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Category: Stock Market and Crocs Inc
Date: 28 February 2020 Stock Price: $28.45 We take a look at the 4th quarter earnings release of their 2019 fiscal year of shoe maker Crocs. You either love them or hate them, but they have a cult like following with a large number of them saying "if you aint crocin you aint rockin".
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About Crocs Inc
Crocs, Inc. (Nasdaq: CROX) is a world leader in innovative casual footwear for women, men, and children, combining comfort and style with a value that consumers know and love. The vast majority of shoes within Crocs’ collection contains Croslite™ material, a proprietary, molded footwear technology, delivering extraordinary comfort with each step. In 2020, Crocs declares that expressing yourself and being comfortable are not mutually exclusive
Overview of Crocs Inc' 4th quarter 2019 earnings report
The data below refers to the most recent quarter unless specified otherwise
- Total Revenues: $262.979 million (up from $215.989 million from the same quarter of the previous year)
- Revenue increased by 21.7% over the last 12 months
- Cost of sales: $136.741 million (up from $116.167 million for the same quarter of the previous year)
- Cost of sales increased by 17.7% over the last 12 months
- Some margin improvement for Crocs Inc with their revenues growing at a faster rate than their operating expenses
- Net income: $19.913 million (up from -$10.886 million for the same quarter of the previous year)
- Diluted earnings per share: $0.29 (up from -$.172 for the same quarter of the previous year)
- PE ratio of Crocs Inc: 17.1
- Diluted weighted-average shares outstanding: 69.843 million (up from 69.010 million for the same quarter of the previous year)
- Cash and cash equivalents: $108.253 million
- Cash and cash equivalents per share: $1.54
- Cash and cash equivalents makes up 5.4% of Crocs Inc market capital
- Cash and cash equivalents makes up 14.6% of Crocs Inc total assets
- Crocs Inc inventories: $172.028 million
- Inventories makes up 23.2% of Crocs Inc total assets
- Crocs Inc accounts receivable: $108.199 million
- Accounts receivable makes up 14.6% of Crocs Inc total assets
- Accounts receivable makes up 14.6% of Crocs Inc total assets
- Stockholders equity in Crocs Inc: $131.905 million
- Stockholders equity per share in Crocs Inc: $1.88
- Crocs Inc is trading at 15.1times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at.
- Cash generated from operations (for full fiscal 2019): $89.985 million
- Cash generated from operations per share (for full fiscal 2019): $1.28
Crocs Inc management commentary on their 4th quarter 2019 earnings report
IWOT, Colo.--(BUSINESS WIRE)-- Crocs, Inc. (NASDAQ: CROX), a world leader in innovative casual footwear for men, women, and children, today announced its fourth quarter and full year 2019 financial results.
Andrew Rees, President and Chief Executive Officer, said, “Our record fourth quarter and full year top-line combined with our double-digit operating margin underscores the progress we have made executing our key strategic initiatives. Focusing on our core clog and sandal categories and further igniting brand heat through impactful marketing campaigns and collaborations are fueling strong revenue growth. Equally important, the work we’ve done reducing our expense structure is allowing us to translate our top-line success into even stronger earnings growth as we continue to make important investments in the business.”
Andrew Rees, President and Chief Executive Officer, said, “Our record fourth quarter and full year top-line combined with our double-digit operating margin underscores the progress we have made executing our key strategic initiatives. Focusing on our core clog and sandal categories and further igniting brand heat through impactful marketing campaigns and collaborations are fueling strong revenue growth. Equally important, the work we’ve done reducing our expense structure is allowing us to translate our top-line success into even stronger earnings growth as we continue to make important investments in the business.”
“Although we begin the new year with great momentum and exciting plans in place to build on our recent growth, our immediate focus is with everyone affected by the coronavirus and ensuring that our employees in China, along with our partners, safely navigate the risks associated with this global health epidemic. Despite this difficult situation, we continue to be very optimistic about our long-term growth prospects in China and our Asia region.”
Balance Sheet and Cash Flow Highlights:
Share Repurchase Activity:
During the fourth quarter of 2019, we repurchased 0.4 million shares of our common stock for $13.7 million, at an average price of $34.73 per share. For the full year, we repurchased 6.1 million shares of our common stock for $147.2 million, at an average price of $24.20 per share. At year end, $508.6 million of our $1 billion share repurchase authorization remained available for future repurchases.
Distribution Center Investment:
The Company completed the relocation of its U.S. distribution center from California to Ohio during the fourth quarter of 2019. In 2019, we entered into a lease to relocate our distribution center in the Netherlands to a larger facility in 2021. We are evaluating similar investments this year and beyond designed to support our anticipated growth.
Financial Outlook:
First Quarter 2020:
With respect to the first quarter of 2020, we expect:
With respect to 2020, we expect:
Balance Sheet and Cash Flow Highlights:
- Cash and cash equivalents were $108.3 million as of December 31, 2019, compared to $123.4 million as of December 31, 2018. The change in cash and cash equivalents was driven primarily by share repurchases and capital expenditures, partially offset by cash generated from operating activities.
- Cash provided by operating activities decreased 21.2% to $90.0 million during 2019 compared to $114.2 million during 2018.
- Inventory increased 38.2% to $172.0 million as of December 31, 2019 compared to $124.5 million as of December 31, 2018, while our inventory turnover ratio increased to 4.3 turns per year.
- Capital expenditures, including accruals, during the year ended December 31, 2019 were $50.6 million compared to $10.9 million during 2018. The increase primarily reflects expenditures for the relocation of our U.S. distribution center from California to Ohio.
