Inside a Crocs store at Queens Center in New York.
Ryan Baker | CNBC
Casual footwear company Crocs plans to reduce orders for the second half of the year amid what its CEO called a “concerning” environment for the consumer.
“We see the U.S. consumer behaving cautiously around discretionary spending. They are faced with current and implied future price increases, which we think has the potential to be a further drag on an already choiceful consumer. Against this backdrop, our retail partners are acting more carefully and reducing their open-to-buy dollars in future seasons,” said CEO Andrew Rees on the company’s second-quarter earnings call this week, according to a FactSet transcript.
“The current environment in the second half is concerning, and we see that clearly reflected in retail order books. We strongly believe this is a time to make bold decisions for the future to sustain and advance a durable cash flow mode,” Rees added.
Shares of Crocs shed nearly 30% on Thursday after the company issued the stark warnings and posted a weaker-than-expected forecast for the current quarter.
Thursday’s losses made for the stock’s worst day since October 2011.
Crocs imports most of its products from countries like Vietnam, China, Indonesia and Cambodia that are now subject to steep import tariffs.
Rees said the company is taking steps to protect profitability, including pulling back on promotional activity across retailers and taking back some of its older inventory, specifically for its Heydude shoe brand, in order to “reset” retail partners with new stock.
“This will create further headwinds to sales volume over the next several quarters,” Rees said on the earnings call.
Rees said in an earnings release that Crocs had previously implemented $50 million in cost savings.
“Although these actions will impact the topline of our business in the short term, they will position our business to win, drive margin dollars, and support continued cash flow generation longer term,” he said in the release.
The company is projecting third-quarter revenue well below Wall Street estimates. Crocs expects revenue for the current quarter to shrink between 9% and 11% year over year. Analysts surveyed by LSEG expected revenue to be slightly higher over the year earlier.
Crocs is also forecasting a third-quarter adjusted operating margin of around 18% to 19%, down from 25.4% in the third-quarter a year prior.
The company declined to issue full-year guidance.
For the second quarter, Crocs reported a net loss of $492.3 million, or $8.82 per share, compared with net income of $228.9 million, or $3.77 per share, during the same period a year earlier. That loss was driven by a $737 million noncash impairment charge related to its Heydude brand.
Excluding that charge and accounting for other one-time items, the company posted adjusted earnings of $4.23 per share, topping the Wall Street expectation for $4.01 per share, according to LSEG.
Revenue came in at $1.15 billion, an increase of 3.4% over the year prior and in line with the LSEG estimate of $1.14 billion.
— CNBC’s Melissa Repko and Sara Salinas contributed to this report.
