Crocs Inc. shares fell more than 20 percent Thursday, a day after the maker of colorful plastic shoes reported second-quarter results that fell far short of Wall Street expectations.
THE SPARK: Goldman Sachs analyst Taposh Bari downgraded the footwear maker’s stock rating to “Neutral” from “Buy.”
THE BIG PICTURE: Crocs has been trying to expand beyond its signature plastic clogs to wedges, sandals and even golf shoes. But that strategy doesn’t seem to be working yet.
The Niwot, Colo.-based company said late Wednesday that its net income fell 43 percent on weaker sales in the U.S. and Europe, blaming the sales slump on colder-than-normal temperatures in the spring. However, sales rose in Asia, a region that the company said will drive growth.
THE ANALYSIS: Bari said that Crocs is volatile, and added in a note to clients that there is a “lack of visibility into this increasingly complex business.”
Piper Jaffray analyst Erinn Murphy has a different view. Murphy said that Thursday’s stock-price drop presents a good buying opportunity for long-term investors.
“While results were clearly disappointing, we continue to believe in the long-term thesis of rebuilding global distribution, expanding styles beyond the core clog silhouette and increasing the direct-to-consumer component,” Murphy said in a note to clients.
When asked for comment, Crocs pointed to statements made by its chief financial officer Wednesday during a call with analysts: “The fundamentals of the business remain strong, as the balance of the revenue around the globe and the strengthening retail performance outside of Japan solidify our long-term sustainable growth expectations for revenue,” CFO Jeff Lasher said. “Our healthy balance sheet continues to be a source of notable strength.”
SHARE ACTION: Crocs shares dropped $3.43, or 20 percent, to close at $13.55 Thursday. The stock is near the 52-week low of $12 it reached in November 2012.