Crocs pays big to trash unsold clogs
The company just took a $3.4 million hit for 'obsolete inventory.' But it's still selling tons of shoes.
Crocs (CROX), in the midst of a corporate retread, is struggling to get out from under a pile of garish resin clogs.
Business for the tarnished shoe brand actually isn't as bad as one might expect. The company has built a long line of styles that are a big step away from the chunky, hole-punched hooves that made it a household name.
This spring, for example, Crocs is putting a hard sell on men's golf shoes and women’s wedges and espadrillas. That product expansion is no doubt why Blackstone Group (BX) agreed to buy a $200 million stake in the company in December.
But as anyone with a bit of bright Mario Batali orange at the bottom of his closet knows, old Crocs are tough to get rid of. In the fourth quarter, Crocs wrote down $10.7 million in impairment charges, effectively canceling out 5 percent of its sales.
Most of the one-time expenses were tied to its network of 619 retail stores, although Crocs had to take a $3.4 million hit for "obsolete inventory" -- the financial equivalent of tossing a bunch of shoes in the trash.
In part because of that housecleaning, Crocs posted a $66.9 million loss in the quarter, well above its $3.6 million loss a year earlier.
Believe it or not, the company is still selling tons of shoes: 10.7 million in the three months ended Dec. 31, which is 9 percent more than in the year-earlier period.
That's almost one pair of Crocs for every person in Ohio, and only about half of those were clogs. In particular, the company made big strides abroad, more than doubling the pairs of shoes sold in Europe and posting a 22 percent increase in Japan. Total revenue, however, ticked up just 1.6 percent to $228.7 million, a sign that Crocs, on the whole, are getting a bit cheaper.
The challenge for Crocs remains wooing the U.S. customers who put it on the map a decade ago and have since moved on to Toms, Rainbow flip-flops, and increasingly Birkenstocks. In America, Crocs sold 8 percent fewer shoes in the recent quarter.
Meanwhile, the company said it won’t be providing profit guidance this year or answering questions during earnings reports. On Wall Street, that kind of coyness is considered about as fashionable as chunky clogs.
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If you read the tax law, you will find out companies are supposed to write down old unsold inventory every year. For those companies that are in states that tax inventories, reducing the value of old inventory also saves taxes.
The mind boggles at how few people read and how even fewer comprehend the articles they comment on. Reading them seems to have become a daily affirmation of the fact that a good percentage of the population is clinically retarded.
They are the ugliest shoes every made.
Crocs are only acceptable for children and infants to wear any adult wearing these lime green ugly shoes is a clown.
Used Crocs will soon be clogging the landfills for millions of years.
Seeing all the comments of people who actually think they are throwing the shoes away really says a lot about the sad state of affairs in our country.
People...you really can't be that dumb...turn off your tv..start reading more and quit believeing everything you see on the likes of MSN or MSNBC.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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