids, Isabella for women's and kids and Sloane and Sandro for women. As planned, cold-weather styles were eliminated from the range to reduce the seasonal inventory risk.
Crocs' total revenues in the Americas came in at $120.5 million, up by 5.1 percent, while sales declined by 12.0 percent to $80 million in Asia-Pacific. In Europe, they rose by 6.2 percent to $42.5 million.
In the wholesale segment, revenues were off by 2.2 percent to $106.7 million, or by 3.0 percent in constant currencies, primarily due to store closures and changes in the business mode. The Americas and Europe saw sales gain of 0.6 percent and 8.9 percent at wholesale, respectively, while they were down by 10.0 percent in the Asia-Pacific region.
In Crocs' retail segment, sales fell by 7.2 percent to $99.3 million, or by 7.5 percent in constant currencies, reflecting the declining store count. They grew by 1.4 percent in the Americas, while Asia-Pacific dipped by 20.8 percent and Europe decreased by 5.8 percent. On a comparable store basis, retail sales gained 2.8 percent in the Americas but lost 2.1 percent in Europe and 2.9 percent in Asia-Pacific. Crocs ended the quarter with 29 fewer stores than in the previous quarter and 80 fewer stores as compared to a year earlier. It ended up with 474 locations, mostly in Asia-Pacific.
The e-commerce segment posted a much better quarter, with revenues rising by 25.2 percent to $37.8 million, or by 24.8 percent in constant currencies. The Asia-Pacific region performed best in this channel with an increase of 17.8 percent, while the Americas gained 28.5 percent and Europe rose by 17.8 percent.
Overall, the gross margin went up by one percentage point to 50.8 percent, which the company attributed to improved products and better management of inventories.
Looking ahead, the management is confident that further operational improvements and a disciplined approach to expense management will facilitate a return to double digit operating margins in the medium term, after the store closure program is completed.