Crocs posted revenues for the third quarter that were at the low end of the range it had predicted, going down by 10.3 percent over the year-ago quarter to $245.9 million, or by 11.6 percent on a constant-currency basis.
However, the gross margin topped expectations, exceeding the guidance by approximately 2.0 percentage points, which the company attributed to its trading-up strategy and tight business management in a challenging consumer environment. The company's gross margin gained 5.7 percentage points to 49.8 percent, as Crocs further limited off-price selling and promotional activities, particularly in the U.S. and Europe. At the same time, the company reduced inventories by 11.2 percent compared with last year.
In the wholesale segment, Crocs' revenues decreased by 17.9 percent to $109.1 million during the quarter, or by 19.7 percent in constant currencies, mainly due to a planned reduction in sales to discount channels in Europe and the Americas and lower sales to distributors who were carrying excessive inventories.
The Americas region saw wholesale revenues dip by 15.3 percent to $41.4 million, while revenues were down by 14.7 percent to $45.6 million in the Asia-Pacific region and by 27.6 percent to $21.9 million in Europe. Revenues from Other Businesses dropped by 35.2 percent to $271,000.
In the retail segment, sales were down by 4.1 percent to $107.1 million, or by 5.0 percent in constant currencies. The Americas recorded a 4.8 percent decrease, while Asia-Pacific dipped by 2.9 percent and Europe declined by 4.5 percent. Crocs closed down 27 stores – mostly in Europe and the U.S. - and opened 23 new ones during the period, ending up with 554 locations - 184 fewer than two years ago.
Overall sales in China improved by a mid-single digit as Crocs completed its divorce from its former distributors. The Crocs stores in China are now directly owned or operated by partners.
The e-commerce segment underwent a rough quarter, too, with revenues decreasing by 10.3 percent to $245.9 million, or by 11.6 percent in constant currencies. The Asia-Pacific region performed best, with an increase of 14.1 percent, while the Americas grew by 2.1 percent. However, this wasn't enough to offset an 18.4 percent drop in European online sales.
Crocs recorded a net loss of $1.5 million in the three months ended Sept. 30, compared with a loss of $24.0 million in the third quarter of 2015. Excluding extraordinary charges in both periods, the loss was trimmed to about $2 million from $19.2 million, and the company's profitability is expected to improve further.
Looking ahead, the management said it is working to drive quality growth through its product, marketing, and distribution strategies. The company expects fourth-quarter revenues to slide by between 7 and 11 percent from fourth quarter of 2015. For the year ending next Dec. 31, the management expects revenues to be in the $1,034.0 million to $1,044.0 million range, indicating a drop of 4 to 5 percent from the level reached in 2015.