In a presentation to financial analysts, Crocs predicted that its sales will fall about $10 million below its previous forecasted range of $280 to $290 million during the third quarter of this year. The revised guidance, which sent the company's stock market value down by 9 percent, stems from the strong dollar and the company's decision to hold back about $6 million worth orders to a selected group of 48 Chinese distributors, who service 800 single-brand points of sale, because of an ongoing inventory glut.
As the brand generates two-third of its turnover outside the U.S., foreign exchange currency rates will reduce its revenues by about $4 million during the quarter. Currency changes have caused Crocs' gross margin to decline by four percentage points since 2012. The management said its business in China is growing fast and is very profitable.
On the other hand, the management maintained its short-term profitability targets and confirmed that it wants to return to an operating margin of 10 to 12 percent by 2018, with sales growing at an annual rate of at least 8 percent, driven by wholesale and e-commerce, in spite of the closure of many physical Crocs stores.
Margins should benefit from lower operating costs, a more centralized product strategy and a 40 percent cut in SKUs. The first fruits of the new strategy are expected to be seen in deliveries and sell-throughs for the spring/summer 2016 collection, which has been very well received by the trade, particularly in the Americas and Asia.