Reports of the demise of Crocs Inc. (NYSE: CROX) have proven to be premature — again.
Four years ago, Crocs seemed doomed after George B. Boedecker, the footwear maker’s largest shareholder, resigned from the board the same week he was arrested for threatening to slit his the throat of brother-in-law’s who was in the midst of a nasty divorce from his sister. (Charges were later dropped and the case was settled) At the same time, auditors found “material weaknesses” in the company’s financial statements.
In 2009, the board replaced CEO Ronald Snyder who presided over the boom and bust of Crocs with corporate turnaround expert John H. Duerden. Snyder, though, did not go away empty-handed. According to the Colorado company’s proxy, the 53-year-old was paid a $3.03 million “retirement package” Deurden, whose retirement at age 68 seems more plausible, was paid $2.23 million. His service ended in March when Chief Operating Officer Joel McCarvel took the job. Crocs now seems to be heading in the right direction.
Shares are up more than 142 percent this year as investors bet that a public weary of spending their days pounding the pavement looking for work would want to invest in the comfortable yet ugly shoes. (I own two pairs). Crocs smartly decided to diversify its product line including its recent addition of modestly priced back-to-school shoes.
Interestingly, the board features two veterans of Circuit City, the electronic retailer that went bankrupt and closed its doors in 2009. Perhaps, Crocs is benefitting from the advice of Richard Cannon (ex Circuit City CEO) and Richard Sharp (ex Circuit City General Counsel) about what not to do. Whatever the management team is doing at Crocs they should keep doing it because it seems to be working.
Second quarter 2010 net income was $32.3 million, or 37 cents per share, reversing a loss a year ago. Revenue in the second quarter increased 15% year-over-year . Operating Margin Improves to 16.9% Selling, General, & Administrative expenses decreased 25.8% to $93.2 million or 40.9% of sales. The Company’s cash and cash equivalents as of June 30, 2010 increased 25% to $96.9 million. It had no bank debt as of June 30, 2010.
No wonder most Wall Street analysts think the stock is a buy.