- At December 31, 2019, there were $205.0 million of borrowings outstanding on our $450.0 million credit facility.
Share Repurchase Activity:
During the fourth quarter of 2019, we repurchased 0.4 million shares of our common stock for $13.7 million, at an average price of $34.73 per share. For the full year, we repurchased 6.1 million shares of our common stock for $147.2 million, at an average price of $24.20 per share. At year end, $508.6 million of our $1 billion share repurchase authorization remained available for future repurchases.
Distribution Center Investment:
The Company completed the relocation of its U.S. distribution center from California to Ohio during the fourth quarter of 2019. In 2019, we entered into a lease to relocate our distribution center in the Netherlands to a larger facility in 2021. We are evaluating similar investments this year and beyond designed to support our anticipated growth.
Financial Outlook:
First Quarter 2020:
With respect to the first quarter of 2020, we expect:
- Revenues to be between $305 and $325 million compared to $295.9 million in the first quarter of 2019. We anticipate revenues for the first quarter of 2020 will be negatively impacted by approximately $20 to $30 million due to disruptions to our Asia business from COVID-19 (the “coronavirus”) and by approximately $3 million due to currency;
- Many of our partner stores in China are closed temporarily. For those that remain open, they are operating on a reduced schedule and experiencing lower than usual traffic levels. We are also seeing the broader impact as we are experiencing traffic declines throughout many of our key countries in Asia.
- Operating margin to be between 9% and 12%, including $3 million of non-recurring expenses for store closures and other provisions in Asia as a result of business disruptions from the coronavirus.
With respect to 2020, we expect:
- Revenues to be up 8% to 12% over 2019 revenues of $1,230.6 million. We anticipate 2020 revenues will be negatively impacted by $40 to $60 million as a result of disruptions to our Asia business from the coronavirus and approximately $10 million of currency;
- An operating margin of between 11% and 13%, which includes expenses associated with our new distribution center in the Netherlands and charges for store closures and other provisions in Asia as a result of business disruptions from the coronavirus;
- Interest expense of approximately $9 million; and
- A tax rate of approximately 17%.
Crocs Inc (NASDAQ: CROX) stock price history
The image below, obtained from Google, shows the stock price history of Crocs Inc (NASDAQ: CROX) over the last 5 years. And its been a pretty good time for Crocs Inc stockholders. 5 years ago the stock of Crocs Inc was trading at around $11.40 a stock and its currently trading at $28.45. That's a very healthy return of 149.5% provided to Crocs Inc stockholders over the last 5 years.
Crocs Inc stock is trading at close to the midpoint between its 52 week high and 52 week low which to us is an indication that the short term sentiment and momentum of Crocs Inc stock is neutral at this point in time.
Crocs Inc stock is trading at close to the midpoint between its 52 week high and 52 week low which to us is an indication that the short term sentiment and momentum of Crocs Inc stock is neutral at this point in time.
Recent coverage of Crocs Inc.
The extract below shows recent coverage of Crocs Inc as obtained from TheStreet.com
Crocs, Inc. (NASDAQ: CROX), a world leader in innovative casual footwear for men, women and children, today raised its revenue guidance for the fourth quarter ended December 31, 2019 in anticipation of its presentation at the 2020 ICR Conference.
"We delivered the strongest fourth quarter in Crocs' history," said Andrew Rees, President and Chief Executive Officer. "Our positive brand momentum allowed us to deliver strong DTC growth combined with excellent wholesale sell through. Our projected fourth quarter results represent a strong finish to a record year and we anticipate building on our 2019 growth trajectory in 2020."
For the fourth quarter of 2019, the Company now expects revenue to be between $260 and $262 million, up from its previous guidance range of $245 to $255 million and compared to $216.0 million in the fourth quarter of 2018.
Read the full article here
Crocs, Inc. (NASDAQ: CROX), a world leader in innovative casual footwear for men, women and children, today raised its revenue guidance for the fourth quarter ended December 31, 2019 in anticipation of its presentation at the 2020 ICR Conference.
"We delivered the strongest fourth quarter in Crocs' history," said Andrew Rees, President and Chief Executive Officer. "Our positive brand momentum allowed us to deliver strong DTC growth combined with excellent wholesale sell through. Our projected fourth quarter results represent a strong finish to a record year and we anticipate building on our 2019 growth trajectory in 2020."
For the fourth quarter of 2019, the Company now expects revenue to be between $260 and $262 million, up from its previous guidance range of $245 to $255 million and compared to $216.0 million in the fourth quarter of 2018.
Read the full article here
Crocs Inc. (NASDAQ: CROCS) latest stock valuation
So based on Crocs Inc latest earnings report what do we value Crocs Inc stock at? Based on their earnings reported our valuation model provides a target price (full value price) for Crocs Inc at $24.30 per stock.
We therefore believe that the stock of Crocs Inc stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $24.30. A good entry price into Crocs Inc would therefore be at $21.90 or below.
We expect the stock of Crocs Inc to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months as we do believe the group's stock is overvalued at its current price.
We therefore believe that the stock of Crocs Inc stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $24.30. A good entry price into Crocs Inc would therefore be at $21.90 or below.
We expect the stock of Crocs Inc to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months as we do believe the group's stock is overvalued at its current price.
Next earnings release of Crocs Inc
It is expected that Crocs Inc will release their 1st quarter 2020 earnings release in late May 2020