The net loss was $33.2 million against income of $38.3 million for the final quarter ended Dec. 31 as sales plunged by 43.9 percent to $126.1 million. While that was higher than what analysts forecast (sales of $100 million to $120 million), it nonetheless closes out a disastrous year for Crocs, which lost a total of $183.6 million against income of $168.2 million on a 14.8 percent sales decline to $721.6 million.
The final quarter included $21.1 million in foreign exchange losses as well as some minor restructuring and impairment charges. The quarterly gross margins dropped by 11.6 percentage points to 44.4 percent.
For the full year, Crocs had $25.4 million in currency losses, $45.8 million in impairment charges, $8.6 million in restructuring costs related to shutting down its own manufacturing, and $65.4 million in inventory write-downs. Its gross margin for the year fell by 26.3 percentage points to 32.4 percent.
Crocs is still showing growth in Asia but revenues in Europe and the Americas continued to fall. For the full year, Asia was up by 22.4 percent to $204.9 million while Europe declined by 16.2 percent to $150.7 million and the Americas fell by 26.9 percent to $366.0 million.
Crocs is showing strong growth in its direct business, with retail stores up by 68.7 percent for the year to $125.8 million and e-commerce up by 28.9 percent to $43.7 million. The company indicated that it would continue investing in these two areas in 2009, though it would slow growth in the U.S. to 10-12 outlet stores and perhaps a few strategic locations. Some 10-15 stores are expected to open in Asia under Crocs’ distribution with perhaps others by distributors there. The direct business made up 38 percent of total sales for the fourth quarter. Wholesale sales were down by 25.3 percent to $552.1 million.
Looking forward, the company is counting on growth among its successful new offerings, relying less on key styles. The chief operating officer for Crocs, John McCarvel, said that orders were up among these new products, though in general retailers in the U.S. are hesitant to stock a lot of inventory. The company also noted that it planned new materials and patterns for key styles to create seasonal collections, and focus its wholesale business more on larger retailers who can offer a wider range of products.
Crocs gave only first-quarter guidance of achieving sales in the $110-135 million range and a loss of $14.2 million to $26.7 million. It suggested that it had lined up its cost structure with its revenue expectations, and planned for gross margins to stabilize around 50 percent, with much of the molded product still in the mid-50s balanced by non-molded product in the mid-40s. Some of that margin is also coming because Crocs is putting more emphasis on its retail business. Wholesale was 77 percent of Crocs business in 2008 versus 87 percent the prior year, and that percentage looks sure to decline again in 2009.
