Led by the U.S. market and driven by its wholesale business, Crocs posted record revenues for the fourth quarter. Reaching a level of $216.0 million, they were up by 8.5 percent from the year-ago quarter, or by 11.3 percent on a constant-currency basis. This was well above the top end of the company's previous guidance of $195 million to $205 million.
Crocs reached strong growth despite a loss of approximately $7 million in revenues due to a smaller number of stores in operation and changes in the business model. After booking a loss of $31.7 million in 2016, the management announced in 2017 that it would close its subsidiary in Taiwan and shut down 160 stores globally by the end of 2018. During the latest quarter, Crocs reduced the number of directly operated stores by six to 383. The emphasis in retailing has shifted from full-price stores, which now make up only one-third of the fleet, to outlet stores, which represent more than half of the total count. The balance consists of kiosks and shop-in-shops.
In Crocs' retail segment, global sales were up by 1.3 percent in absolute terms to $69.9 million. In constant currencies, retail sales in the Americas improved by 13.5 percent, while they decreased by 23.4 percent in Europe and by 11.6 percent in the Asia-Pacific region. On the other hand, on a comparable-store basis, currency-neutral retail sales went up by 17.3 percent in the Americas, by 4.7 percent in Europe and by 6.2 percent in Asia-Pacific.
E-commerce saw sales rocket by 18.9 percent to $43.9 million, with currency-neutral increases of 28.6 percent in the Americas and 28.3 percent in Europe. However, the company reported a decrease of 2.3 percent in its online operations in Asia-Pacific.
In the wholesale segment, the company's revenues went up by 9.6 percent to $45.3 million. In constant currencies, Europe saw sales rise by 17.7 percent at the wholesale level. In the Americas, they advanced by 14.1 percent, while they improved by 9.4 percent in Asia-Pacific.
In terms of product, Classic and lined clogs were standouts in the quarter. The company recorded 11 percent higher revenues from sandals, which represented 15 percent of footwear revenues. Clogs grew by 17 percent.
Crocs' gross margin for the quarter improved by 0.8 percentage points to 46.2 percent, which the company attributed to strong sales of high-margin clogs, the strength of its direct-to-consumer business and a disciplined approach to promotions.
The group suffered a net loss of $10.8 million, well below the net loss of 24.3 million booked in the year-ago quarter. The loss was mainly attributed to the repurchase and conversion in December of the company's preferred stock previously owned by Blackstone Capital Partners, for an amount of $118.7 million, up from $28.3 million in the fourth quarter of 2017. The adjusted net loss declined to $7.7 million from $18.9 million.
For the full 2018 financial year, revenues rose by 6.3 percent to $1,088.2 million, or by 5.2 percent on a currency-neutral basis. The wholesale business grew by 7.8 percent, while the e-commerce business jumped by 22.5 percent and comparable store sales gained 10.8 percent. The gross margin advanced by one full percentage point to 51.5 percent.
Income from operations grew by 263.1 percent, coming in at $62.9 million, thanks to the restructuring efforts undertaken by the management. The operating margin jumped by 4.1 percentage points to 5.8 percent. On an adjusted basis, it jumped to 7.7 percent from 3.4 percent. Crocs still ended with a net loss $69.2 million for the year, compared to a net loss of $5.3 million in 2017.
Moving forward, Crocs is now considering new initiatives in terms of product development and retailing, including the further development of e-commerce. The management said that it will continue to focus on clogs, sandals and visible comfort technology in 2019. Both product lines will be enhanced through value-adding visible comfort technologies, starting with the existing Lite Rite cushioning and a new Reviva line of sandals being launched this spring, which uses molded bubbles to deliver a massaging effect.
The company is projecting a sales increase for this year of between 5 and 7 percent, in spite of a further decrease of $20 million in retail revenues. However, the gross margin is expected to decline to around 49.5 percent because of higher freight costs, reduced purchasing power associated with the strengthening of the U.S. dollar, and non-recurring charges related to a new distribution center in Ohio.