After three consecutive quarters of better-than-expected growth, Crocs is continuing on this upward trend, posting sales for the fourth quarter that again exceeded its sales projections, led by the Americas region. Despite these positive results, the company's share value fell by nearly 2 percent, as analysts were disappointed about the outlook given by the management for 2018. Its latest guidance calls for revenues to remain flat, while Wall Street was looking at a rise of almost 10 percent.
The company is remaining cautious, after closing stores and cutting costs recently to improve margins. Last year, it decided to close its Taiwanese business and shut down 160 stores globally by 2018, after a loss of $31.7 million incurred in 2016.
While releasing its latest results, the management also announced that it has entered into a new agreement with Swire Resources, a subsidiary of a Hong Kong-listed conglomerate, Swire Pacific, to take over its wholesale and retail businesses in Hong Kong. The transfer took place in January and the retail store transfers should be completed in April. The revenues associated with the 15 retail stores it operated in Hong Kong in 2017 were approximately $15 million.
Still, the management remains positive, noting that the perception of the brand continues to rise, with results from its latest annual brand survey showing double-digit increases in brand desirability, relevance and consideration as compared to last year.
Revenues for the three months ended Dec. 31 were up by 6.2 percent to $199.1 million, or by 3.8 percent on a constant-currency basis, despite a loss of $14 million from operating fewer stores and absorbing the impact of the sales of former sales operations in Taiwan and the Middle East. Originally, the guidance was calling for revenues of between $180 and $190 million.
Crocs' total revenues in the Americas came in at $105.8 million, up by 13.6 percent, while sales declined by 3.2 percent to $66.6 million in Asia-Pacific. In Europe, they rose by 3.7 percent to $26.3 million, which the management attributed to its strengthened focus on clogs and sandals, along with Europe's growing enthusiasm for the Black Friday and Cyber Monday promotions.
The clogs category remained the largest segment of the company's revenues, representing around 57 percent of footwear sales, up from 52 percent in the third quarter of 2017. Sandals, including flips and slides, represented a large and growing category, with revenues up by 44 percent from the fourth quarter of 2016. They represented 15 percent of footwear sales in the latest quarter, up from 11 percent for the year-ago period.
In the wholesale segment, revenues increased by 15.5 percent to $93.1million, or by 12.2 percent in constant currencies, due primarily to store closures and changes in the business model. The Americas and Asia-Pacific saw sales gain by 29.2 percent and 9.9 percent at wholesale, respectively, while they were down by 4.4 percent in Europe.
In Crocs' retail segment, sales fell by 6.3 percent to $69.0 million, or by 7.8 percent in constant currencies, reflecting the declining store count. They grew by 2.0 percent in the Americas, while Asia-Pacific dipped by 23.1 percent and Europe inched up by 0.8 percent. On a comparable store basis, retail sales gained 7.0 percent in the Americas and 1.7 percent in Europe, but lost 2.9 percent in Asia-Pacific. Crocs ended the quarter with 27 fewer stores than in the previous quarter and 111 fewer stores as compared to a year earlier. It ended up with 447 locations, mostly in Asia-Pacific and the Americas.
The e-commerce segment posted a better quarter, with revenues rising by 11.6 percent to $36.9 million, or by 14.2 percent in constant currencies. Europe performed best in this channel with an increase of 36.1 percent, while the Americas gained 13.0 percent and Asia-Pacific declined by 1.4 percent.
The gross margin exceeded expectations, expanding by 3.4 percentage points to 45.4 percent, driven by efforts to continue to prioritize high-margin molded product, improving go-to-market capabilities and better managing promotions. Crocs had expected a gross margin of about 43 percent. The quarterly net loss came to $28.3 million, down from a net loss of $44.5 million for the year-ago quarter.
For the full year, Crocs' revenues were down by 1.2 percent to $1,020 million and off by 1.7 percent in constant currencies. The gross margin improved by 2.2 percentage points to 50.5 percent, and net income stood at $5.3 million, down from a net loss of $31.7 million in 2016.
Looking at 2018, the management said that the spring/summer collection is being well received. It expects moderate wholesale and double-digit e-commerce growth to be offset by the loss of retail revenues associated with store reductions. It also anticipates delivering continued gross margin gains.
Crocs intends to play a much more active role in marketing its products on rapidly expanding third-party marketplaces such as Rakuten in Japan, Coupang in South Korea and Zalando in Europe.
