Crocs Inc. reported a loss of $66.9 million in the fourth quarter, partly due to $49.2 million in non-recurring restructuring charges. Revenues increased 1.6 percent.
Fourth Quarter and Full Year Financial Highlights:
GAAP revenue increased 1.6 percent and 6.2 percent in the 2013 fourth quarter and the full year, respectively. On a constant currency basis, revenue increased 4.1 percent and 8.8 percent in the 2013 fourth quarter and full year, respectively.
Global Wholesale revenues were up 1.2 percent to $111.7 million and gained 4.1 percent on C-N basis. Retail revenues added 0.4 percent to $89.9 million and 2.6 percent on a C-N basis. Comps were up 4 percent. Internet sales inched up 8.1 percent to $228.7 million and grew 9.5 percent on a C-N basis.
By region, sales in the Americas were down 4.7 percent to $106.7 million, and declined 3.8 percent on a C-N basis. Wholesale sales were down 10.1 percent to $43.3 million and were down 8.8 percent C-N. Retail sales in the Americas were down 2.7 percent to $46.1 million and off 1.8 percent C-N. E-commerce sales in the Americas gained 4.9 percent and tacked on 5.4 percent on a C-N basis.
Outside the U.S., Latin America growth was constrained by import restrictions, currency devaluation, and lower market demand. Its partnership with its Chile distributor was ended and the brand stopped importing product into Argentina, with both moves expected to have a $10 million annual impact on revenue.
Outside the Americas, Europe revenues jumped 46.2 percent to $40.8 million and gained 41.2 percent on a C-N basis. The performance reflected a 7.1 5 percent C-N gain in Wholesale revenues and a 16.7 percent C-N Retail gain.
In the Asia Pacific region, revenues nudged up 0.7 percent to $61.1 million and added 2.6 percent on a C-N basis. Japan revenues were down 17.3 percent to $20.0 million but grew 2.3 percent on C-N basis.
The company reported a net loss of $0.76 and net income of $0.12 per diluted share on a GAAP basis in the 2013 fourth quarter and the full year, respectively. Excluding certain non-recurring, unusual and infrequent charges, the company reported a non-GAAP net loss1 of $0.20 and non-GAAP net income of $0.82 per diluted share in the 2013 fourth quarter and the full year, respectively.
John McCarvel, President and Chief Executive Officer, said "We delivered balanced performance in the fourth quarter despite the challenging retail environment in North America. On a constant currency basis, 2013 revenue grew by 4 percent for the quarter and 9 percent for the full year. The full-year revenue growth was driven by a solid 7 percent increase in wholesale revenue, with particular strength in Europe, as well as our global retail expansion."
"We've made tremendous progress as a company over the past 10 years -- from a one-season, one-shoe, and one-country brand to a diversified, four-season global footwear leader that is on solid financial footing, and we believe our business is well positioned to succeed going forward," McCarvel continued. "The recent investment in Crocs by Blackstone is a vote of confidence in our company and our brand, and we believe Crocs will benefit from Blackstone's financial, consumer, retail and brand-building experience."
Financial Review
Fourth quarter operating results
In the fourth quarter of 2013, the company incurred a GAAP net loss of $66.9 million or $0.76 per diluted share, compared with a net loss of $3.6 million or $0.04 per diluted share in the comparable quarter in the prior year.
As outlined in detail in the non-GAAP reconciliations set forth later in this press release, the company recorded $49.2 million in non-recurring, unusual and infrequent charges (of which $45.5 million were non-cash charges) in the fourth quarter of 2013.
Excluding these items, the company reported a non-GAAP net loss of $17.7 million in the quarter or $0.20 per diluted share compared with non-GAAP net income of $4.4 million or $0.05 per diluted share in the fourth quarter of 2012.
Full year 2013 operating results
The company generated net income of $10.4 million or $0.12 per diluted share for the full year 2013, compared with net income of $131.3 million or $1.44 per diluted share in 2012.
As outlined in detail in the non-GAAP reconciliations set forth later in this press release, the company recorded $62.4 million in non-recurring, unusual and infrequent charges (of which $48.3 million were non-cash charges) for the full year 2013.
Excluding these items, the company generated non-GAAP net income of $72.8 million or $0.82 per diluted share for the full year 2013 compared with non-GAAP net income of $129.1 million or $1.42 per diluted share during 2012.
Balance Sheet
Cash and cash equivalents at December 31, 2013, amounted to $317.1 million, which is an increase of 7.7 percent from December 31, 2012. Inventory decreased 1.5 percent during 2013 to $162.3 million at December 31, 2013.
Financial Outlook
Thomas J. Smach, Crocs chairman of the board, commented, "As we look forward, 2014 will be a significant transition period for the company. We will recruit a new CEO who will work with the reconstituted board to refine the company's short-term and long-term strategic plans, which will include prioritizing earnings over top-line growth. We will focus on improving financial performance, particularly in the Americas and Japan, as well as enhancing our global retail execution. As we increasingly focus on profitable growth and retail excellence, we may moderate the pace of our investments in new retail stores as well as consolidate some existing locations. While the company will remain focused on creating long-term value for our shareholders, given the transition that the company will be going through, we will not be providing earnings guidance in 2014."
For the first quarter of 2014, the company expects revenue between $305 million and $315 million.
Stock Repurchase
With respect to the previously announced $350 million stock repurchase program, the company expects to begin buying back stock in the current quarter. The company intends to be patient, methodical and opportunistic in the execution of this expanded buyback plan.
CEO Search
As previously announced, McCarvel intends to retire as president, chief executive officer and board member by Apr. 30, 2014. The board has begun a search for McCarvel's replacement and will make an announcement when the search is successfully concluded.
