Crocs beat its own guidance in the fourth quarter of 2010 thanks to the strong performance of its wholesale business, especially in Asia. Group revenues in the quarter increased by 32 percent to $179.2 million, compared with a company forecast of $165 million. The company's chief executive, John McCarvel, said the response to the group's fall/winter collection has been very encouraging, helping to turn Crocs into an all-seasons brand.
By region, sales were up by 37 percent to $22.7 million in Europe, by 36 percent to $94.1 million in the Americas and by 24 percent to 62.4 million in Asia. By channel, the wholesale turnover rose by 27 percent to $97.7 million, while retail sales were up by 36 percent to $59.6 million. Internet sales increased by 44 percent to $21.9 million.
Comparable store sales grew by a low single digit and were up by only 1 percent in the U.S. At the end of 2010, Crocs had 138 full-priced stores, 88 shop-in-shops, 76 factory outlets and 76 kiosks. In 2011, it will open 25-35 stores in the Americas and 20-30 stores in both Europe and Asia. Capital expenditure is forecast to reach $30-40 million this year, down from $43 million in 2010.
The momentum continues to be very strong. The group had an order backlog of $260 million at the end of 2010, up by 57 percent from the previous year, of which 55 percent is scheduled to be shipped in the first quarter. Wholesale orders show an increase in the average selling price per pair to $16.50 from $14.67 a year ago. Crocs forecasts that it will reach revenues of $215 million in the first quarter, compared with $166.9 million a year earlier. The company's peak quarters tend to the second and third ones.
Crocs aims to continue growing within its core network of sporting goods chains, specialty retailers, department stores and family footwear retailers but will add some new accounts, largely from small independent retailers. The company will continue its efforts to expand in the southern hemisphere and in warmer countries to reduce the seasonality of its business.
The company has an in-house manufacturing capacity to produce about 10 million pairs a year, with factories in Italy and Mexico, and supply contracts with third parties in China to produce up to 55-60 million pairs, enabling it to fulfill the expected demand in 2011. Last week alone, Crocs sold nearly 43 million pairs of shoes.
The gross margin increased to 48.2 percent in the fourth quarter from 44.3 percent a year earlier. The margin is traditionally weaker in the last quarter compared with the rest of the year due to the lower margins of the fall/winter collection and the inventory cleanup. The bottom line swung into a $4.7 million net profit from a $11.4 million loss a year earlier. Crocs was profitable in all four quarters for the first time since 2007 and expects to continue to make a profit, forecasting earnings per share of about $0.19 in the first quarter of 2011.
Financial analysts predict that the company will generate sales of $970 million and a net profit of $96 million in 2011. For the full 2010 financial year, Crocs reports an increase in turnover of 22 percent to $789.7 million and the net income improved to $67.7 million compared to a net loss of $42.1 million. The gross margin rose to 53.7 percent from 46.6 percent in 2009, and it should remain flat in 2011. In the course of 2010, Crocs' cash pile jumped by 88 percent to $145.6 million.