Crocs view isn't bright with melting sales, profit

By Alexandria Sage - Analysis

SAN FRANCISCO (Reuters) - In the beginning, Crocs Inc (CROX.O: Quote, Profile, Research, Stock Buzz) was all about quirky shoes in cheerful, eye-catching colors, a fast-growing company that created a market with an inventive use of material -- plastic. But the meltdown has begun.

Shares since January were down 87 percent as of Friday's market open in what has been a spate of bad news for the company over the past year, from slowing sales to lawsuits.

And 2009 may not be any better, as the company strives to revive its sales in the United States and abroad and scale back its infrastructure and inventories to reflect slower growth.

A warning by the company after the market close on Thursday that near-term profit and sales would be worse than expected sent shares into a nosedive, and the stock lost nearly half its value. In late afternoon Nasdaq trade, Crocs was down more than 43 percent to $5.08.

"The company's meteoric rise has been followed by an equally dramatic fall," wrote Robert W. Baird analyst Mitch Kummetz in a note published on Friday.

Wall Street has a laundry list of concerns about Crocs, from sharp decreases in U.S. demand to eroding profit margins, fat inventory levels and decelerating sales in global markets.

Crocs, which first launched its shoes in 2002, has been hit on multiple fronts. Foremost, the novelty of its brightly-colored, lightweight shoes made with a patented resin has largely waned.

Moreover, the weakening U.S. economy has meant customers are less likely to spend on footwear, especially nonessential items, and retailers have cut back on inventories --- accounting for the expected shortfall in wholesale sales in the second quarter.  Continued...